Jersey as a location for
eBusiness
The possibilities emerging out of the global rush to embrace new technologies
are as diverse as business itself. By 2002 e-commerce transactions
are expected to grow by an order of magnitude and, for example, reach
4% of the UK's GDP. Innovations in products and services, changing
relationships between buyers and sellers and entry of new competitors
are fundamentally changing the business landscape. The very pace
of this change and the new ground that is being broken introduce uncertainties
and opportunities that cannot be ignored. The creation of knowledge
or enhancement of existing products with new knowledge content is a fundamental
facet of this explosion.
New technologies offer a freedom of choice for the location of a wider
range of business than ever before. Countries around the world recognise
this and are making efforts to attract e-businesses. Offshore centres
have been popularly been associated with tax advantages. But the
most successful offshore centres have established their position by developing
their ability to provide attractive environments for global business activities.
Centres of substance offer a good deal more than attractive tax regimes.
These benefits are especially relevant for businesses in the new economy
where choice of location becomes a factor. For example, Guernsey
anticipates that offshore centres may, in appropriate circumstances, be
attractive to businesses concerned with:
- software providers
- canned media (e.g. graphics)
- streaming media
- online communities (e.g. portals, hubs)
- on-line publishing
- sale of hard / soft goods (catalogues, order capture, payment processing)
- financial services
- electronic invoicing
- on-line brokerage (e.g. auto, home and auction)
- on-line publishing
- B2B trading
(adapted from e-commerce in Guernsey strategy document, see references)
Jersey's attractions as a location for e-business are discussed in this
article. These notes are provided for illustrative purposes and
specific advice should be sought in this fast changing area.
Constitution
Jersey has been able to develop an environment that attracts international
business as a result of its constitutional status. The development
of Jersey's peculiar status can be traced back to its inclusion in the
territories of the Duchy of Normandy in 933. The Island remained
attached to the King of England (as successor to the Duke of Normandy)
after Normandy was lost to the crown in 1204. Under subsequent monarchs
the Island retained and developed its own laws, customs and liberties
which have been confirmed through Royal Charters so that the Island has
an independent judicial system and privileges including the right to tariff
free trade with England and freedom from English taxes.
The Island has its own legislative assembly ("States of Jersey")
and comprehensive legal, fiscal and administrative systems. The
Crown is represented by the Lieutenant Governor. Other officers
appointed by the Crown are the Bailiff and Deputy Bailiff who preside
of the States of Jersey and the Royal Court, the Attorney General and
Solicitor General who act as legal advisors. Most Laws are promulgated
by the States of Jersey but depend on Orders made by the Monarch in Council.
Acts of Parliament only extend to the Island by Order in Council and,
by convention Parliament does not legislate for the Island without its
consent in matters of taxation or issues of local concern. The UK
government is responsible for the Island's international relations and
consults the Island before entering agreements that apply to would apply
to the Island.
As regards the European Union, the accession of the United Kingdom to
the Treaty of Rome specified, under protocol 3, special terms for the
Island. Jersey is included within the European Union for the purpose
of free movement of goods and Jersey must apply the common external tariff.
For other provisions that do not apply to the Island, Jersey is treated
as a "third country".
Vulnerability
The question of the vulnerability of the Island's constitutional position
has been brought to the fore in the context of to various international
initiatives concerning harmful tax regimes, financial stability and criminal
activity. This has led to a number of statements in the House of
Lords and elsewhere that gives added certainty to the view of the Island's
position described here.
The United Kingdom Government is responsible for the defence
and international relations of Jersey, and the Crown is ultimately responsible
for its good government. However, the people of Jersey cannot vote
in elections for the United Kingdom Parliament and it would be unprecedented
for the United Kingdom to legislate for Jersey on taxation and other domestic
matters without the agreement of the Jersey authorities. Legislation
on tax matters has always taken the form of laws enacted by the Island
legislature.
HM Treasury submission to EU Code of Conduct Group
A fuller discussion of Jersey's constitutional position
can be found at the Jersey
Financial Services Commission web site.
Political Risk
Jersey's long established democracy demonstrates a level of political
stability that can compare with any other nation. The ultimate oversight
that can be exercised by the Crown over the good government of the Island
provides a further assurance of the quality and probity of the Island's
government.
The Island enjoys a buoyant economy and substantial reserves.
Commercial Legislation
The quality and certainty of the legislative regime will profoundly influence
the choice of location for a business venture. Jersey has a comprehensive
range of modern and flexible commercial legislation that provides a framework
in which new businesses can be established in a variety of forms. Those
familiar with UK legislation will recognise similarities in Jersey's statutes
whilst nonetheless are adapted to the needs of international business.
