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Overview
Guernsey is the second largest of the Channel Islands and is
situated in the English Channel, 130 kilometres south of the English
mainland. The islands lie adjacent to the coast of France and the
Bailiwick of Guernsey includes the smaller Channel Islands of Alderney,
Sark, Herm and Jethou. The Channel Islands are self-governing
dependencies of the Crown of England but they are not part of the
United Kingdom. Neither are they part of the European Union. As a UK
crown dependency Guernsey’s relationship with the EU is defined by a
protocol attached to the UK’s membership. The island complies with EU
directives in the trade of industrial and agricultural products, but is
not subject to any directives or regulations, including those dealing
with harmonisation of taxation, financial services, exchange of
information or social policy.
As an offshore jurisdiction, Guernsey is widely recognized as a
well-regulated financial centre with very well-developed advisory and
financial infrastructure. Guernsey is the home to the offshore
operations of many of the world’s largest banks, investment, and
insurance companies (although Jersey remains by far the largest of the
British Isles offshore jurisdictions in terms of its offshore deposits
and mutual funds). The Finance Industry is Guernsey’s major industry
having grown significantly since the early 1980's. It contributes over
55% of the island's Gross Domestic Product and employs around 6,500
staff in many different sectors. Tourism now takes second place and
Horticulture third. There are over 50 banks in Guernsey representing a
range of countries with concentrations of banks with head offices in
the UK and Switzerland. Other banks are from Bahrain, Bermuda, Canada,
Cyprus, France, Germany, Greece, Hong Kong, Ireland, Italy,
Netherlands, South Africa, Qatar and the USA. Total deposits held with
Guernsey banks at the end of June 2005 reached £72,727 million.
Collective investment funds is a fast growing sector and have been
established in Guernsey for 40 years with around forty fund managers,
administrators and custodians operating in the island. The
international market place for Guernsey open and closed-ended funds is
illustrated by the fact that funds are promoted/sponsored by leading
institutions in over 38 countries. As at the end of June 2005 funds
under management and administration in Guernsey reached a total of
£84.1 billion. Over the year to June 2005, the total value of funds
grew by over £20 billion, an increase of 32.1%.
Since the launch of Guernsey’s Qualifying Investor Fund regime
(QIF) on 7 February 2005, 12 QIF funds have been authorised, of which
six were closed-end vehicles and six were open-ended funds.
Guernsey is also a major centre for the provision of international
trust and corporate services. In 2001 the island was one of the very
first jurisdictions in the world to introduce a comprehensive system
for the regulation and supervision of trust and corporate service
providers (including company directors).
The Guernsey insurance sector is well known in the world of
international insurance with Guernsey now home to Europe’s largest
captive insurance sector.
There are a number of low-tax business formats, including
International Companies, 'Exempt' companies, and Limited Partnerships.
Guernsey does not generally enter double-tax agreements, but has
treaties with the UK and Jersey.
Online News Sources
This is Guernsey: www.thisisguernsey.com
The Guernsey Press: www.guernsey-press.com
Business Environment
The Guernsey Financial Services Commission regulates the financial sector.
Guernsey allows the establishment of companies limited by shares,
protected cell companies, and companies limited by guarantee, with or
without share capital. Incorporation requires disclosure of an entity's
beneficial owners to the regulator. Every company must have a
registered office with books and records kept in Guernsey. There is no
minimum capital requirement.
For taxation purposes companies are classified as 'resident',
'exempt' or 'international'. Resident companies are under the
beneficial ownership or control of Guernsey residents. A company
incorporated in Guernsey or overseas and under the beneficial ownership
of non-residents may apply for tax exempt status. An exempt company is
exempted from income tax on its non-Guernsey source income. There are
no restrictions on investing or doing business in Guernsey but such
activities will be liable to income tax. An exempt company may also
invest on a tax-free basis in another exempt company, an exempt
investment scheme or in Guernsey bank deposits. An exempt company can
hold board meetings in Guernsey and may conclude contracts without
those meetings constituting the carrying on of a business provided that
the only other activities conducted in the island are of an
administrative or clerical nature. An exempt company is not required to
file annual accounts but must file any information necessary to
quantify Guernsey sources of income.
International company status is given to businesses
wholly-beneficially owned outside Guernsey and deriving income
exclusively from non-residents. Banks, specified insurers, and
companies that were previously regarded as either resident or tax
exempt in Guernsey are not eligible to apply for international company
status. An international company is required to submit annual accounts
to the administrator of income tax.
