Guernsey
Executive Summary
Guernsey Not in EU Fiscal Area
The
island of Guernsey, one of the Channel Islands
between England and France, is a British Crown
dependency although in practice is it self governing.
Britain is responsible for its external affairs
including negotiations with the European Union;
under the UK's accession treaty with the EU,
Guernsey forms part of the single market but
is outside the EU fiscal area. Guernsey does
not generally enter double-tax agreements, but
has treaties with the UK and Jersey.
Economy Buoyant But Guernsey Is Full Up!
Guernsey
has a buoyant economy dominated by the finance
sector. Unemployment is very low. The political
stability in Guernsey together with its consistently
low tax status and its international reputation
as an important financial centre make it an
attractive prospect to foreign investors and
workers. To protect the island's limited resources
the government tends to discourage labour-intensive
inward investment that is controlled by non
residents. There are no investment grants or
incentives, but electronics and other knowledge-based
industries have been encouraged.
Guernsey's Lowtax Specialisations
Guernsey
has Europe's largest captive insurance sector,
and also has strong banking, investment fund
and trusts sectors, with very well-developed
advisory and financial infrastructure. The Channel
Islands Stock Exchange is based in Guernsey.
The general rate of corporate tax is 0%, except
for 'finance' companies which pay tax at 10%.
Guernsey v. the EU and the OECD?
Guernsey's
unusual situation with regard to the EU, shared
with Jersey, is both a strength and a weakness.
The island will remain a favoured base for holding
and trading companies working into the EU, and
for e-commerce activity; but it has the EU's
'unfair tax competition' initiative, and the
OECD to contend with. The UK's Edwards Report
gave Guernsey high marks for its regulatory
structure, but after several years of 'hands-off'
policy in regard to Guernsey taxation, the UK
government in 2002 came close to threatening
Guernsey with sanctions if it didn't fall in
line with EU information-sharing rules.
Guernsey
signed a 'commitment' letter to the OECD in
February 2002, but it contained an 'Isle of
Man' level playing field clause making changes
dependent on comparable changes in Switzerland
and the USA.
Guernsey
seems to have emerged from the financial crisis
with its reputation intact, and, following the
April 2009 G20 summit in London, was named on
the OECD 'white list' of territories which have
substantially implemented the internationally
agreed tax transparency standard.
In
November, 2002, Guernsey announced that it planned
to introduce a 'zero/ten' rate of corporation
tax for companies
under which Guernsey's businesses and corporate
entities will be subject to income tax at 0%
from the 2008 tax year. However, businesses
regulated by the Guernsey FSC would be charged
tax at 10%.
Advisory and Finance Committee chief, Deputy
Laurie Morgan said that it was absolutely necessary
for Guernsey to follow the lead of other jurisdictions,
both in terms of increasing competitiveness,
and in order to comply with the European Union's
code of business conduct over taxation. The
new system went into force on January 1, 2008.
In July 2005, Guernsey introduced a retention
(ie withholding) tax under the EU's Savings
Tax Directive in respect of EU resident individuals'
savings interest 'at the same time as the EU
Members States of Austria, Belgium and Luxembourg
and the named Third Countries of Andorra, Liechtenstein,
Monaco, San Marino and Switzerland'.
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