The Island has a flexible yet comprehensive financial services regulatory
regime that is recognised as among the best internationally, details can
be obtained from the Jersey
Financial Services Commission web site.
Attention is being given to the early introduction of legislation that
addresses the needs particular of e-business. In particular:
The Electronic Communications (Jersey) Law 2000, currently awaiting sanction
by Privy Council, implements the UNCITRAL model e-commerce law
Current draft laws, include the Copyright (Jersey) Law 2000, Design Right
(Jersey) Law 2000 and the Performers’ Protection (Jersey) Law 199-.
There is also an intention to update The Data Protection (Jersey) Law
1987.
A list of the laws of the Island of Jersey and online copies of more
recent legislation, including draft legislation, can be found at the Jersey
Legal Information Board
Taxation
Jersey's 20% income tax rate has remained unaltered since 1940 and there
are no capital gains or inheritance taxes, neither is there VAT or other
sales taxes. Trusts for non-residents are exempt from income tax
on overseas income and bank deposit interest in Jersey. Jersey has
double tax treaties with the UK and Guernsey only.
Under the Income Tax (Jersey) Law 1961, companies incorporated in Jersey
or managed and controlled from Jersey are regarded as resident for the
purposes of the law. However companies owned by non-residents can
obtain Exempt Company Status and will be treated as not resident in Jersey
for the purposes of the Income Tax law. Companies in which no Jersey
resident has an interest can also apply for International Business Company
("IBC") status. An IBC is treated as resident for tax
purposes but are taxed at rates that are very favourable. A foreign
incorporated company will be regarded as resident for the purposes of
the Income Tax Law if managed and controlled in the Island but, by concession
where the beneficial owners are not resident it is exempt from Income
Tax providing it is not in receipt of Jersey source income.
Future Developments
These tax regimes have received attention in international initiatives
currently in progress and were explicitly identified in the EU Code of
Conduct Group ("Primorolo") report. Jersey is prepared
to co-operate with international initiatives providing this is on an international
level playing field basis. Tax advantages that are available for
international businesses operating in Jersey will therefore be likely
to continue to compare with the Island's reputable competitors.
Jersey has not announced any proposals to change these regimes at the
time of writing.
It has always been our position that we are perfectly willing
to co-operate with the OECD…However, we will only do so in an open and
transparent manner, on an international level playing field basis.
In other words, we will move, but only when others move as well.
Senator Frank Walker, President States of Jersey
Finance and Economics Committee.
For up to date information on international initiatives see the Jersey
Financial Services Commission web site.
Taxes on Consumption
As regards taxes on consumption (e.g. VAT) the position depends on whether
a good or a service is being purchased and the place where the contract
is considered to take place. Many transactions have the potential to fall
wholly or partly within the category of service. Thus a very wide
variety of e-business activities, which are of a service nature, can legitimately
avoid attracting VAT in the country of the customer. Internationally
attention is being given to the distinction to be made between digitised
goods and services but work is at an early stage. Further clarification
can be expected in due course.
In respect of goods exported from Jersey a threshold of £18 exists
below which VAT is not payable for UK resident customers. This threshold
also applies to other EU members albeit at different values country by
country. WorldPay
offer an online VAT advisory service for a nominal fee.
Jersey Post have
an alliance with Indigo
Lighthouse providing fulfilment services from Jersey. This includes
an agency arrangement by which VAT can be collected on goods dispatched
to UK customers. In principal agency arrangements can be established
with other countries.
Customs Duties
Customs duties are not payable on goods moving between EU member states
and the Channel Islands. Restrictions exist on the import and export
of endangered species, textiles, cultural goods, military goods and firearms.
Enquiries on customs matters can be made on line via the Jersey
Customs and Excise web site.
Exports outside the EU will be subject to import duties and / or tariff
quotas that vary from country to country. There may be thresholds
available for low value items imported by post (for example items below
$20 imported to Canada).
Workforce and Expertise
Being a long established and substantial financial services centre, Jersey
has available an outstanding depth and breadth of skills to support diverse
forms of e-business. This includes:
A range of legal firms with outstanding experience of international business.
Accounting practices including all of the big five as well as a number
of others.
Fiduciary businesses that include both independent firms and subsidiaries
of financial institutions. These businesses provide a full set of
company administration services for trading and other companies.
A wide range of banks offering a full range of banking services most
of which are numbered within the world's top 500 financial institutions.
Contact details for all legal practices, accountants, banks stockbrokers
and trust companies are available at focusjersey.com.
A full range of IT services. Larger IT services businesses in Jersey
include, among others, iTEX,
XKO Communication
Systems and Matrix
Computer Services. (iTEX merged with Matrix in January 2001).
