Income Tax in Guernsey

Taxes on personal income:

‘Principally resident’ and ‘solely resident’ individuals are both liable to Guernsey income tax on their worldwide income. ‘Resident only’ individuals are either taxed on their worldwide income or alternatively taxed on Guernsey-source income and can opt to pay a set charge of GBP 30,000 in respect of non-Guernsey source income and no additional liability will arise on this income in Guernsey.

Personal income tax rates:

Tax is payable at the rate of 20% on net income after allowances.

It is possible for a Guernsey resident individual to elect for a cap on their income tax liability. Elections can be made for a liability cap of GBP 110,000 to apply for an individual or couple on non-Guernsey-source income, and the liability cap can be increased to GBP 220,000 if an election is made for the cap to apply to an individual or couples' worldwide income.

Furthermore, an election for a liability cap of GBP 50,000 can be made for individuals who purchase open market property on the island in excess of GBP 1,500,000 in the year they take up permanent residence. The cap is applied to an individual or couples' worldwide income and is also available for the three consecutive years after the year of arrival.

Income determination:

Employment income:

While treated solely or principally as a resident of Guernsey, an individual is assessable on the full amount of the emoluments of employment, no matter where the duties are performed. This will include certain benefits. Where a non-resident carries out any duties in Guernsey, the emoluments attaching to these duties are assessable in Guernsey.

Capital gains:

There is no tax on capital gains in Guernsey.

Individual – Residence:

Individuals are considered ‘principally resident’ if they are in Guernsey for 183 days or more or ’solely resident’ if they are in Guernsey for 91 days or more and not in any other jurisdiction for 91 days or more. Individuals in Guernsey between 91 and 183 days are considered ’resident only’. A person spending 35 days in a year and an aggregate of 365 days over the preceding four years in Guernsey will also be considered ‘resident only’ in Guernsey.

Tax administration:

Taxable period:

The tax year is the calendar year.

Tax returns:

Tax returns are required to be filed by the deadline of 30 November following the end of the year of charge.

There is a joint tax return filing for married couples. The income of a married woman who is living with her husband is deemed to be the income of the husband, subject to an election for separate assessment that does not affect total tax payable. A married woman is treated as living with her husband unless there is a permanent separation.

However, couples who married or entered into a civil partnership after 31 December 2015 are taxed separately. Effectively, this introduces a regime that requires all individuals to file their own personal tax returns, even when they are married.

Payment of tax:

Tax, including tax payable on benefits in kind, is deducted from wages under the Employees Tax Instalment (ETI) (Guernsey payroll tax deduction) system. Any additional tax payable is calculated and collected via an income tax assessment. These are issued by the tax office following the submission of the tax return form, and payment is due within 30 days of an assessment being raised by the Income Tax Office.

Taxes on corporate income:

Resident corporations are liable to tax on their worldwide income. Non-resident corporations are subject to Guernsey tax on their Guernsey-source income.

Companies pay income tax at the current standard rate of 0% on taxable income.

Income derived from a banking business, insurance business, custody services business, licensed fund administration business, and regulated investment management services to individual clients (excluding collective investment schemes) is taxable at 10%.

'Banking business' is broadly defined as income that arises as a result of the provision of credit facilities by any type of company and the utilisation of customer deposits. Income derived from licensed fiduciaries (with regulated activities), licensed insurers (in respect of domestic business), licensed insurance intermediaries, and licensed insurance managers is also taxable at 10%.

Income derived from the exploitation of property located in Guernsey or received by a publicly regulated utility company is subject to tax at a higher rate of 20%. In addition, income from retail businesses carried on in Guernsey where taxable profits exceed 500,000 British pounds sterling (GBP) and income derived from the importation and/or supply of hydrocarbon oil and gas are also taxed at 20%.

Exempt companies:

Some collective investment schemes (CISs) and unit trusts may qualify for exempt status, which will place them completely outside the Guernsey tax regime. In addition, anybody that forms part of, or contributes to, the overall structure of a CIS may claim exempt company status. This removes doubt in relation to the entities that are involved in the management or support of a CIS qualifying for exempt status. For each year for which exempt status is sought, a charge of GBP 1,200 is levied.

