Guernsey there is no general capital gains tax,
capital transfer tax, purchase or sales tax or
VAT. The main taxes are income tax, which is levied
on resident individuals, and companies in Guernsey
and Alderney. Until 2009 there was a dwellings
profit tax, which amounted to a capital gains
tax on property sales. Its intention was to defeat
speculation, somewhat similar to the one-time
UK DLT. But in January 2009 the tax was suspended
after it was found that the costs of collection
were exceeding tax collected at least four-fold.
are property rates (taxes), duties up to 2% on
transfers of real property, some minor charges
on issuance of capital, an annual charge of GBP100
on submission of a company's return. Individual
parishes levy minor property-related taxes.
2002, the Guernsey States agreed that an overhaul
of the taxation system was necessary to ensure
that the island remains competitive as a low tax
jurisdiction and international finance services
centre. The centrepiece of Guernsey's Future Taxation
Strategy was a 'zero/ten' rate of corporate tax,
under which Guernsey's businesses and corporate
entities have been subject to income tax at 0%
from the 2008 tax year. However, businesses regulated
by the Guernsey FSC are charged tax at 10%.
July, 2006, Guernsey's parliament passed a set
of economic and taxation changes that included
the zero rate of corporate tax and the capping
of personal tax at GBP250,000.
package of measures included:
zero rate of income tax on company profits,
except for specific banking activities which
will be taxed at 10%;
A continuation of the 20% tax on Guernsey residents'
A personal tax cap of GBP250,000 on non-Guernsey
income and investment income;
Taxation of Guernsey-resident shareholders on
distributed company profits only; and
Commitment that wealth taxes such as inheritance
tax and capital gains tax will not be introduced.
am delighted that this package has been agreed
by the States – it really is very good news for
what is an already buoyant finance industry,"
Peter Niven, the Chief Executive of GuernseyFinance,
announced in July 2006, adding that:
this decision provides the industry and its clients
with certainty going forward and secondly, the
set of measures agreed will further enhance the
environment for doing business in the island."
continued: "Importantly this package has the support
of not just the finance industry but also the
much wider business community. The measures reinforce
the message that Guernsey is very much open for
business and welcomes high net worth individuals."
also clearly promote enterprise within the economy
as a whole, in particular high-earning, low footprint
activities and the feeling within the finance
industry is that they will help attract new business
to the island, especially activities such as hedge
Situation From 2008
main strands of the package came into effect on
January 1, 2008. From this date, the standard
rate of income tax for companies moved from 20%
to 0% and exempt company and international business
company regimes were abolished (other than for
Exempt Collective Investment Schemes – CISs).
As a consequence of this most Guernsey registered
companies are treated as resident for tax purposes.
In addition, the GBP600 annual exempt fee ceased
to be payable from January 1, 2008 (again, other
than for exempt CISs).
change in the tax regime affects only companies
and so unit trusts – which apply for exemption
under Category A of the 1989 Ordinance –
are not affected and they are able to continue
to apply for exemption in the normal way. Companies
which were exempt under Category B (Guernsey registered
companies) and under Category C (non-Guernsey
companies) are able to continue to apply for exemption
if they wish to do so.
which are currently exempt under Category D became
resident for Guernsey tax purposes from January
1, 2008 and their income is chargeable at 0% unless
it consists of income from:
banking activities (which would include money
lending, lease purchase, hire purchase and similar
financing arrangements carried on in the island)
– in which case they would be taxable
derived from activities that are regulated by
the Office of Utility Regulation – in
which case they will be taxed at 20%; and
derived from Guernsey land and buildings (whether
from property development and exploitation of
land or rental income) – in which case
tax will be charged at 20%.
companies previously exempt under Category D,
there is no restriction on the company having
a Guernsey source of income but if it does (other
than bank deposit interest) it has to pay tax
on that income.
the provisions of the Income Tax Law, companies
that are resident for Guernsey tax purposes will
be required to submit income tax returns and computations
even if they are chargeable at 0%. This is because,
in certain circumstances, the profits of the companies
may be chargeable on the beneficial shareholder.
However, a company is not required to submit accounts
and tax computations with its annual tax return
if it can confirm, on the income tax return, that
no Guernsey employees (other than local directors);
has no Guernsey resident beneficial members;
is not carrying out any activities which are
regulated by the Office of Utility Regulation;
has not made any qualifying loans (Chapter XII
of the Income Tax Law);
has no Guernsey rental or property development
does not carry out any banking activities.
exempt under Categories B and C that choose not
to apply for exemption for 2008 and beyond are
also able to submit a tax return without supporting
accounts and computations if they can satisfy
the above conditions.
to the Guernsey Income Tax Department, there may
be a number of reasons why a Category B or C company
may wish to be exempt from Guernsey tax (and therefore
treated as non-resident) rather than being resident
but taxed at 0%. These include:
Guernsey resident investor in a Category A,
B and C entity will be taxed only on actual
distributions made to him. Such investors will
not be taxed on the underlying investment income
nor on any deemed distributions where the company
is exempt, whereas they may be taxed in this
way if they invest in a company which is resident
but pays tax at 0%.
