New proposed requirements for an economic substance test for Jersey tax-resident entities have been published to meet the requirements of the EU Code of Conduct Group.

The reforms came into force on 1 January 2019, following approval from the States of Jersey, and established new tests for tax-resident entities carrying on relevant activities, including fund management. The tests require those entities to demonstrate that they meet the economic substance tests, including that they are directed and managed in Jersey, and that certain of their core income generating activities (CIGAs) are undertaken here.

Fund vehicles themselves are out of scope, but it is expected that the majority of fund manager clients will be in scope (as they will have gross income in relation to their fund management activities) and so consideration will need to be given to the level of activity carried out in Jersey, with specific consideration being given to outsourcing arrangements.(1)

In summary the economic substance tests include two key tests, as set out below.

'Directed and managed' test

Fund managers must be directed and managed in Jersey, which requires:

  • meetings of the board of directors (all of whom must have the necessary knowledge and expertise to discharge their duties as a board) in Jersey at adequate frequencies, given the level of decision making required;
  • a quorum of the board of directors to be physically present in Jersey at these meetings;
  • minutes recording the strategic decisions of the company made at these meetings; and
  • retention of all company records and minutes in Jersey.

Having regard to the level of fund management carried on in Jersey, fund managers must:

  • have an adequate number of employees;
  • demonstrate adequate expenditure in Jersey; and
  • have adequate physical assets in Jersey. The guidance notes are expected to clarify that 'physical assets' in the context of fund management means access to premises.

Core income generating activities

Fund managers must conduct CIGAs in Jersey, which includes:

  • taking decisions on the holding and selling of investments;
  • calculating risks and reserves;
  • interest fluctuations and hedging positions; and
  • preparing relevant regulatory and other reports for government authorities and investors.

The guidance notes are expected to confirm that some, but not all, CIGAs must be carried on in Jersey. Consideration will need to be given to ensuring sufficient CIGAs are carried on in Jersey to avoid a letter-box entity characterisation.

The new law proposes sanctions for non-compliance to include financial penalties, strike-off from the register of Jersey companies and reporting to any relevant tax or regulatory authorities in the European Union.


Fund managers should review outsourcing arrangements in respect of Jersey tax-resident companies that fall within the scope of the new law and consider whether the third-party service provider agreements in place meet the tests set out, particularly in relation to provision of office space and appropriate access to sufficiently senior employees.

As the legislation also includes finance and leasing business, consideration should be given to any intra-group financing and any holding company within the group structure with a view to determining whether any entities in addition to the fund manager fall within scope.

It is anticipated that many structures will be compliant with the new requirements already – consideration should still be given to whether amendments and updates are required to policies and procedures as a result of the new law.

Further detailed guidance is anticipated on the precise definition of activities to fall within the scope of the law, and the definition of adequacy in respect of employees, expenditure and premises under the tests.

For further information on this topic please contact Niamh Lalor at Ogier by telephone (+44 1534 514 000) or email ( The Ogier website can be accessed at


(1) Please see here for Ogier's briefing applicable to holding companies and here for Ogier's briefing in respect of banks, insurance businesses and leasing vehicles.

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