Guernsey: Guernsey Issues Amended Legislation And Updated Draft Guidance Notes On FATCA-Based Reporting

On 31 March 2015 amendments were made to the Income Tax (Approved International Agreements) (Implementation) (United Kingdom and United States of America) Regulations, 2014 (the "2014 Regulations") which brought FATCA-based reporting into force under Guernsey law. FATCA-based reporting is implemented in Guernsey pursuant to the UK-Guernsey IGA, signed on 22 October 2013 and the US-Guernsey IGA, signed on 13 December 2013 (together the "IGAs"). On 30 April 2015 the States of Guernsey Income Tax ("ITO") published updated draft Guidance Notes relating to the implementation of FATCA-based reporting in Guernsey. The changes to domestic law and further clarification in draft Guidance have been made in response to specific questions and comments received from industry in the lead up to the deadline of 30 June 2015 for filing reports in Guernsey under the US-Guernsey IGA. The changes are also relevant to reports made under the UK-Guernsey IGA, the first of which is due to be filed in June 2016 in relation to the 2014-2015 reporting period. This briefing note provides a summary of some of the key changes to the domestic legislation and guidance published by the ITO.

Summary of Key Changes and Clarifications

Changes to domestic Regulations

  • reversing the automatic application of the de minimis thresholds below which Financial Accounts do not need to be reviewed, identified or reported. Now an election is required for Reporting Guernsey Financial Institutions ("RGFIs") to apply the de minimis thresholds;
  • introducing the requirement that a Sponsoring Entity must agree to perform and actually perform the obligations imposed on its Sponsored Entity, in order for the Sponsored Entity itself to discharge its obligation to comply with the FATCA-based reporting.

Clarifications in revised draft Guidance Notes

  • clarifying the treatment of loans made to, or by, the trustees of a trust;
  • explaining how to determine the value or balance of an Equity Interest in a trust attributable to a beneficiary as at 30 June 2014 based on distributions made to that beneficiary during 1 July 2013 to 30 June 2014;
  • clarifying where interests that are traded on an established securities market relate to a "widely held company" for the purposes of the US-Guernsey IGA;
  • clarifying when Nil Returns are required from RGFIs;
  • clarifying the procedure for election by RGFIs offering to report on the basis of the Alternative Reporting Regime for Resident Non-Domiciled individuals under the UK-Guernsey IGA; and
  • tidying up drafting and making consequential amendments arising from the reversal of the de minimis provisions.

This briefing will be of direct interest to Guernsey resident financial institutions, as well as non-resident financial institutions that have a permanent establishment located in Guernsey through which they conduct the business of a financial institution, for the purposes of compliance with the IGAs. The changes are also informed by the publication on 21 July 2014 by the OECD of their commentary on the Common Reporting Standard ("CRS"). Guernsey, along with 57 other jurisdictions, formally committed to exchange information starting in 2017 in respect of accounts open at the end of 2015, and new accounts open from 2016. A further 35 jurisdictions have committed to implementing the CRS by 2018. It is anticipated that more countries will commit to the CRS over time.

Amendments to Domestic Legislation

The Income Tax (Approved International Agreements) (Implementation) (United Kingdom and United States of America) Regulations, 2015 (the "Amending Regulations") amend the 2014 Regulations which brought into effect under Guernsey's domestic law from 30 June 2014 the obligations for RGFIs arising under the IGAs. Under these obligations RGFIs must apply due diligence procedures to Financial Accounts maintained by them and, where identified pursuant to those procedures, report certain data in relation to Financial Accounts that are held by Specified Persons. In addition, for the purposes of the US-Guernsey IGA only, RGFIs are also required to report payments made to Non-Participating Financial Institutions. In essence, the Amending Regulations make two substantive changes to the obligations of RGFIs. These changes, which are explained in more detail below, are brought into effect on 31 March 2015, although the Amending Regulations will be formally laid before the States of Deliberation of Guernsey (Guernsey's parliament) on 24 June 2015.

Application of De Minimis Thresholds

The 2014 Regulations originally followed the provisions of the IGAs so that the de minimis threshold exemptions, below which value Financial Accounts maintained by Financial Institutions do not need to be reviewed, identified and reported, applied automatically for RGFIs subject to an election to disapply the de minimis exemption. This was the approach adopted by Jersey, but not by the Isle of Man or the UK, where the position is essentially reversed so that all Financial Accounts would need to be reviewed, identified and potentially reported upon unless the Financial Institution had elected to apply the de minimis thresholds.