CIS may consider that it is an advantage to
be able to put in the scheme documentation/prospectus
the fact that it is exempt from income tax in
Guernsey. Whilst, in financial terms, there
would be no difference for the CIS, whether
it is exempt from Guernsey tax or whether it
pays tax but at 0%, there may be a perception
amongst potential investors that what is currently
a 0% rate of tax may, in the future, increase.
in exceptional circumstances, a company which
was previously exempt is not able to make the
declaration referred to above, it may have additional,
quarterly, reporting requirements and should notify
the Administrator as soon as possible to ensure
that it is provided with the necessary documentation
to enable it to comply with those obligations.
report from Guernsey’s Policy Council, supported
in a vote by States members in October 2009, has
said that in all probability the island, under
pressure from the EU, will have to accept an increase
in the general corporate tax to 10%.
no clear direction at this stage has been provided
by HM Treasury [in the UK], it is believed that
that a movement from a limited to general corporate
tax rate of at least 10% is the likeliest route
to achieve such support and success, as 10% is
the lowest general rate of corporate tax within
the EU," explained the report.
report added that during a recent series of meetings
between representatives of the States of Guernsey
and HM Treasury it was communicated that that
the EU Code of Conduct Group now considers the
'Zero-10' corporate tax regime of the Crown Dependencies
to be non-compliant with the "spirit"
of the European Union (EU) Code of Conduct for
Treasury went on to advise that the Crown Dependencies
would need to review general corporate tax rates
to comply with the Code not just technically,
but with the "spirit" of the Code.
report makes it clear that the UK Treasury had
confirmed that the general approach was compliant
with international standards and the EU Code of
Conduct. Previous indications from the Code of
Conduct Group were that Zero-10 would be deemed
Policy Council blamed the unprecedented global
economic turbulence of the previous 12-18 months
and the significant deterioration of the fiscal
position of many European countries for the ruling
that the Zero-10 regime is no longer compliant
with the spirit of the Code.
reviewing corporate tax rates - which will be
carried out in close consultation with Jersey
and the Isle of Man - the Policy Council says
that Guernsey must look to provide certainty for
investors, and seek to maintain the respect of
the international community.
is also of fundamental importance that Guernsey
ensures the outcome of the next stage of the corporate
tax strategy be fully sustainable in the long
term, and mitigate any negative economic effects
on our economy,” added the report.
Chief Minister, Lyndon Trott announced to the
States in April 2010 that proposals for a new
corporate tax regime, to replace its 'zero-ten'
system, will be tabled when the budget is debated
to Trott, a public consultation is to be launched
in the summer, with the results of this to be
published in the autumn of 2010.
said that any new corporate tax regime must be
"simple, competitive, internationally acceptable,
based on a solid rationale, promote a sustainable
economy, and must give rise to other benefits
such as double taxation agreements."
government has studied various proposals to replace
the shortfall in revenues under the zero/ten system,
including a general sales tax (GST), higher social
security levies and additional duties on petrol,
alcohol and tobacco. However, then Chief Minister
Laurie Morgan announced in 2007 that Guernsey
did not intend to move forward with a GST (as
Jersey has done), although this the tax may be
introduced as part of Stage 2 of the jurisdiction's
Economic and Taxation Strategy.
mid-2009, Guernsey’s Treasury and Resources
Department took draft legislation for a General
Sales Tax to the States for approval. The government
insisted, however, that it does not seek to introduce
a GST, but instead is merely considering its options.
statement from the Guernsey government underlined
that the department is only presenting an enabling
law. If the States decides to introduce a GST
at a later date, this could be done, following
a debate on the detail and the subsequent preparation
of an Ordinance to this law. It could even be
possible to structure a system broadly compatible
with the system introduced in Jersey.
and Resources Minister Deputy Charles Parkinson
don’t want the appearance of this legislation
to take anyone by surprise. Its publication does
not mean a decision has been taken to introduce
States have previously directed my department
to prepare an enabling law and it is a sensible
move if the States have, at some stage in the
future, to introduce such a tax.”
States would only introduce a new tax after consideration
of a detailed report, which would make recommendations
on issues such as the rate of tax to be applied,
proposed exemptions and collection methods.
