Jersey Royal Court dismisses first ever appeal under TIEA Regulations

Posted: 20/06/2013

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The Royal Court of Jersey has dismissed the first ever appeal brought as a consequence of a request for information under a Tax Information Exchange Agreement (TIEA).

Under the Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 the Jersey Comptroller of Taxes has powers to issue a notice requesting information in relation to a taxpayer when a request from a third country is made under a TIEA.

Carey Olsen Jersey partner, John Kelleher, said the landmark ruling had set the precedent for cases of this nature brought before the Royal Court of Jersey.

“The court determined a number of important questions and provided useful guidance on the practical effect of the Regulations and TIEAs," Mr Kelleher said.

This first appeal was against a decision of the comptroller to issue a notice to Volaw Trust & Corporate Services requiring Volaw to produce documents and records that it held in relation to its dealings with Mr Larsen, a Norwegian taxpayer, and certain companies in which it is suspected that Mr Larsen had an interest. The Norwegian Tax Authority had requested the information under its TIEA with Jersey.

Mr Kelleher said: "Of particular interest was the conclusions reached by the court in relation to whether information that predated the entry into force of the TIEA could be obtained, the use to which information obtained in relation to a "criminal tax matter" could be put and the factors that the comptroller should take into account when deciding to issue a notice."

The court agreed with the comptroller that information that predated the TIEA could be obtained if it related to a “criminal tax matter" as the TIEA distinguishes between the date that the agreement came into force for "criminal tax matters" and "all other tax matters".

The court concluded that information obtained for the purposes of a criminal investigation could be subsequently used for any of the other purposes set out in the TIEA with the effect that the information obtained could also be used to conduct a civil tax assessment.

The court also agreed that the comptroller had good grounds for believing that Norway's suspicions in respect of Mr Larsen were well-founded and he was, therefore, entitled to issue the notice under the regulations.

Mr Kelleher said: "The Royal Court of Jersey has recognised that, for TIEAs to operate effectively, the threshold to which the comptroller must be satisfied before issuing a notice cannot be unduly onerous; he is not obliged to resolve issues of foreign law or reach definitive conclusions in respect of an individual's tax liability.

“In a climate where there is an increasing focus on tax transparency, I am sure that there will be further challenges to notices issued by the comptroller pursuant to TIEA requests and it will be interesting to see how this area of the law develops in the future.”

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