The G-7’s Financial Stability Forum rated Guernsey as a ‘group one’
offshore financial centre deemed to be under ‘good quality’
supervision. In February 2002 Guernsey signed a letter of commitment
with the Organisation for Economic Co-operation and Development
agreeing to exchange information with overseas authorities in criminal
tax matters by 31 December 2003 and in civil tax matters by 31 December
2005. Guernsey was not blacklisted in the Financial Action Task Force
report on money laundering.
Taxes
The provisions of Guernsey's income tax law apply to the islands of
Guernsey, Alderney and Herm. Guernsey has no exchange controls. No
legal restrictions apply to the transfer of profits, the repatriation
of capital invested in Guernsey or the transfer of royalties and fees.
There are no capital gains or inheritance taxes. Resident companies,
like resident individuals, pay income tax at the standard rate of 20%
on worldwide income. The company is entitled to deduct tax at the 20%
rate from dividends paid out of its taxable profits. Any tax so
deducted must be remitted to the income tax office within one month. An
exempt company is exempted from income tax on its non-Guernsey source
income. Exempt companies pay an annual fee of £600. There are no
restrictions on investing in any Guernsey sources such as property but
income derived from such a source will be liable to income tax. An
international company is resident in Guernsey under the income tax law
but can negotiate a rate somewhere above zero but not more than 30%.
The rate of tax is determined on a case-by-case basis and may be set
for a maximum term of five years, after which it can be renewed. An
international company that does not renew its status will be liable to
tax at the standard rate of 20%. An international company must deduct
tax from dividends at the standard rate of 20% (without reference to
the rate of tax at which the company has negotiated). Interest paid by
an international company to a non-resident is not subject to a
deduction of income tax. The interest payment to a non-resident is
treated as an allowable expense when computing an international
company's liability to income tax. There is a dwellings profits tax law
to counter speculation in residential properties. Profits made on
the sale of a dwelling are taxed at the rate of 100%, subject to an
allowance for inflation and expenditures on repairs, improvements or
alterations. Profits from the sale of a property owned and occupied as
a sole or main residence for more than twelve months are exempt from
any tax. The profit on the sale of any property owned for more than
five years is exempt.
It is to be noted however that as a result of pressure from the
OECD and EU, Guernsey has been forced to overhaul its tax strategy.
According to the OECD, the island had five so-called “harmful tax”
regimes – exempt companies, international loan business, international
bodies, offshore insurance companies and insurance companies. They were
listed because the beneficial tax treatment provided is considered to
be “ring-fenced” from the domestic economy – the regime is available
fully, or in part, only to non-residents rather than to residents in
the country offering the measure. In response, Guernsey's advisory and
finance committee published a new corporate tax policy in November 2002
outlining a series of measures to remove the differential taxation
rates favouring exempt and international companies.
Under the new tax regime it is proposed that the statuses of exempt
company and international company will be abolished with effect from 1
January 2008, after which they are to be subject to the 0% or 10% rate
under the new policy. Resident companies general rate of income tax
will be reduced to 0%. A 10% profits tax will be introduced for
specified sectors of companies licensed by the Guernsey Financial
Services Commission. The 10% tax would be introduced for banks and
fiduciaries, insurance managers and fund managers. Domestic and
offshore insurers registered under the Insurance Business (Bailiwick of
Guernsey) Laws 1986-1999 will be subject to the 0% rate. Collective
investment schemes, including closed end investment vehicles will
continue under current arrangements. Special rules will be introduced
to ensure that Guernsey resident individuals are taxed on a proportion
of the profits of a company in which they have a beneficial interest.
Resident individuals will continue to pay tax at 20% on assessable
income. A published concession, allowing for an automatic 90% deduction
for 'referred loan business', will be withdrawn from 1 January 2008, or
on the date when the equivalent systems in the other UK crown
dependencies are abolished.
The new tax regime is expected to be ratified by the
States in the autumn of 2005 together with the measures necessary to
meet any fiscal deficit the “zero-to-ten” tax regime may produce.
Stock Exchange
The Channel Islands’ Stock Exchange ("CISX") was
launched in Guernsey in 1998 as a joint project with Jersey. Mutual
funds make up about 85% of listings. As of May 2005, the number of
securities listed on the Exchange had reached 1000 with a market
capitalisation of around US $30 billion through 37 members, and
sponsors.
CISX is a member of the International
Federation of Stock Exchanges as a corresponding market, a member of
the International Securities Market Association and the European
Securities Forum. It was approved by the US Securities and Exchange
Commission (SEC) in 2002, the UK Inland Revenue later in the same year
and the UK Financial Services Authority (FSA) in 2004. The exchange
does compete directly with the London Stock Exchange and others around
the world, but has developed specialist niches in floating property
funds, open and closed-ended investment funds, debt, securities and
special purpose vehicles.
