EU VAT requirements do not apply in the Channel Islands.
Situated off the northwest coast of France, the Islands comprise
Jersey, Alderney, Guernsey, Herm and Sark. Each Island is
self-governing with its own legislative assembly and system of law,
albeit the British government is responsible for the Islands'
defence and international relations.
Jersey's VAT exemption, coupled with an EU VAT law that exempts
VAT on goods imported to Member States that are valued between €10
and €22, means that companies based in Jersey can supply goods
direct to customers within the EU free of VAT.
Accordingly, the islands are an ideal base from which to sell
items like CDs and DVDs at a lower price than is possible from the
UK, which have to apply the UK VAT rate of 17.5%.
The Sunday Telegraph reports that Jersey is honouring its
existing licences, granted to retailers including Tesco,
Amazon.co.uk, Asda and Woolworths; it is simply restricting the
grant of new licences. The island has seen an increase in the
number of UK businesses using Jersey as a base – and it wants to
curtail any abuse of the Island's position that accompanies this
growth.
Jersey's Deputy Gerald Voisin, President of Economic
Development, said that the type of business "where UK companies
simply divert sales through Jersey" is against the island's
economic interests and damaging to its reputation for integrity,
good government and principled regulation.
He characterised the diversion through Jersey of VAT-free DVDs
and CDs to UK consumers as low value activity that does not create
local jobs, and a business model that has resulted in negative
publicity for the island.
