Guernsey has been steadily developing as an international finance centre since the mid 1960s when two British merchant banks established operations to provide secure, tax efficient services to their overseas clients. Previously Guernsey's banks restricted themselves largely to domestic business.
The basic reasons why the newcomers chose Guernsey remain valid today: part of the British Isles but fiscally independent of the UK; self-governing and political stable (no party politics); close to London and Europe; good transport and telecommunications services; convenient time zone; experienced professional services; well-educated and adaptable workforce; a benign tax regime.
The latter remains true today - a standard rate of income tax at 20% with no other direct taxes including capital gains tax or inheritance tax. In addition, there is no Value Added Tax (VAT) and no tax is deducted from interest accruing on Guernsey bank accounts. Many new international banks arrived in Guernsey during the 1970s when two external events helped increase the Island's attractions as an international finance centre. These were the abolition by Britain of exchange controls and the determination of Guernsey's relations with the then EEC. Enshrined in Protocol 3 of the Treaty of Accession this places the Island 'in' the EU for trade in physical goods but 'out' for everything else including measures to harmonise taxation and the need to comply with Financial Directives.
It was also in the late 1960s and early 1970s that the Island began enhancing statutory and other controls over its expanding banking, insurance and offshore fund businesses. By 1988 growth had been such that it was necessary to establish the Financial Services Commission as sole regulatory authority. The Commission is not a part of the Island government and its 30 staff are not civil servants. Its senior executives are an qualified and experienced supervisors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.
For further information contact Peter Crook on Tel: +44 (0) 1481 712706 or visit the Guernsey Financial Services Commission Web Site at:
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