July 2005, Guernsey adopted a 15% retention (ie
withholding) tax under the EU's Savings Tax Directive
(STD) in respect of EU resident individuals' savings
interest (although depositors retain the option
to exchange information on savings income with
the tax authority of their home member state).
The retention tax increased to 20% as of July
1, 2008, for three years, after which it will
rise to 35%.
originally drafted, the STD aimed at a uniform
'information exchange' regime to apply across
the Union, with all countries agreeing to report
interest on savings paid to the citizens of other
Member States to those States' tax authorities.
Because of resistance from EU Member States with
strong traditions of banking secrecy, the Commission
had to allow Austria, Luxembourg and Belgium to
apply a withholding tax. The STD also extends
to a number of third countries which are not members
of the EU, including Andorra, Liechtenstein, Monaco,
San Marino and Switzerland. Many of the UK's offshore
financial centres (including Jersey and the Isle
of Man) have been forced to join the STD, along
with the Netherlands Antilles and Aruba.
2009, the Guernsey government released a statement
regarding the Isle of Man’s decision to
switch from a withholding tax system to the automatic
exchange of information from July 1, 2011, when
the withholding tax option currently available
to customers having accounts with Isle of Man
banks as part of a transitional arrangement will
Guernsey government has underlined that it has
always considered the withholding tax arrangement
to be transitional, and has begun a consultation
with industry about a review of the position in
Brown, Chief Executive of the States of Guernsey
commented at the time that:
"The international climate is changing with
regards to exchange of information. We are fully
aware of those developments and have had the position
under review for some time.
commitment to the highest international standards
in transparency is constant."
January 2009, Guernsey released details of further
tax proposals drafted by the government, including
the suspension of Dwellings Profit Tax and amendments
to the 'proportional relief' system. Regarding
the Dwelling Profits Tax, the government stated:
of tax was never the principal purpose and the
tax raised has never been significant –
GBP58,000 over the last 14 years. Seven of those
years produced no tax at all.”
the administrative burden on Income Tax –
with a certificate required for every property
transaction – takes up three people part-time
at a cost of at least GBP17,000 a year. There
are implications too for advocates’ offices,
with consequent costs for those buying and selling
costs of collection have exceeded tax collected
at least four-fold,” said Deputy Charles
Parkinson. “And has the tax prevented property
speculation and kept prices down? In its present
form, my Department believes this tax is not effective
in terms of administration costs, or in achieving
The Dwellings Profit
Tax was suspended by the States under the Dwellings
Profits Tax (Suspension of Law) (Guernsey) Ordinance,
2009. This Ordinance came into force on the 25th
given below relates to the tax regime in force
Scope of Income Tax
Guernsey income tax is based on the Income Tax
(Guernsey) Law 1975 as amended. The States Income
Tax Authority (a permanent committee) controls
income tax, through the Administrator, who assesses
and collects tax. Appeals on income tax matters
are heard by the Guernsey Tax Tribunal. Until
1990, corporation tax (which amounted to an annual
fixed charge) was payable by limited liability
companies registered in but not managed and controlled
from Guernsey. Such companies were still liable
to Guernsey income tax on income from Guernsey
sources. The tax was abolished after exempt status
was introduced for companies in 1989. Income tax
is now payable by all companies resident in Guernsey
or Alderney on income arising from 'business'
widely defined but excluding income chargeable
to Dwellings Profits Tax
Income Tax Rates
The rate of Guernsey income tax is 20%.
companies pay an annual fee of £600.
International Companies pay a rate between nil
and 30% according to the agreement they have negotiated
with the Administrator.
Offshore Legal and Tax
Regimes for further details of the taxation
of offshore entities.
Calculation of Taxable Base
For companies, income tax is normally assessed
for the year of charge (the calendar year) on
income arising in the year of computation, which
is the accounting year of the company which ended
in the year preceding the year of charge, or with
the permission of the Administrator, in the month
of January in the year of charge. Calendar year
(the Year of Assessment). There are special rules
for the opening and closing years of a business.
is defined fairly comprehensively and includes
capital gains. Land and buildings (unless, broadly
speaking, occupied for the purposes of the business)
are chargeable on the basis of 'annual rental
value' (ARV); the rules for calculating ARV are
quite complex and include deductions for various
types of expense.
which are subsidiaries or branches of non-resident
parents are allowed, by concession, a deduction
of 90% of the profits made from international
here for details of Guernsey's Double Taxation
Treaties with Jersey and the UK. There are some
provisions for unilateral relief on taxed income
received from other countries.
expenditure needs to be incurred 'wholly and exclusively'
for the business and includes a fairly normal
range of types of expense; mixed private/company
expenses can often be apportioned.
are capital allowances for buildings (1 1/4% annually
if it is a normally substantial structure) and
for glasshouses (important in Guernsey). For plant
and machinery there is a pooling system for capital
expenditure allowing deduction of 20% of the pool
balance annually. The rules are reasonably complex.
to some conditions, losses may be carried forward;
terminal losses may be carried back two years.