Telecommunications services including Internet backbone services are
available from Jersey
Telecoms and Newtel.
Internet payment services provided by WorldPay
and Payoffshore.
Contact details for businesses can be found in Jersey Telecoms yellow
pages (Bizwizz.com).
The workforce is highly skilled and substantial investment is being made
in further developing the IT skills base in the Island.
Infrastructure
Jersey has excellent air links with the UK with frequent daily services
to several London airports and flight times of around 45 minutes.
There are also scheduled flights to Paris and other continental European
and UK destinations.
As a result of substantial on going investment in Jersey's telecommunications
infrastructure the Island offers a highly resilient high capacity telecommunications
infrastructure. In addition to the States owned operator Jersey
Telecoms which has cable links to the UK with back up microwave links
to France. Fibre optic links to France have also been created and telecommunications
markets liberalised. Telecommunications services are increasingly
competitively priced.
Jersey Post offers
a proactive and efficient postal service with links into a UK Royal Mail
hub and separate links to France for continental mail. Jersey Post
also operate an alliance providing comprehensive fulfilment services.
Jersey is believed to offer one of the largest server farm facilities
in Europe, operated by Foreshore.net.
Establishing a Business in Jersey
Procedures for establishing a business are designed to protect the reputation
of the Island and ensure that the benefits to Jersey are commensurate
with the resources required. Jersey welcomes businesses that offer
significant benefits to the Island and these procedures will not be an
obstacle in such cases. Key issues to consider are:
Consent to establish a business required under the Regulation of Undertakings
and Development (Jersey) Law 1973. This law arises out of
policy objectives to contain population and is applied in a pragmatic
and flexible manner. Businesses that are not labour intensive, provide
jobs that can be filled by local people, or that contribute significant
tax revenues or provide opportunities for school leavers are considered
sympathetically. The Regulation of Undertakings law also provides
powers to control the number of staff that may be employed in Jersey.
Licences to employ additional staff that are not "locally qualified"
may be granted where there is evidence that the post cannot be filled
locally.
The Housing (Jersey) Law 1949 sets restrictions on sales and leases of
private accommodation to those coming to the Island. "Essential
Employees" who offer significant economic or social benefit to the
Island may occupy accommodation owned or leased by their employer other
than accommodation restricted to occupancy by local residents.
Additional requirements exist for financial services businesses.
Examples
Businesses that have chosen to establish an operation in Jersey provide
some indication of the diversity of e-business that that can find the
Island an attractive location:
- Royal
Bank of Canada offering offshore internet banking
- Flying
Flowers Group, a direct marketing business with substantial operations
in Jersey and a close working relationship with Jersey Post.
- WorldPay provides
international credit and debit card payment services for Internet transactions.
- FT Financial
Information distributes financial information in multiple electronic
formats
- Indigo Lighthouse
provides fulfilment services in alliance with Jersey Post
- Promail, a
service of Jersey Post, provides a comprehensive mailing house service
capable of accepting mailings electronically
- Oaktree Investment
Management offering portfolio reporting over the internet.
- Picnic House
provide a luxury hamper service shipping worldwide.
- Unicomms offers unified
messaging services
In addition a full range of financial services are provided from the
Island. Increasingly these offer electronic channels of access ranging
from, for example, international call centre banking to online access
to employee benefits administration services provided for corporate clients.
Developments Elsewhere
Interest in offshore e-business is widespread. Other offshore locations
that may be viable locations for ebusiness include Hong Kong, Gibraltar,
Cyprus, Guernsey, Ireland, Isle of Man, Liechtenstein, Luxembourg, Switzerland,
Malta, Cayman, Anguilla, Bahamas, Monaco, Barbados, Bermuda, Costa Rica,
Panama.
Some interesting examples of emerging offshore e-business include:
- Bank of Ireland who have created an Internet bank,
FSharpbank.com in Isle of Man
- Quo
Vadis offering PKI services from Bermuda
- Fundnexus,
based in Cayman, has repositioned to "link fund managers,
administrators and the investment community".
References & Further Information
Sites to visit for up to date information include:
- e-team which provides
comprehensive information for prospective e-businesses wishing to operate
in Jersey
- Guernsey-on-line
which provides information on Guernsey as a location for e-business
- offshore-e-com
a commercial site providing a good range of information and links on
offshore e-business in many locations
- Guernsey
E-commerce web site provides a range of papers on the situation
and possibilities for ecommerce in Guernsey and extensive links
- The Bermuda Ministry
of Telecommunications and E-Commerce provides limited information
on the possibilities for ecommerce in that jurisdiction and links to
other sites of interest.
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