Guernsey's benign tax climate can prove an attractive
base for both individuals and businesses says St John Robilliard.
The second largest of the Channel Islands, Guernsey consists of
some 24 square miles and has a population of just over 61,000. It
is at a hub of a thriving set of financial services industries and
unlike its somewhat larger sister, Jersey, provides more flexible
opportunities both for individuals wishing to establish residence
and for companies seeking to relocate there.
EU and certain other European citizens enjoy a right of
establishment there and are able to purchase "Open
Market" property without the need of seeking any formal
permission. The Open Market consists of approximately 7% of the
housing stock and includes such things as luxury apartments with
prices of just over a million pounds running to country houses
supported by their own estates running up to five or six million
pounds. Residing in such a property also means that the individual
may take up any occupation without the need of getting a consent
(for those not so housed and who lack "Local Market
qualifications," by a combination of birth and residence in
the Island, a licence is required under the Housing (Control of
Occupation) (Guernsey) Law, 1994).
When acquiring such properties the purchaser is not required,
unlike the position in Jersey, to pay a minimum amount of Income
Income Tax is the only direct tax of note and has been at a flat
rate of 20%, after allowances, for many years. There is a
distinction of being simply "resident" and being
"principally resident" or "solely resident". A
person is resident where:
He spends at least 91 days in Guernsey in that year of charge
(in Guernsey the calendar year); or
He has spent at least 35 days in Guernsey in that year of
charge and during the proceeding 4 years has spent at least 365
days in Guernsey.
Those who are resident in Guernsey but not principally or solely
residents simply pay Guernsey tax on:
Guernsey source income; and
income remitted to Guernsey.
A person is "solely resident" if he is:
resident in Guernsey;
has not spent 91 days or more in any other jurisdiction in that
Finally a person is "principally resident" if:
he spends at least 182 days in Guernsey; or
has spent 91 days in Guernsey in that relevant year and in the
four preceding years spent 730 days or more in Guernsey.
Those solely or principally resident pay tax on their world-wide
The "midnight rule" is applied, so that a person is
considered present in the Island if he is in Guernsey at midnight
on the relevant day.
Individuals living in Guernsey may still take advantage of
various Guernsey tax planning opportunities which include:
If they are the settlors of settlements from which they, their
spouses and minor children are excluded from the possibility of
benefiting, the income of such a settlement would only be liable to
Guernsey Income Tax if paid out to a Guernsey resident
As Guernsey has no capital gains tax, benefiting from a pure
"capital" settlement is tax free.
Guernsey residents may contribute to retirement annuity trusts
where there is an annual contribution upper limit for tax relief of
£20,000 a year. However, those relocating to Guernsey may
transfer existing schemes in without any upper limit.
In order to attract the seriously wealthy from tax-year 2008
onwards, there is likely to be an upper cap of tax on non-Guernsey
Following pressure from the EU, Guernsey is introducing at the
beginning of 2008 a new corporate tax rate of zero in place of the
current rates of either 20% or the flat rate £600 which an
"exempt" company pays. Only banks and licensed utilities
will be liable to tax under this.
Guernsey does not have any legislation requiring governmental
consent to set up a new business with the exceptions of licensed
financial services businesses (such as a banks, insurance
companies, and fiduciary companies) in which case a consent must be
obtained from the Guernsey Financial Services Commission, and
miscellaneous matters such as gaming. Outside that, and subject
only to the points made above about housing and immigration,
businesses are free to set up and enjoy the new zero per cent tax
rate which, will include the facility to dividend profits gross to
non resident shareholders without the payment of any tax.
Both the current and the "2008 changes" are generating
considerable interest, both with regard to new residents and new
businesses in the Island.
Many people are baffled by trusts, the purpose of which they don't fully comprehend. Some even regard them with suspicion, as tools of of opaque tax evasion strategies of a type favoured by wealthy individuals.
We were recently instructed by a Bank in relation to a regulatory matter. The Bank had made a suspicious activity report to the Financial Investigation Unit ("FIU") due to their concerns about the potential source of funds in an account.
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