Taxation in Guernsey is the responsibility of the States of Guernsey Income Tax Authority and the principal legislation is contained in the Income Tax (Guernsey) Law, 1975 as extensively amended since 1975. Guernsey does not levy any form of capital gains tax, inheritance tax or value added tax either in respect of fund vehicles or investors in fund vehicles. The income tax position for fund vehicles is detailed below.
The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 as amended (Exempt Bodies Ordinance) provides that a body is exempt from income tax for any year of charge on its income (other than Guernsey source income excluding bank deposit interest) if it is a body of a description set out in Schedule 1 of the Ordinance, has applied for and been granted exemption and meets the conditions of eligibility set out in Schedule 2 of the Ordinance. Exemption has to be applied for annually and is subject to payment of a fee currently fixed at £1,200. Generally, unit trusts and any companies in their beneficial ownership fall within category A of Schedule 1 and the condition of eligibility are as follows:
A company incorporated in Guernsey is treated as resident in Guernsey in any year of charge unless it has been granted exemption under the Exempt Bodies Ordinance. Generally, an investment company can seek exemption on similar conditions as set out above for a unit trust. It should be mentioned that the basic rate of income tax on company profits will be 0%. However, certain regulated businesses will be subject to income tax at 10%.
A limited partnership, whether or not it has elected to have separate legal personality, is transparent for the purposes of Guernsey tax. There is no requirement for the partnership as such to make any returns or pay any fees to the States of Guernsey Income Tax Authority and it is the responsibility of each partner to determine whether he has any liability in Guernsey to tax. A limited partner who is resident in Guernsey, for Guernsey tax purposes is liable to income tax on his share of the profits of a limited partnership whether those profits are generated in Guernsey or elsewhere. A limited partner which is an individual who is not solely or principally resident in Guernsey or a company which is not resident in Guernsey is not liable to pay tax in Guernsey on any income derived from a limited partnership’s international operations, defined as business operations conducted on behalf of a limited partnership with, and investments made on behalf of a limited partnership in, persons who are not resident in Guernsey for the purposes of the Income Tax (Guernsey) Law, 1975.
Although no stamp duty or similar tax is payable on the issue, transfer or redemption of shares in a company, units of a unit trust or limited partnership interests, a Guernsey grant of probate or administration (each of which may incur ad valorem fees) may be required to deal with the shares, units or partnership interests of a deceased holder. Guernsey is free from all exchange control restrictions.
Guernsey has also entered into a number of double taxation agreements and tax information exchange agreements and these are listed below but the list may be subject to change so please check the relevant websites for the latest list as well as additional information and related documents.
| Country | Signed | In force with effect from |
| Cyprus | 15 + 29 July 2014 | |
| Hong Kong | 28 March + 22 April 2013 | 5 December 2013 |
| Isle of Man | 24 January 2013 | 5 July 2013 |
| Jersey 1955 | 1 January 1956 | |
| Jersey 2013 | 24 January 2013 | 9 July 2013 |
| Liechtenstein | 5 + 11 June 2014 | |
| Luxembourg | 10 May 2013 | 8 August 2014 |
| Malta | 12 March 2012 | 10 March 2013 |
| Mauritius | 17 December 2013 | 30 June 2014 |
| Monaco | 7 April 2014 | |
| Qatar | 22 February 2013 | 11 July 2013 |
| Seychelles | 27 January 2014 | |
| Singapore | 6 February 2013 | 26 November 2013 |
| United Kingdom (consolidated text) | 1 January 1951 |
| Country | Signed | In force with effect from |
| Australia | 7 October 2009 | 24 August 2012 |
| Denmark | 28 October 2008 | 4 November 2009 |
| Faroes | 28 October 2008 | 15 January 2010 |
| Finland | 28 October 2008 | 11 November 2009 |
| Greenland | 28 October 2008 | 19 November 2010 |
| Iceland | 28 October 2008 | 26 November 2009 |
| Ireland | 26 March 2009 | 10 June 2010 |
| Japan | 6 December 2011 | 23 August 2013 |
| New Zealand | 21 July 2009 | 8 November 2010 |
| Norway | 28 October 2008 | 5 November 2009 |
| Poland Individuals | 8 October 2013 | 1 October 2014 |
| Poland Shipping & Aircraft | 8 October 2013 | |
| Sweden | 28 October 2008 | 23 December 2009 |
| Country | Signed | In force with effect from |
| Argentina | 22 & 28 July 2011 | 4 January 2012 |
| Australia | 7 October 2009 | 27 July 2010 |
| Austria | 14 May 2014 | 23 November 2014 |
| Bahamas | 29 July & 8 August 2011 | 28 March 2012 |
| Belgium | 25 April & 7 May 2014 | |
| Bermuda | 19 September & 23 August 2013 | 5 April 2014 |
| Botswana | 10 May 2013 | |
| Brazil | 6 February 2013 | |
| British Virgin Islands British Virgin Islands Protocol |
