Economic substance requirements for Jersey companies and LLCs

The Taxation (Companies – Economic Substance) (Jersey) Law 2019 (the Substance Law) was enacted in order to address concerns of the EU Code of Conduct Group that Jersey companies could be used to artificially attract profits that are not commensurate with economic activities and substantial economic presence in Jersey. EU Finance Ministers signalled their approval of the Substance Law by whitelisting Jersey on 12 March 2019.

The Substance Law was amended on 1 September 2022 to extend its application to limited liability companies (LLCs) following the coming into force of the Limited Liability Companies (Jersey) Law 2018 (LLC Law). What is said in this guide regarding companies applies equally to LLCs and, therefore, any references to a company should be construed as including a reference to an LLC. Where necessary, additional specific commentary for LLCs has been added in brackets, but the absence of specific commentary should not be construed as meaning that what is said in relation to companies is limited to companies only.

The Substance Law imposes economic substance requirements on companies and LLCs that are tax resident in Jersey that undertake relevant activities in respect of financial periods commencing on or after 1 January 2019. In essence, such companies and LLCs will have to demonstrate that they have substance in Jersey by being directed and managed in Jersey, having adequate people, premises and expenditure in Jersey and conducting core income generating activities (CIGA) in Jersey.