Group relief was introduced by the Income Tax
(Group Loss Relief Amendment) (Guernsey) Law 1997.
Groups must consist of resident, non-exempt Guernsey
businesses and outside ownership of a subsidiary
company in a group is effectively limited to 10%.
deduction is permitted for dividends paid out
by a company; but a Guernsey-resident company
may deduct standard rate tax from dividends paid
out of taxed income (or which would have been
taxed if an actual current year basis was applied).
Resulting overpayments are refunded.
Dwellings Profit Tax
The Dwellings Profits Tax came into force in Guernsey
in 1973, and is governed by the Dwellings Profits
Tax (Guernsey) Law 1975 as amended. The tax is
managed by the Administrator. The purpose of the
tax was to deter speculation in land and buildings;
it imposes a tax of 100% on the profits from sale
of a dwelling or land, unless used
for bona fide residential purposes. The rules
are quite complex, but in practice the tax has
succeeded in its object and it is not very often
imposed. Nonetheless, a business needs to be aware
of it, and to be careful when purchasing or dealing
in real estate or companies owning real estate.
With regard to property
taxation, stamp duty on property worth GBP150,000
or less was abolished to encourage first time
buyers in Guernsey's November Budget 2001.
The Dwellings Profit
Tax was suspended by the States under the Dwellings
Profits Tax (Suspension of Law) (Guernsey) Ordinance,
2009. This Ordinance came into force on the 25th
Taxation of Trusts
When the beneficiaries of a trust are non-resident,
full exemption from Guernsey taxation is given
to foreign income and Guernsey bank interest,
by concession, whether or not the income is distributed.
trustee of a trust with Guernsey-resident beneficiaries
may be charged with tax due on trust income, although
the tax is normally assessed directly on the beneficiary.
The trustee is entitled to any allowances which
would apply to the beneficiary.
trusts are treated in the same way as other trusts;
the existence of Jersey unit-holders does not
affect exemption, subject to some conditions.
Taxation of Partnerships
Guernsey partnerships each partner is liable for
income tax on his share of profits, including
partnership income other than from the business
of the partnership. Limited Partnerships are treated
in the same way as ordinary partnerships.
are treated as businesses under Guernsey law,
and the calculation of profits follows the same
rules as it does for companies (see above) including
allowance for losses and capital allowances. The
treatment of capital items used by the partnership
is the same whether the items are owned by all
the partners or only some of them. This provision
does not apply to lettings or to capital items
provided to the partnership in return for a consideration
which is itself deductible from profits
Taxation of Insurance Companies
Guernsey there are various special regimes for
taxation of insurance companies.
life insurance company, or the life insurance
business of a composite insurer, is taxed according
to the decision of the Administrator, either
a normal business, with investment gains and
losses being counted in (other than profits
reserved or expended for policy-holders or annuitants);
the basis of gross investment income adjusted
for various types of expense and income, as
long as the final taxable amount is not less
than it would be under 1., with any excess being
carried forward as a loss to future years.
This is a highly simplified version of a set of
on their circumstances, other types of insurer
can choose between a number of different taxation
be taxed as normal businesses;
be taxed on a sliding scale - the rules are
complex, but broadly this results in no tax
on underwriting profits, 20% income tax on Guernsey
income and on the first £250,000 of other
(investment) income, and a nominal rate of tax
on the balance;
be an Exempt Company;
(an irrevocable choice) to be an International
is impossible here to set out the bases on which
a choice might be made, since so much depends
on the nature and circumstances of individual
Filing Requirements and Payment of Tax
The tax year is 1st January to 31st December
and is referred to as the year of charge. Tax
due on an assessment is payable in two halves,
one before 30th June of the year of charge and
one before 31st December; or if the assessment
is late, tax is due within 21 days of the issue
of the assessment.
Dividends are subject to income tax at 20%.
Payments of interest to a non-resident by a
Guernsey 'income tax' company (ie resident company)
are also subject to 20% income tax. By concession,
payments of interest by Guernsey banks to non-residents
or exempt companies are untaxed. Royalties are
treated on the same basis as interest.
from 1st July, 2005, interest and other returns
on savings paid to citizens of EU Member States
are subject to withholding tax at 15% under
the Savings Tax Directive.