12 & 17 April 2013 25 November & 11 December 2014 |
11 November 2014 |
| Canada | 19 January 2011 | 18 January 2012 |
| Cayman Islands | 29 July 2011 | 5 April 2012 |
| Chile | 4 April & 24 September 2012 | |
| China | 27 October 2010 | 17 August 2011 |
| Costa Rica | 5 March 2014 | |
| Czech Republic | 15 September 2011 | 9 July 2012 |
| Denmark | 28 October 2008 | 6 June 2009 |
| Faroes | 28 October 2008 | 21 August 2009 |
| Finland | 28 October 2008 | 5 April 2009 |
| France | 24 March 2009 | 4 October 2010 |
| Germany | 26 March 2009 | 22 December 2010 |
| Gibraltar | 22 October 2013 | 12 March 2014 |
| Greece | 29 September & 8 October 2010 | 7 March 2014 |
| Greenland | 28 October 2008 | 25 April 2009 |
| Hungary | 11 September 2013 | 7 March 2014 |
| Iceland | 28 October 2008 | 26 November 2009 |
| India | 20 December 2011 | 11 June 2012 |
| Indonesia | 27 April 2011 | |
| Ireland | 26 March 2009 | 10 June 2010 |
| Italy | 5 September 2012 | |
| Japan Japan – extension of taxes covered by TIEA |
6 December 2011 | 23 August 2013 |
| Latvia | 5 September 2012 | 4 October 2013 |
| Lesotho | 3 July 2013 | |
| Lithuania | 20 June 2013 | 8 March 2014 |
| Macao | 3 September 2014 | |
| Mauritius | 6 February 2013 | 5 July 2013 |
| Mexico Mexico – Economic Benefits |
10 & 27 June 2011 | 24 March 2012 |
| Montserrat | 7 April & 19 May 2014 | |
| Netherlands | 25 April 2008 | 11 April 2009 |
| New Zealand | 21 July 2009 | 8 November 2010 |
| Norway | 28 October 2008 | 8 October 2009 |
| Poland | 6 December 2011 | 1 November 2012 |
| Portugal | 9 July 2010 | |
| Romania | 12 & 17 January 2011 | 22 January 2012 |
| San Marino | 29 September 2010 | 16 March 2011 |
| Seychelles | 20 December 2011 | 22 July 2012 |
| Slovakia | 22 October 2013 | 26 January 2015 |
| Slovenia | 26 September 2011 | 9 August 2012 |
| South Africa South Africa – extension of taxes covered by TIEA |
21 February 2011 | 26 February 2012 |
| St Kitts & Nevis | 18 January & 7 February 2012 | 14 April 2013 |
| Sweden | 28 October 2008 | 23 December 2009 |
| Swaziland | 3 July & 30 August 2013 | |
| Switzerland | 11 September 2013 | 14 October 2014 |
| Turkey | 13 March 2012 | |
| Turks & Caicos | 24 April & 24 July 2014 | |
| United Kingdom UK Exchange of Letters |
20 January 2009 22 October 2013 |
27 November 2009 29 July 2014 |
| United States of America Protocol USA |
19 September 2002 13 December 13 |
30 March 2006 |
| Uruguay | 2 July 2014 |
Guernsey is not subject to the EU Savings Tax Directive (the “EUSTD”). However, the States of Guernsey has entered into bilateral agreements with the EU member states to give effect to certain objectives of the EUSTD.
Under a system of automatic exchange of information the details of payments of interest, or other similar income, made to an individual beneficial owner resident in an EU member state by a paying agent situated in Guernsey are communicated to the tax authorities of the EU member state in which the beneficial owner is resident (the terms ‘beneficial owner’ and ‘paying agent’ are defined in the EUSTD).
Under the terms of the bilateral agreements, interest payments may include distributions from, and the proceeds of, shares or units in a UCITS authorised in accordance with Directive 85/611/EEC (as amended) (the “UCITS Directive”) or an equivalent undertaking for collective investment established in Guernsey.
However, the guidance notes on the implementation of the bilateral agreements (issued by the States of Guernsey on 30 June 2005 and 1 July 2005) indicate that the EUSTD applies only to Class A schemes. Where any funds are outside this scope, any payments made will not be subject to the automatic exchange of information.
The object of the US Foreign Tax Compliance Act (“FATCA”) regime is to require “foreign financial institutions” (“FFIs”) to report to the IRS US persons’ direct and indirect ownership of non-US financial accounts and non-US entities. An offshore investment fund will constitute a FFI for this purpose.
On 13 December 2013, the United States of America and the States of Guernsey entered into an intergovernmental agreement (“IGA”) relating to the automatic exchange of information with the US. An IGA has also been entered into between the United Kingdom and Guernsey on 22 October 2013, which has similar reporting requirements to the ones contemplated by the US IGA.
Guernsey (together with Jersey and the Isle of Man) have jointly released revised draft guidance notes dated 31 March 2014 (the “Guidance Notes”) relating to the automatic exchange of information with the UK and the US under the IGAs entered into in 2013 by each Crown Dependency, in order to improve international tax compliance and the implementation of US FATCA.
The revised Guidance Notes (on which the local finance industry has had the opportunity to comment) are intended to provide practical assistance to both business and the Crown Dependency staff who deal with entities affected by the UK and US IGAs and seek to clarify any areas of uncertainty as to the operation of the registration and reporting provisions set out in the UK and US IGAs.