Guernsey – Tax Efficiencies for Individuals, Companies and Funds
Background
Guernsey is a premier international financial centre with an enviable reputation and excellent standards. The Island is also one of the leading jurisdictions providing international corporate and private client services and has developed as a base from which internationally mobile families can organise their worldwide affairs through family office arrangements.
The island of Guernsey is the second largest of the Channel Islands, which are situated in the English Channel close to the French coast of Normandy. Guernsey combines many of the reassuring elements of UK culture with the benefits of living abroad. It is independent from the UK and has its own democratically elected parliament which controls the Island’s laws, budget and levels of taxation.
Taxation of Individuals in Guernsey
For Guernsey income tax purposes an individual is; ‘resident’, ‘solely resident’ or ‘principally resident’ in Guernsey. The definitions relate primarily to the number of days spent in Guernsey during a tax year and, in many cases, also relate to the days spent in Guernsey in several preceding years, please contact: advice.guernsey@dixcart.com for further information.
Guernsey has its own system of taxation for residents. Individuals have a tax-free allowance of £13,025. Income tax is levied on income in excess of this amount at a rate of 20%, with generous allowances.
‘Principally resident’ and ‘solely resident’ individuals are liable to Guernsey income tax on their worldwide income.
Attractive Tax Caps
There are a number of attractive features of the Guernsey personal taxation regime:
- ‘Resident only’ individuals are taxed on their worldwide income, or they can elect to be taxed on their Guernsey source income only and pay a standard annual charge of £40,000.
- Guernsey residents falling under any one of the three residence categories, detailed above, can pay 20% tax on Guernsey source income and cap the liability on non-Guernsey source income at a maximum of £150,000 per annum OR cap the liability on worldwide income at a maximum £300,000 per annum.
- New residents to Guernsey, who purchase an ‘open market’ property, can enjoy a tax cap of £50,000 per annum on Guernsey source income in the year of arrival and the subsequent three years, as long as the amount of Document Duty paid, in relation to the house purchase, is at least £50,000.
Additional Benefits of the Guernsey Tax Regime
The following taxes are not applicable in Guernsey:
- No capital gains taxes.
- No wealth taxes.
- No inheritance, estate or gift taxes.
- No VAT or sales taxes.
Immigration to Guernsey
The Dixcart Information Note: Moving to Guernsey – The Benefits and Tax Efficiencies contains additional information about moving to Guernsey. Please contact the Guernsey office if you have any specific questions or require any additional information regarding immigrating to Guernsey: advice.guernsey@dixcart.com
Taxation of Companies and Funds in Guernsey
What are the Advantages Available to Guernsey Companies and Funds?
- A key advantage for companies registered in Guernsey, is a ‘general’ corporate tax rate of zero.
There are a number of additional advantages:
- The Companies (Guernsey) Law 2008, the Trusts (Guernsey) Law 2007 and the Foundations (Guernsey) Law 2012, reflect Guernsey’s commitment to providing a modern statutory basis and increased flexibility for companies and individuals using the jurisdiction of Guernsey. The laws also reflect the importance placed on corporate governance.
- Guernsey’s Economic Substance regime was approved by the EU Code of Conduct Group and endorsed by the OECD Forum on Harmful Tax Practices, in 2019.
- Guernsey is home to more non-UK entities listed on the London Stock Exchange (LSE) markets than any other jurisdiction globally. LSE data shows that at the end of December 2020 there were 102 Guernsey-incorporated entities listed across its various markets.
- Legislative and fiscal independence mean that the Island responds quickly to the needs of business. In addition the continuity achieved through the democratically elected parliament, without political parties, helps deliver political and economic stability.
- Located in Guernsey, there are a wide range of internationally respected business sectors: banking, fund management and administration, investment, insurance and fiduciary. To meet the needs of these professional sectors, a highly skilled workforce has developed in Guernsey.
- 2REG, the Guernsey aviation registry offers a number of tax and commercial efficiencies for the registration of private and, off-lease, commercial aircraft.
Formation of Companies in Guernsey
A few key points are detailed below, outlining the formation and regulation of companies in Guernsey, as embodied in the Companies (Guernsey) Law 2008.
- Incorporation
Incorporation can normally be effected within twenty four hours.
- Directors/Company Secretary
The minimum number of directors is one. There are no residency requirements for either directors or secretaries.
- Registered Office/Registered Agent
The registered office must be in Guernsey. A registered agent needs to be appointed, and must be licensed by the Guernsey Financial Services Commission.
- Annual Validation
Each Guernsey company must complete an Annual Validation, disclosing information as at 31st December of each year. The Annual Validation must be delivered to the Registry by 31st January of the following year.
- Accounts
There is no requirement to file accounts. However, proper books of account must be maintained and sufficient records must be kept in Guernsey to ascertain the financial position of the company at no greater than six monthly intervals.
Taxation of Guernsey Companies and Funds
Resident companies and funds are liable to tax on their worldwide income. Non-resident companies are subject to Guernsey tax on their Guernsey-source income.
- Companies pay income tax at the current standard rate of 0% on taxable income.
Income derived from certain businesses, however, may be taxable at a 10% or 20% rate.
Details of Businesses Where a 10% or 20% Corporate Tax Rate is Applicable
Income derived from the following types of business, is taxable at 10%:
- Banking business.
- Domestic insurance business.
- Insurance intermediary business.
- Insurance management business.
- Custody services business.
- Licensed fund administration business.
- Regulated investment management services to individual clients (excluding collective investment schemes).
- Operating an investment exchange.
- Compliance and other related activities provided to regulated financial services businesses.
- Operating an aircraft registry.
Income derived from the exploitation of property located in Guernsey or received by a publicly regulated utility company, is subject to tax at the higher rate of 20%.
In addition, income from retail businesses carried out in Guernsey, where taxable profits exceed £500,000, and income from the importation and/or supply of hydrocarbon oil and gas are also taxed at 20%. Finally, income derived from the cultivation of cannabis plants and income from the use of those cannabis plants and/or licensed production of controlled drugs is taxable at 20%.
Further Information
For additional information regarding personal relocation, or the establishment or migration of a company to Guernsey, please contact the Dixcart office in Guernsey: advice.guernsey@dixcart.com.
Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission.
Dixcart Fund Administrators (Guernsey) Limited: Protection of Investors Licence granted by the Guernsey Financial Services Commission