During the ITO's consultation with industry, some Financial Institutions observed that it would be less burdensome for them to review all accounts, rather than applying different due diligence procedures depending on the varying value of the Financial Accounts maintained. However, a concern was raised that if a RGFI were to elect to review and potentially report on all Financial Accounts maintained by them, in the absence of a legally enforceable obligation to do so, the RGFI could be criticised for acting in its own interests to the detriment of accountholders who would prefer their accounts below the de minimis threshold to remain outside the reporting regime. It was also observed that, except in the case of Pre-Existing Entity Accounts below US$250,000 (or the local currency equivalent), the due diligence procedures to be applied under the CRS do not incorporate the de minimis thresholds under the IGAs.

As a result of the changes brought into effect by the Amending Regulations, all Financial Accounts are to be reviewed in accordance with the due diligence procedures, unless the RGFI elects to apply the de minimis thresholds. An election can be made to apply to all Financial Accounts or to a clearly identifiable group of accounts, such as accounts held by a line of business or by reference to the location of where the account is maintained. No submission to the Director of Income Tax is required in order to notify him of the application of the de minimis threshold. A RGFI would record the election, if made, and retain this record amongst its evidence of the steps taken regarding due diligence procedures applied by the RGFI for the relevant year. The exact format of the written election can be determined by the RGFI. It should be noted that on 21 May 2015, HMRC published updated guidance for UK-based reporting financial institutions to the effect that an election to apply the de minimis thresholds under the UK's regime of FATCA-based reporting is to be made as part of the registration procedures of HMRC's online reporting system known as the Government Gateway.

Sponsoring Investment Entity Regime

In the context of the Sponsored Investment Entity Regime, a Financial Institution that authorises another entity to fulfil its registration, due diligence and reporting obligations on its behalf would, where available, expect to be free of having to discharge those obligations itself. The amendments effected by the Amending Regulations provide that, as long as the Sponsoring Entity agrees to perform and actually performs those obligations, the Sponsored Entity would be regarded as a deemed compliant financial institution and therefore a Non-Reporting Guernsey Financial Institution. As long as the Sponsored Entity remains a Non-Reporting Financial Institution, it will not be subject to the obligations that apply to a RGFI. The corollary of this principle reflects the intention of the US and the UK that, in practice under both IGAs, the Sponsored Entity will remain liable for any failure on the part of its Sponsoring Entity to fulfil its FATCA-related duties.

Clarifications in Revised Draft Guidance Notes

Guidance Notes 7.7 and 7.8 - Trusts as Investment Entities

Guidance Note 7.7 has been amended to include references to Debt Interests, as well as Equity Interests, being Financial Accounts in a trust which is classified as an Investment Entity. Therefore, RGFIs will need to review lenders to whom money is owed by the trustees of a trust as well as holders of Equity Interests in the trust, in order to identify Reportable Accounts.

Additional text in Guidance Note 7.8 also clarifies the position where a loan by the trustees of a trust to a beneficiary is written off. A distribution will arise at the time the loan is written off, and this in turn will result in the beneficiary having an Equity Interest in the trust in the amount written off. The Equity Interest would need to be reviewed and reported if the beneficiary concerned is identified as a Specified Person for the purposes of the IGAs.

Other amendments to Guidance Note 7.7 include the deletion of the words "or benefit" to be consistent with previous amendments made to draft Guidance to the effect that an Equity Interest is attributable to a discretionary beneficiary who is in receipt of a distribution during the relevant reporting period.

In the case of a pre-existing account (i.e. an account that was maintained by the RGFI as of 30 June 2014), the amount of distributions (directly or indirectly) made to a discretionary beneficiary during the period 1 July 2013 to 30 June 2014 should form the basis of determining the value or balance of an Equity Interest attributable to that beneficiary as at 30 June 2014. This value or balance would then be used to determine whether the account is below the de minimis threshold (where elected to apply). The value is also used to determine whether the pre-existing account is a Lower Value Account or a High Value Account for the purposes of deciding whether to apply the standard due diligence review based on electronic records or whether an enhanced review is required based on paper records and actual knowledge known to the relevant relationship manager for the account.

Guidance Note 12.10 - Debt or Equity Interests regularly traded as an established Securities Market and the US-Guernsey IGA

Equity or Debt Interests of an Investment Entity that are "regularly traded" on "an established securities market" are not Financial Accounts for the purposes of the IGAs. Guidance Note 12.10 sets out what is meant by "regularly traded" and "an established securities market" for the purposes of the US-Guernsey IGA. The test for "regularly traded" requires there to be a meaningful volume of trading with respect to the interests on an on-going basis. Applying these tests, Guidance Note 12.10 said that it may be considered that where interests are traded on an established securities market and relate to a "widely held company", there can be a presumption that a meaningful volume of trading has occurred, unless this presumption is rebutted by evidence to the contrary. The amendment to this Guidance Note goes on to explain that a company may be viewed to be "widely held" if the company is ultimately owned by or on behalf of 25 or more unconnected natural persons, and no majority (greater than 50%) interest in the company is ultimately owned by or on behalf of five or fewer natural persons and natural persons connected with them.

