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Fast track incorproations make it possible to incorproate a company in less than two hours.

Jersey further tightened its regulatory environment in June 1998 with the establishment of a Financial Services Commission (FSC).

The Commission is responsible for the regulation, supervision, development and promotion of the financial services industry on the island. Its role is to maintain high standards of business practice, to enact new financial services legislation, to encourage diversification in the industry and to increase the contribution of the finance industry to Jersey's economy. This body, which was created with a similar structure and role to that of the Financial Services Authority (FSA) in the UK, has assumed much of the work previously dertaken by the Finance and Economics Committee of the States of Jersey. The Commission is a self- financing statutory body corporate, operating indeendently from the States of Jersey Government structure.

There are no capital gains taxes, estate or inheritance duties nor are there any value-added taxes (VAT) or sales taxes in Jersey.

Any company incorporated in Jersey that is neither exempt company nor an International Business Company (IBC) is an Income Tax Company and pays tax in Jersey on its worldwide income at a rate of 20 %. Jersey has full taxation treaties with Guernsey and the UK.

Jersey companies

The two primary types of Jersey companies used for offshore financial planning are the Exempt Company and the International Busiess Company.

All Jersey companies must maintain a registered office in Jersey and the address given to the Jersey Financial Services Commission.

Disclosures

Information regarding the beneficial owner must also be submitted, but is not disclosed outside the Commission. There must be at least two directors for a public company (one for a private company) who must be individuals but may be of any nationality. A company secretary must also be appointed. The share capital of a company may be of any amount in any currency but bearer shares are not per- mitted. The minimum number of shareholders is two of any lity. Ready-made "shelf" compa- are not available, but in 1994 fast track incorporations introduced, allowing for- of a Jersey company in than two hours.

Exempt companies

Under Jersey law, an exempt company pays income 'tax only on Jersey-source income other than interest arising from Jersey bank and building society deposits (no tax on income arising outside the island). An exempt company is not considered a resident in Jersey and residents of Jersey can have no ownership interest in the company. However, locally resident nominees or trustees acting in those capacities for the benefit of non-residents may hold shares in an exempt company.

IBCs

An IBC is taxed on profits international operations epending on the level of rofit. IBCs are not allowed to ade locally. Despite being owned by a on-resident, an IBC, unlike an exempt company, is resident in Jersey for tax purposes (except in the case of local branches of overseas companies) but pays Jersey income tax at substantially reduced rates. IBCs are of also of particular use for companies which have international operations as they provide a tax efficient structure for a range of off- shore activities such as import/export, international finance and also insurance business.

They are quite regularly used in connection with double taxation agreements with other countries which require that traders pay a certain amount of tax in their jurisdiction.

Trusts

Jersey trusts are used in a variety of tax and estate planning procedures for private clients and are often formed with an underlying Jersey company. Although there are various types of trusts, the two most popular in Jersey are the fixed-interest and the discretionary trust.

With discretionary trusts, trustees have the choice as to whom to pay income and capital out of a predeter- mined list of beneficiaries. The person putting assets into the trust, the settlor or grantor, normally gives the trustees a letter of wishes regarding disposal of the trust's income and assets.

The attraction of a discre- tionary trust is that it allows flexibility to meet changing family circumstances and it can also provide a range of fiscal benefits.

In a fixed trust, the settler predetermines disposal of the assets, including the entitlement of each benefi- ciary. The settler can be named in the trust deed or can remain anonymous.

Establishment fees and annual management costs depend on the trustee chosen, the complexity of the trust deed and the amount of work that is involved in administering the trust.

Jersey is party to The Hague Convention on the Law Applicable to Trusts and on Their Recognition. Trusts for non-residents are exempt from income tax on overseas income and on any bank deposit interest arising in Jersey.

An investor's compensa- tion scheme in Recognized Collective Investment Funds is also in operation.

Bank deposits

Despite a background of bank restructuring and the strengthening of sterling, Jersey's banking sector has experienced an impressive amount of growth, with bank deposits rising 8.5 % during 1997 to stand at 97.3bn. pounds. This has fallen back slightly in the first quarter to 31 March to 96.5bn Pounds , due mainly to the recent strong performance of sterling. The best indicator of the strength of this sector is the number of new banking licences issued over the year, which has taken the total to 79 banks registered on the island. New licenses issued have included Australia New Zealand Group (ANZ), Alpha Credit Bank (a wholly owned subsidiary of a major Greek bank), Deutsche bank and Bodenbank (a subsidiary of Defa-Bank Group), and the opening of a new subsidiary of UBS. It is a particularly positive trend that the total banking licenses registered now represent 17 different countries, illustrating that Jersey is now well recognized as an interna- tional banking center.

Funds

A similarly global approach from the funds industry is paying dividends, with funds rising by 50% over the past two years to the end of 1997. These funds are being marketed to investors in areas as varied as the Middle East, Far East, South Africa and, most recently, Australia. Growth in these areas means that Jersey's banking and collective funds sectors now handle around 14% of the world's estimated offshore wealth.

Insurance

Another success story has been the development of the insurance sector in Jersey, which has enjoyed a 100% increase in the number of category 'B' offshore companies registered on the island since the implementation of the Insurance Business Gersey) Law in 1996. The recent granting of "designated territory status" to Jersey by the UK Government for insurance business has secured this positive trend by enhancing the attractive- ness of Jersey as an insurance location to non-LTK long-term insurers. The law allows all insurers based in Jersey to automatically sell products into the UK as long as they comply with the requirements laid down by the Jersey Law and Jersey Financial Services Commission.

Legal changes

On 19 May the States of Jersey approved the Limited Liability Partnerships (Insolvent Partnerships) (Jersey) Regulations 1998, putting in place the final piece of subordinate legislation which will allow the introduction of the Limited Liability Partnerships (Jersey) Law 1997, due to'come into force in Sep- tember of this year.

The LLP legislation will enable both UK and non-UK professional partnerships to establish themselves under Jersey law with limited liability for their partners. The law is a good example of Jersey's responsiveness to the changing needs of its clients.

It addresses the fact that in the current litigious environment it has become increasingly difficult for partnerships to obtain the level of professional indemnity insurance coverage sufficient to protect the personal assets of partners.

The Investment Business(Uersey) Law was passed on 2 June, after extensive consultation with the industry.

The law will formalize a policy of regulation of investment business already being followed on the island by the Jersey authorities and aims to protect the interests of investors in their dealings with stockbrokers, investment advisers and discre-ionary investment managers. Penalties of up to 10 years imprisonment for non-compliance with the Act will apply.

A number of new amend- ments to the Companies (Jersey) Law 1991" designed to provide a range of new options in relation to the incorporation and operation of Jersey companies, are currently out for consultation with Jersey's finance industry.

Key changes proposed in the draft law include: