eJersey

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.