Use of Jersey Corporate Structures by Singapore Crypto Fund Managers and the Jersey-Singapore Double Taxation Agreement

Introduction

Singaporean asset managers are increasingly making use of Jersey structures for the establishment of funds dealing with crypto-currency assets, to take advantage of a Double Taxation Agreement (“DTA”) which benefits Jersey domiciled corporate structures managed in Singapore.

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How the Jersey-Singapore DTA supports crypto funds

Although Cayman and BVI structures are more familiar to Singaporean managers, Jersey provides a tax neutral solution for regulated Singaporean fund managers to establish Jersey funds investing in cryptocurrency, through an agreement between the two jurisdictions covering funds managed in Singapore and domiciled in Jersey using corporate structures.

The DTA is designed to prevent double taxation where the same income is taxable in two jurisdictions, and:

  • helps determine the taxing rights (if any) of one jurisdiction over a resident of the other jurisdiction; and
  • provides certainty of tax treatment for cross-border trade and investment.
Under the Singapore-Jersey DTA, regulated Singaporean fund managers are able to manage Jersey corporate funds without creating a taxable presence for the Jersey fund in Singapore to the extent that the Singaporean fund manager is deemed to be an “agent of an independent status… acting in the ordinary course of their business”.

The fund structure requires evaluation from a general tax avoidance and principal person test perspective in order to ensure that there are good commercial reasons to establish the fund in Jersey (including Jersey’s reputation as a well-regulated jurisdiction, political and economic stability, extensive infrastructure to support its funds industry with high quality professionals providing tax, legal, accounting and administration services, and being conveniently located within the European time zone) and that it is not with an intention to avoid Singapore tax.

How Jersey supports crypto funds

The Jersey regulator, the Jersey Financial Services Commission, approved the launch of the world’s first regulated Bitcoin investment fund in 2014 and Jersey was one of the first jurisdictions to adopt a regulatory regime for virtual currencies. In addition, Jersey is the domicile of a number of investment funds investing in crypto assets, and the JFSC has issued a guidance note in relation to initial coin offerings/token generation events.

Founded on a stable political infrastructure, Jersey has successfully combined a reliable legal and tax framework with the ability to offer flexible regulatory products that are appropriate for the level of sophistication of the investor base and target audience. The experience and expertise within the Jersey finance industry has attracted global leaders in the fields of private equity, real estate, venture capital and infrastructure, supporting the island to continue to grow its funds specialism and to break new ground in emerging asset classes.

Jersey provides a tax neutral environment for investors with no applicable value added or goods and services tax or capital gains tax. The Island has been “whitelisted” for both OECD and EU tax transparency and economic substance compliance. Amidst a competitive marketplace of financial services jurisdictions and an increasingly global set of international rules, regulations and laws on transparency, substance and AML procedures, Jersey has built a reputation on the strength and rigour of its regulation.

Our international Investment Funds team is one of the largest worldwide. Our market-leading team advises many of the world’s most prominent asset managers, fund promoters and institutional investors on the full range of structures used in the market today.

JERSEY
Jonathan HeaneyManaging PartnerT +44 (0)1534 700 786jonathan.heaney@walkersglobal.com
Dilmun LeachGroup Partner*T +44 (0) 1534 700 783dilmun.leach@walkersglobal.com
Christopher ReedGroup Partner*T +44 (0) 1534 700 825christopher.reed@walkersglobal.com
Leanne WallserGroup Partner*T +44 (0) 1534 700 755Leanne.Wallser@walkersglobal.com
Tatiana CollinsSenior CounselT +44 (0) 1534 700 757tatiana.collins@walkersglobal.com
Joseph Barker-Willis Senior AssociateT +44 (0) 1534 700 715 joseph.barker-willis@walkersglobal.com
Tom FothergillSenior AssociateT +44 (0) 1534 700 724tom.fothergill@walkersglobal.com