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In light of the substantial changes companies need to consider in relation to Economic Substance and a recent announcement from Revenue Jersey, we would like to take the opportunity to provide you with an update on a few important matters with regard to Economic Substance.

Coronavirus/COVID-19

Revenue Jersey have recently offered some reassurances to companies with concerns about meeting the economic substance test as a result of the global corona virus outbreak and the disruptions to travel.

In published guidance, the Comptroller has expressed that he will not seek to prejudice companies who temporarily adjust their normal operating practices (e.g. hold virtual meetings rather than physical meetings in Jersey) so as to mitigate the threats from the corona virus outbreak.

Furthermore, the Comptroller has confirmed that such adjustments will not disturb the determination of corporate tax residence of a company, when this is assessed under the ‘management and control’ test of residency.

This is a welcome announcement from Revenue Jersey. 

The new corporate income tax return

Revenue Jersey have now released guidance on the new corporate income tax return and, as expected, the new return will be significantly more onerous to complete than its predecessor; when coupled with the full withdrawal of the “global tax return” mechanism, these changes require due consideration.

Among others, detailed company information may be required to be reported on the return in relation to:

— Business activities
— Income and expenditure
— Board meetings held
— Strategic decisions taken at such meetings
— Confirmation of Core Income-Generating Activities (“CIGA”) conducted per relevant activity
— Where there has been outsourcing of CIGA, relevant details will have to be supplied
— Number of employees, specifying the number of fulltime equivalent employees with reportable qualifications
— Companies will be required to self-assess as to whether or not they have passed the economic substance test

There are a number of subjective questions within the return that require consideration and it is vital that you are able to substantiate the position if subsequently challenged by Revenue Jersey. We recommend that you engage with this process as soon as possible as penalties for late submission / incorrect returns could be actioned against you.

All tax returns will now also need to be accompanied by the company’s financial statements / accounts.

KPMG can help you and your organisation meet your obligations under the new tax return and avoid the consequences of non-compliance.

KPMG Economic Substance Tool

KPMG have designed a dynamic software Tool in order to assist you to assess your requirements under the economic substance rules. The KPMG Economic Substance Tool is especially powerful in organisations which administer entities across a number of jurisdictions, as the rules in each jurisdiction do differ and the Tool can help you identify and deal appropriately with these differences.

If you would like to learn more about the Tool, please visit our KPMG Economic Substance Tool web page and feel free to contact us to organise a conversation or demo.

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