Additional text also says that in determining ultimate ownership in these circumstances, it is necessary to look at any entity (including a corporate) shareholder to identify the beneficial ownership of such shares. However, if it is reasonable to assume from information that the Financial Institution holds for regulatory or customer relationship purposes, or from publically available information, that the entity (including a corporate) shareholder is itself widely held or holds such shares for a wide group of beneficial owners, no further investigation is required. This additional clarification would assist where shares are held in a company by one or two investors that hold those shares for a wide group of unconnected beneficial owners, for example by the trustees of a large pension fund.

Guidance Note 19.3 - Nil Returns by RGFIs

RGFIs that have registered on Guernsey's online reporting system, the Information Gateway Online Reporting System known as "IGOR", are required to submit Nil Returns on an annual basis where there are no UK or US Reportable Accounts for the specified year. Nil Returns will be made by ticking a box entry on IGOR.

Financial Institutions which do not have US or UK Reportable Accounts are not obliged to register on IGOR for the purposes of reporting under the IGAs and will not be required to file a Nil Return.

If a RGFI permanently changes its customer base so that it has no US or UK Reportable Accounts maintained in Guernsey, the Financial Institution will be able to de-register itself from IGOR. Further information on the practicalities of using IGOR are to be issued by the ITO in due course.

Guidance Note Appendix 3B - Election by RGFI to offer ARR

The Alternative Reporting Regime ("ARR") is relevant to the UK-Guernsey IGA only and is available only to UK resident non-domiciled individuals ("RND") that have claimed, and are entitled to file tax returns in the UK on, the remittance basis of tax. The ARR, where available, requires both the RGFI and the RND to make certain elections and the RND is required, in addition, to provide a self-certification in relation to his or her tax status.

Appendix 3B of the Guidance Notes has been amended so that it is clear that the election to provide ARR by the RGFI to its clients does not need to be filed with the ITO. The election must be in writing and, if made, must be retained in the RGFI's records.

Drafting and Consequential Amendments

There are a number of changes that have been made to the Guidance Notes to reflect drafting changes for consistency with the IGAs and consequential amendments following the requirement to elect to apply the de minimis threshold (reversing the previous position under the 2014 Regulations). The latest version of the draft Guidance Notes is the 4th iteration since they were first published on 31 January 2014, and will continue to be the subject of on-going discussions between the ITO and members of the finance industry.

Further Reading

The following links will take you to useful reference documentation:

Latest draft Guidance Notes published 30 April 2015

The Income Tax (Approved International Agreements) (Implementation) (United Kingdom and United States of America) Regulations, 2015 effective 31 March 2015

Intergovernmental Agreements and related Documentation published by the States of Guernsey Income Tax

Carey Olsen bulletin March 2015: Listed Guernsey and Jersey Funds - FATCA Reporting Deadlines are Looming. Are you ready?

Carey Olsen bulletin November 2014: Guernsey Issues Bulletin to update draft Guidance Notes on FATCA-Based Reporting

Carey Olsen bulletin September 2014: Guernsey Issues Regulations to implement FATCA-Based Reporting

Carey Olsen bulletin February 2014: Guernsey and Jersey Issue Draft Guidance Notes for FATCA-Based Reporting

Carey Olsen bulletin August 2013: FATCA based reporting for Guernsey

Carey Olsen bulletin June 2013: Coping with TIEAs in Guernsey

Carey Olsen bulletin May 2013: Guernsey's Journey Towards FATCA Based Reporting

Carey Olsen bulletin April 2013: Memorandum of Understanding Between Guernsey and HMRC

Carey Olsen bulletin March 2013: FATCA Based Reporting and IGAs for Guernsey

Carey Olsen bulletin October 2012: FATCA IGAs for Crown Dependencies

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Jan 2018, Conference, St Peter Port, Guernsey

In association with the Guernsey Training Agency, we are pleased to offer a unique, interactive event that will explore the role of integrity in the modern employment relationship, with a particular focus on the financial services sector.

15 Mar 2018, Seminar, St Peter Port, Guernsey

We are once again sponsoring C5 Fraud, Asset Tracing & Recovery which is due to take place on 15-16 March 2018 (tbc) in Geneva.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions