Jersey's TIEA with India

04 November 2011

In 2002 Jersey entered into a political commitment to reflect the OECD’s principles in promoting transparency and exchange of information relating to tax matters. Since that date Jersey has signed over 25 Tax Information Exchange Agreements (TIEA’s), including India.

When discussing TIEAs with Indian clients we are often asked the following questions:

What is a TIEA and what is its purpose?

A TIEA is a bilateral agreement between two jurisdictions to establish a formal regime for the exchange of information relating to taxes. The TIEA’s are generally based upon an OECD model agreement to allow a level playing field in how information is exchanged.

The purpose of the TIEA is to act as a tool in the fight against fiscal crime.

How is information exchanged?

Tax information exchanges are by request only and there are strict criteria written into agreements which explicitly state that no “fishing expeditions” are carried out.

Information requests are sent to the “Competent Authorities” of the respective jurisdiction. The Competent Authority requesting the information must provide the following:

1. The identity of the person under examination or investigation;
2. What information is being sought;
3. The tax purpose for which it is sought;
4. Grounds for believing that the information requested is held in the jurisdiction;
5. To the extent known, the name and address of any person believed to be in possession of the requested information;
6. A statement that the request is in conformity with the law and administrative practices of the requesting jurisdiction and the TIEA; and
7. A statement that the requesting jurisdiction has pursued all means available in its own territory to obtain the information.

So long as the above process is followed correctly then the information will be provided between the Competent Authorities within 60 days of the valid request being made.

What does this mean for clients who base their affairs in Jersey?

The process, as set out above, has been designed to protect the privacy and confidentiality of clients who have set-up their affairs legally and correctly, but to identify those who have committed a fiscal crime by effectively exchanging tax information.

Clients in India fear that the TIEA regime could be open to abuse by the Competent Authority in their home jurisdiction, however the OECD and the Jersey authorities have carefully designed the process to minimise any risk of such abuse.

What are the benefits of a TIEA?

Jersey is highly ranked as a top tier international finance centre and it achieves this ranking by complying with international rules, regulations and best practice. Many clients use Jersey as they feel comforted by this reputation. In order to gain and maintain this reputation Jersey needs to demonstrate these qualities, which includes signing TIEAs.

The Indian Government announced in their last budget the issuing of a blacklist of jurisdictions called the “notified jurisdiction” list. The list will be made up of those jurisdictions which are not effectively exchanging tax information. The penalties for being on this list are significant and include onerous reporting requirements and large withholding tax payments. By signing the TIEA, Jersey should feel confident it won’t be included on this blacklist. This will be a huge benefit to clients who use Jersey legitimately.

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