An international company is treated as being resident in Guernsey for Guernsey tax purposes. In addition it is permitted to undertake international trading activities in Guernsey while qualifying for a special tax regime. Such companies are therefore frequently used where a company needs to establish a physical presence in Guernsey but at the same time wishes to benefit from a low rate of tax.
International company status is available to:
a Guernsey incorporated company;
a foreign incorporated company;
a Guernsey branch of non-resident companies; and
a limited partnership.
The company must be beneficially owned by non-Guernsey residents or by a Guernsey-resident company which is wholly owned by non-Guernsey residents.
In addition an international company must fulfil the following conditions:
derive no income from trading with any person who is resident in Guernsey other than another international company;
not be, and must not have been, a bank or a registered or exempt insurer other than an insurer whose gross premium income arising from any domestic business which it carries on does not exceed 5% of its total gross premium income;
never have been an exempt company; and
never have carried on business or exercised functions in Guernsey (or in the case of an entity constituted in Guernsey anywhere in the world) without international company status.
International companies are liable to pay tax in Guernsey on some or all of their income as the result of being resident for Guernsey tax purposes in Guernsey or as the result of carrying on their business in Guernsey.
Prior to formation in the case of a Guernsey-registered entity, or commencement of business in the case of a non Guernsey entity, it is necessary to agree a rate of tax to be paid by the international company with the Administrator of Income Tax. This rate will apply for a period of up to five years and must be greater than 0% and not more than 30%. The company pays tax at this rate on all its income no matter whether it is received from Guernsey or elsewhere.
Full details of the beneficial ownership must be submitted to the Financial Services Commission. A formal application for international company status is then submitted to the Administrator of Income Tax. On approval, the Administrator of Income Tax will issue a certificate stating:
the name of the international company;
the dates during which international company status will apply and the date when international company status will expire; and
the specified rate of income tax.
The computation of business profits, losses, annual allowances, etc, follows the same tax principles applying to other companies in Guernsey and an income tax return must be submitted each year.
Interest paid by an international company to non Guernsey residents is not subject to withholding tax. In common with other companies resident for tax purposes in Guernsey, a Guernsey-incorporated or otherwise resident international company may, but does not have to, withhold tax from dividends paid at the standard rate of income tax of 20%. In practice, tax would seldom be withheld on dividends paid by an international company.
If the international company elects to pay tax at a rate lower than 20% then it will not be able to take advantage of the Guernsey-UK double tax treaty.
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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