Income Tax (Amendment No. 41) Jersey Law 201-

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A decision made 3 April 2012:

Decision Reference: MD-TR-2012-0038
Decision Summary Title:	Income Tax (Amendment No. 41) Jersey Law 201-		Date of Decision Summary:	30 March 2012
Decision Summary Author:	Director of Tax Policy		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Income Tax (Amendment No. 41) Jersey Law 201-		Date of Written Report:	30 March 2012
Written Report Author:	Deputy Director of Tax Policy		Written Report : Public or Exempt?	Public
Subject: Lodge au Greffe Income Tax (Amendment No. 41) (Jersey) Law 201- and an Acte Operatoire to introduce an international pension regime.
Decision(s): The Minister decided to lodge ‘au Greffe’ the Income Tax (Amendment No. 41) (Jersey) Law 201- in order to introduce an international pension regime. The Minister further decided to lodge an Acte Operatoire so that the legislation may have immediate effect.
Reason(s) for Decision: To enable the Income Tax (Amendment No. 41) (Jersey) Law 201- to be lodged ‘au Greffe’ with a request for debate in the States at the earliest opportunity.
Resource & Manpower Implications: The area of international pensions has been identified by the finance industry as a potential growth market and a means of diversifying Jersey’s private wealth offering, creating new opportunities and jobs. Usage of the regime will be monitored so as to maximise the benefits to the island. The staffing implications associated with administering the international pension scheme will be met by existing Taxes Office staff.
Action required: Forward the Income Tax (Amendment No. 41) (Jersey) Law 201- to the Greffier of the States and request that the projet be lodged ‘au Greffe’ for consideration by the States at the earliest opportunity.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Income Tax (Amendment No. 41) (Jersey) Law 201-

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Treasury and Resources

Ministerial Decision Report

INCOME TAX (AMENDMENT NO. 41) (JERSEY) LAW 201-

Purpose of Report

The purpose of this report is to enable the Minister for Treasury and Resources to lodge the draft Income Tax (Amendment No. 41) (Jersey) Law 201- to introduce an international pension regime.

Background

The “Recognized Pension Scheme” created by the Income Tax (Amendment No. 41) (Jersey) Law 201- is a Jersey based pension scheme which is open to both non-Jersey resident and Jersey resident individuals. It is designed to allow individuals worldwide, irrespective of their tax residence, to save for their retirement in a safe and secure environment. It has been introduced in response to a request from Jersey’s finance industry to create an international pension which can be offered as part of the industry’s services for global clients.

Proposal

Jersey Finance Limited approached Government, on behalf of Jersey’s finance industry, to seek the introduction of an international pension regime in Jersey. The finance industry has identified the area of international pensions as a potential growth market and a way to diversify the private wealth offering of the finance industry.

The industry’s initial market is likely to be pension transfers from the UK where the relevant individual is leaving the UK to live abroad and wishes to transfer their existing pension scheme out of the UK. Such pension transfers are made possible under the UK’s Qualifying Recognised Overseas Pension Scheme (“QROPS”) rules. The Recognized Pension Scheme (“RPS”) has been designed to be fully compliant with the QROPS rules, but it is not designed to be limited to this market. Once Jersey has established a track record in the area of international pensions the intention is to open up other markets and forms of retirement saving.

A pension scheme may be recognized by the Comptroller of Taxes provided it meets the conditions outlined in the law, together with such other conditions as the Comptroller of Taxes thinks fit to apply. As a consequence a RPS will have the following characteristics:

- there will be no Jersey tax relief for contributions made to a RPS;

- no Jersey tax will be payable on benefits paid out of a RPS;

- the funds in a RPS will grow free from Jersey tax;

- no benefits can be paid out of a RPS until a member reaches the age of 55 (except in the case of the member’s death or the member suffering from serious ill-health);

- at least 70% of the funds in a RPS must be designated to provide the member with an income for life; and

- there is the ability to pay benefits to a limited category of other people on the death of the member.

The RPS is a pension scheme which is designed to help individuals to save for their retirement and, as such, there are significant Jersey tax implications if the applicable conditions are not adhered to or individuals attempt to take benefits which are not permitted under the law.

Recommendation

It is recommended that the Minister for Treasury and Resources approves the Law Amendment and the attached report and signs the declaration of compatibility with the European Convention on Human Rights and the Decision Summary and that the documents be lodged au Greffe so as to allow the Amendment to be debated by the States at the earliest opportunity.

Reason for Decision

To enable the Income Tax (Amendment No. 41) (Jersey) Law 201- to be lodged ‘au Greffe’ with a request for debate in the States at the earliest opportunity.

Financial and Resource Implications

Based on independent advice, it is expected that accepting transfers from UK pension schemes into the RPS could generate annual tax revenues of approximately £1.2m and an additional 120 jobs. Due to the lack of detailed market information and reliable data, no advice has been sought on the benefits expected to arise from other markets and forms of retirement savings which may utilise the RPS, but additional benefits are expected to arise.

For the majority of Jersey residents it remains advantageous to save through the existing domestic pension schemes. However a small proportion of the population may choose to save for their retirement in a RPS.

Independent advice has been sought on the potential cost of introducing the RPS, which suggests that the cost, based on prudent assumptions, could be around £4.5m per annum. This analysis is based on attempting to predict taxpayer behaviour and cannot be determined with any certainty. Nor can the additional benefits (such as uptake in non-UK markets) be quantified at the current time. It is considered, on balance, that the potential for immediate job creation and diversification of the financial service sector warrants the creation of the RPS.

The RPS will be closely monitored and appropriate steps taken to ensure that it results in a net benefit to the island.

The manpower resource required to administer the RPS will be dealt with by the Pensions Manager within the Taxes Office and hence no additional manpower is required as a consequence of the introduction of the RPS.

Report author : Deputy Director of Tax Policy	Document date :30 /03/12
Quality Assurance / Review : Business Manager	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2012-0038 - Income Tax (Amendment no. 41) Jersey Law 201 - WM\International pension scheme - report supporting MD (02-04-12).doc
MD sponsor : Director of Tax Policy