Jersey has introduced a goods and services tax (GST) that will be charged at a starting rate of 3%.
It will apply to most goods and services sold within the British Crown dependency.
A number of European suppliers of CDs, DVDs and contact lenses sell their goods to UK customers from Jersey because there is no VAT/GST regime and no UK VAT levied on low-value imports entering the UK.
Exported goods from Jersey will remain VAT/GST-free, but suppliers will have an increased administrative burden to prove they are indeed exporting their goods and therefore not liable to pay the new tax.
Hannah Dobson, VAT director at Smith & Williamson, said that although Jersey has guaranteed that the GST - introduced on 6 May - will remain at 3% for at least three years (given that standard VAT rates in the EU, UK and France are 15%, 17.5% and 19.6% respectively), a rate increase may be considered justified after that period.
She added that businesses which have set up in Jersey to take advantage of the local tax benefits may now be concerned about how GST will affect them.
'They need to be clear on the rules and organise their affairs accordingly. The administrative burden for relevant businesses will increase, which will mean further costs,' Ms Dobson remarked.
Businesses are only required to register for GST when their turnover exceeds £300,000, although voluntary registration is possible before then.
The additional income from the tax is intended to make up for any shortfall when the island introduces a standard rate of corporate income tax of 0% and a special rate of 10% for specific industries, e.g. finance, next year.
See the States of Jersey website for more information on the new GST.