One of the following conditions, among others, must be met for the company to be considered exempt:

· The company is beneficially owned outside of Guernsey.

· No Guernsey-resident individual or company has a beneficial interest in the company (with the exception of shareholders, loan creditors, or nominees/trustees).

Loans to participators:

If a company makes loans with preferential terms to an individual or entity connected with the company, this will be deemed to be income in the hands of the debtor, and the creditor company will be required to account for, withhold, and pay the tax. Certain exemptions apply.

Local income taxes:

Guernsey does not operate any local government taxes.

Income determination:

Inventory valuation:

Inventory is valued at the lower of historical cost or net realisable value. Use of last in first out (LIFO) is not permitted. Generally, there are no material differences between accounts prepared on a normal accounting basis and those prepared on a tax basis.

Capital gains:

Capital gains are not subject to tax in Guernsey.

Dividend income:

All dividends paid by a standard tax-paying company (0%) are deemed to have been paid from income arising after 31 December 2007 (i.e. after the introduction of the zero/ten tax regime), unless the company elects to have them treated otherwise.

Stock dividends:

Stock dividends may be treated as income.

Interest income:

Interest income received by a standard tax-paying company is taxable at 0%.

Please refer to the Taxes on corporate income section for further information on companies liable to tax at the company intermediate rate (10%).

Royalty income:

Royalty income is treated as income for corporate income tax purposes. Any royalty income received by a standard-tax paying company is taxable at 0%.

Foreign income:

Resident corporations are liable to tax on their worldwide income. Income tax is levied on foreign branch income when earned, and on investment income from foreign dividends, interest, rents, and royalties. Double taxation is mitigated either through unilateral relief (by giving credit for foreign taxation of up to three-quarters of the effective Guernsey rate) or by treaty relief.

Corporate residence:

All Guernsey-registered companies are regarded as tax resident on the island unless granted exempt company status. In addition, a company will be treated as a resident in Guernsey (regardless of where it is incorporated) if shareholder control is exercised by persons resident on the island.

Permanent establishment (PE):

The Income Tax (Guernsey) Law, 1975 defines PE as including:

· a branch
·  a factory, shop, workshop, quarry, or building site, or 
· a place of management.

Note that the fact that a body’s directors regularly meet at a particular place does not, in itself, make that place a PE of that body.

Tax administration:

Taxable period:

The tax year runs from 1 January to 31 December, although companies can adopt a year-end of their choice.

Tax returns:

It is compulsory for all Guernsey companies to file their tax returns online.

Companies are required to file their income tax return on 30 November following the calendar year in which the accounting period ends. Should a company meet the conditions below, a simplified return may be filed without either a computation or financial statements.

In order to qualify for a simplified return, a company must have none of the following:

·  Guernsey employees (other than directors).

· Guernsey-resident individual beneficial owners.

· Income from utilities (e.g. Guernsey water or electricity companies).

· Income from Guernsey properties.

· Income from a banking business.

· Income from domestic insurance business.

· Income from a licensed fund administration business providing administration services to unconnected third parties.

· Income from the provision of custody services.

· Income from the provision of regulated investment management services to individual clients.

·Income from the importation/supply of hydrocarbon oil and gas.

· Income from a retail business where the profits are above GBP 500,000.

· Loans to Guernsey participators.

·  Distributions made to Guernsey-resident individuals.

Should a company have Guernsey-resident individual beneficial members and/or make loans to participators, it will be required to submit quarterly returns accounting for distributions and loans advanced.

Payment of tax:

In Guernsey, tax is payable in two instalments, on 30 June and 31 December in the year of charge (calendar year). If liabilities have not been determined, this may necessitate initially raising estimated assessments based on prior year figures and raising a final assessment when the figures are agreed. Once the Income Tax Office has received the company’s income tax return, they will issue an assessment detailing the final balancing income tax payment due. This amount will be due to be paid within 30 days of the issuing of the final assessment.

Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.

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