With effect from 1 January 2015, The Income Tax (Guernsey) Law,
1975 was amended so that non-Guernsey residents will now be taxed
on their pension benefits paid from an occupational pension scheme
approved under section 150 of the Law, irrespective of whether they
have performed services in Guernsey or not.
Prior to 1 January 2015, any pension benefits paid from a
section 150 scheme were only treated as income arising or accruing
from a source in Guernsey if the services in respect of which the
pension or annuity was payable were performed in Guernsey. If the
services were performed wholly outside Guernsey, that pension or
annuity was not deemed Guernsey source income and did not attract a
charge to Guernsey tax.
From 1 January 2015 any annuity or pension payable out of or
under the provisions of a section 150 scheme is treated as income
arising or accruing from a source in Guernsey.
The elimination of the differential tax treatment between
Guernsey resident and non-Guernsey resident members of section 150
schemes appears to have been driven by the changes made by HMRC to
the rules and regulations governing Qualifying Recognised Overseas
Pension Schemes in 2012 and the subsequent difficulty faced by
pan-island section 150 schemes in accepting transfers from UK
registered pension schemes.
The changes to the Law will enable pan-island section 150
schemes to once again receive transfer payments from UK registered
pension schemes. This will enable new employees moving from the UK
to the Islands to bring their UK pension rights with them.
In practice, as Guernsey has signed Double Taxation Agreements
with Jersey and the Isle of Man, members of pan-island schemes
resident in Jersey or the Isle of Man should continue to be exempt
from liability to Guernsey tax on their pension benefits.
However there may well be some unintended consequences for those
section 150 schemes with members' resident and / or performing
services in jurisdictions with which Guernsey does not have a
Double Taxation Agreement. Trustees and administrators of such
schemes should now be reviewing the resident status of their
members in order to understand what the consequences are.
Trustees and administrators should also bear in mind that the
Law provides that where the person entitled to the annuity or
pension is non-Guernsey resident the trustees or other persons
having the management of the scheme are charged with tax on behalf
of the non-resident person.
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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