The Islands are low-tax jurisdictions and do not have high spending commitments. There is no value added tax, capital gains, gift or wealth taxes, estate duty or capital transfer tax. No stamp duties are payable or levied on patent royalties, dividends, share and bond issues and transfers of securities.
The Islands are divided into different categories for taxation purposes. Guernsey has its own Guernsey taxation laws and levies its own taxation. Guernsey fiscally administers Alderney. Sark has no material taxation.
The experienced team at St Peters Trust together with external advisors provide assistance and support in all matters relating to Guernsey Taxation.
A company is treated as resident in Guernsey if it is managed and controlled in Guernsey, is incorporated in Guernsey and has not been granted an exemption from tax.
The standard rate of corporate tax for companies is 0%. Certain income however is taxed at higher rates as set out below.
Corporate Intermediate Rate - 10% (income from banking business, domestic insurance business, fiduciary business, insurance intermediary business and insurance manager business).
Corporate Higher Rate - 20% (income from trading activities regulated by the Office of the Director General of Utility Regulation, and income from the ownership of Guernsey land and buildings).
Distributions to a Guernsey resident member are taxable on that member at 20%. Distributions to a non-resident member do not attract any liability to Guernsey tax.
The use of a trust resident in Guernsey, having Guernsey trustees, can be very tax efficient.
If the settlor and beneficiaries are not Guernsey resident, no tax liability should result in respect of non-Guernsey source income and most Guernsey source income, such as bank interest and investment income, should not be taxable.
Foundations are listed on the same basis as companies in Guernsey.
Double Taxation Agreements
Guernsey has entered into full double taxation treaties with many jurisdictions, a full list can be found at www.gov.gg/dta. There are also unilateral provisions relating to relief from double taxation whereby relief may be given of up to three quarters of the Guernsey effective rate in respect of tax levied on the same income in any other territory.
Tax Information Exchange Agreements (TIEAs) have been concluded with many jurisdictions. Double Taxation Agreements can assist with the alleviation of withholding tax which may otherwise be deductible and have other benefits, whereas, in the main, TIEAs relate to exchange of information. However Guernsey is a very compliant jurisdiction and whilst a TIEA may not afford taxation advantages per se to Guernsey companies or resident individuals, it should mean that discriminatory practices are not imposed and in some circumstances other benefits result.
Guernsey Residence for Individuals
The Guernsey tax system is very simple and transparent.
The standard rate of income tax for individuals in Guernsey is 20%. There is no capital gains tax, inheritance tax, gift or wealth taxes.
An additional advantage is that there is a tax cap in respect of non-Guernsey source income of £110,000 and worldwide income of £220,000. This may be reduced further to £27,500 if the individual is not solely or principally resident in Guernsey.