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Exempt companies pay a fixed fee of £500 per annum. Income, apart from bank interest, received from local sources is liable to tax at 20%.
An exempt company is not regarded as resident in the Island for Guernsey tax purposes, although it may be regarded as Guernsey-resident by other countries for their own taxation purposes.
It is not possible for a bank or for an insurance company carrying on domestic business in Guernsey to elect for exempt status. However, offshore insurance companies are entitled to do so and this is the basis on which the majority of captive insurance companies in Guernsey are operated. Further details of the basis on which insurance companies are taxed in Guernsey are set out in KPMG's Insurance in Guernsey.
A company may elect for exempt company status only if no resident of Guernsey has any direct or beneficial interest in the company and disclosure of beneficial ownership has been made to the Financial Services Commission. Election for exempt company status is made within three months of incorporation or of becoming resident and annually before 31 March in each calendar year. Different time limits apply to offshore insurers.
Local directors may be appointed and board meetings held locally without affecting a company's exempt status. Administrative and general clerical services may also be carried on in the Island. Neither the holding of board meetings nor the performance of administrative services will of itself result in the creation of a local branch or permanent establishment. Exempt companies can also conduct trading operations without incurring liability to income tax in Guernsey provided that the trading activity is not carried out in Guernsey.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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