Offshore Jurisdictions of the British Isles
The main British Isles offshore jurisdictions are Jersey, Guernsey and the Isle of Man with Jersey by far the largest in terms of its offshore deposits and mutual funds.
With total assets valued at around 329 billion Euros, Jersey is over twice the size of Guernsey and almost ten times the size of the Isle of Man in asset terms.
Since 1999 consumer interest in the offshore jurisdiction of the Isle of Man has been intensifying and as a result it is growing on average at a rate of 12% per annum. The Isle of Man is a dependency of the British Crown but has its own parliament which controls among other things taxation on the island. Britain is responsible for the defence and foreign affairs of the island which results in a politically stable and militarily safe and protected jurisdiction offering attractive tax advantages.
The Isle of Man has an incredibly experienced Financial Supervision Commission responsible for the regulation of financial services on the Isle and as a result the jurisdiction has strong banking, investment fund and captive insurance sectors.
The Isle of Man has one foot in the EU and one foot firmly planted offshore which results in a unique situation for its inhabitants and financial investors. While the Isle accepts the need to crack down on money laundering it refuses to bow to increased reporting pressure and will do nothing to harm its offshore sector.
The Isle of Man will be affected by the EU Savings Tax Directive when it comes into effect in July 2005; however the jurisdiction has decided to apply the withholding tax option to protect its investors from loss of privacy and also to encourage the development and promotion of investment products that are outside the scope of the Directive.
The Channel Island of Jersey is also a Crown Dependency of Britain but in reality it is self governing with the UK responsible for foreign affairs. Jersey only has double taxation arrangements with the UK and Guernsey and it remains firmly outside of the EU fiscal area. The jurisdiction has developed incredibly strong banking, investment fund and trusts sectors and has recovered from a turn down in investment in 2001 and 2002 and is once again the main offshore jurisdiction of the British Isles.
Jersey was seemingly even more adamant than the Isle of Man to ignore pressure particularly from the EU for information sharing and greater transparency in an effort to crack down on cross border tax evasion and money laundering and it wasn’t until the UK began turning the thumb screws that Jersey reluctantly agreed to come in line with the EU Savings Tax Directive - but like its sister jurisdiction, the Isle of Man, Jersey will also apply the withholding tax option in an effort to protect its investors from privacy loss.
In terms of its political, legal and fiscal standing, Guernsey is very similar to Jersey. Another of the British Channel Islands Guernsey also benefits from a consistently low tax status and as a result it has established a very strong reputation internationally as an excellent offshore jurisdiction and financial centre which has resulted in strong inward investment, incredibly low unemployment and Guernsey is now home to Europe’s largest captive insurance sector. Add to this its strengths in banking, funds and trusts and the fact that the stock exchange for the Channel Islands has its home in Guernsey and you can see it is a very interesting and dynamic offshore jurisdiction.
Falling in line with the other offshore jurisdictions of the British Isles, Guernsey has agreed to the ESD withholding tax option as well.
The attractions of Jersey, Guernsey and the Isle of Man for international investors is manifold and includes the fact that the islands are politically stable, economically strong, directly related to the United Kingdom but independent from it, they ensure the highest levels of investor protection, the financial companies that establish themselves on the islands offer some of the best customer service levels across the entire sector and offer strong brands and competitively priced, impressively low tax investment options.
The attraction of these jurisdictions will possibly be negatively impacted following the introduction of the EU Savings Tax Directive in July 2005 and the resultant perceived loss of investor confidentiality and asset protection from taxation. Anyone who has assets or bank accounts in Jersey, Guernsey or the Isle of Man or who is considering establishing accounts or investments in any of the three jurisdictions should make sure they will not fall foul of the Directive.