Key Contacts
Guernsey Financial Services Commission
PO Box 128
La Plaiderie Chambers, La Plaiderie,
St Peter Port, Guernsey,
Channel Islands, GY1 3HQ
Telephone: (44) 1481 712706 / 712010
Facsimile: (44) 1481 712010
Email: info@gfsc.gg
Website: www.gfsc.gg
Guernsey Chamber of Commerce,
Suite 3, 16 Glategny Esplanade,
St Peter Port GY1 1WN
Tel: (01481) 727 483;
Fax: (01481) 710 755;
E-mail: director@chamber.guernsey.net
Internet: www.chamber.guernsey.net
Key Stats
Country description:
Guernsey; the Bailiwick of Guernsey.
Capital: Saint Peter Port. Population: 65,228 (July 2005 estimated) of
which 65% are Guernsey-born Guernsey and Jersey make up the
Channel Islands and are UK crown colonies or dependencies. The people
of Guernsey are British citizens. The UK government may legislate, with
consultation, on behalf of Guernsey on matters relating to defence,
foreign policy and broadcasting. Guernsey is not represented in the
UK's parliament. Alderney, Sark, Herm, Jethou, Lihou, and Brecqhou are
Guernsey’s dependencies.
Currency: US$1 = £0.56 British pound (September 2005). The Guernsey
pound is at par with the British pound. British pounds are
accepted.
Legal system: Based on British law and local statute. Guernsey has
a Magistrate’s Court and a Royal Court. The baliff or his deputy
presides over the Royal Court. Final appeal is to the London Privy
Council.
Government:
The head of state remains the British monarch
(Queen Elizabeth II) who is represented by Lieutenant Governor and
Commander-in-Chief Lt. Gen Sir John FOLEY (since 2000) . A new form of
local government structure came into effect after the 21 April 2004
election. The legislative body, the States of Deliberation, is
made up of 45 deputies elected from seven districts. A new post of
chief minister (Laurie Morgan since 1 May 2004)was created along with a
deputy chief minister, both elected by the States. Government consists
of a Policy Council, 10 departments and five committees. The
departments are headed by ministers (chosen from the elected deputies),
each of whom will sit on the Policy Council, an overall coordinating
body for the departments and the committees. The chief minister sits as
head of the Policy Council and may not serve as an ordinary minister.
States deputies may not be ministers of more than one department. Each
of the five committees are headed by chairmen chosen from the elected
deputies. The islands of Alderney and Sark continue to have their own
parliaments. The States of Alderney
consists of an elected president and 12 people's deputies. Two members
of the Alderney States who sit in Guernsey's States will continue to do
so. Sark's government, the Chief Please, is made up of 40 tenants or
landowners and 12 people's deputies and has no representation in
Guernsey's States.
Elections for the States of Alderney were last held on 21 April 2004.
Economy: Financial services - banking, fund management, insurance -
account for about 55% of total income in this tiny, prosperous Channel
Island economy. Tourism, manufacturing, and horticulture, mainly
tomatoes and cut flowers, have been declining. Light tax and death
duties make Guernsey a popular tax haven. The evolving economic
integration of the EU nations is changing the environment under which
Guernsey operates.
Gross domestic product (2003): £1,386 million at market prices, a 3% real growth
Exports of goods and services: £3.2 billion (1999) of which financial services make up 76%
Imports of goods and services: £2.51 billion (1999)
Balance of payments: £661.9 million (1999)
Inflation rate (December 2004): 4.9% annual
Labour force (2001): 32,293 employed. Unemployment at below 1%.
Government accounts (2003): Total revenues of £288 million. Total expenditure: £204 million. Surplus £84 million.
Public holidays (2005)
1 January (New Year); 3
January (New Year Holiday) 25 March (Good Friday); 28 March (Easter
Monday); 2 May (May Day bank holiday); 9 May (Liberation Day); 30 May
(bank holiday); 29 August (summer bank holiday); 25 December
(Christmas); 26 December (Boxing Day) 27 December (Christmas holiday).
Time Zone
GMT. The clock goes forward 1 hour
at 1 am on the last Sunday in March and back to normal time at 1 am on
the last Sunday in October.
Restaurant Guide
We recommend:
No 44 Indian Restaurant
No 44, The Pollet, St. Peter Port
Guernsey GY1 1WF
Tel. 01481 723246
Internet: www.vazonbayhotel.com
L’Escalier
6 Tower Hill
St. Peter Port
Tel. 01481 710088
Christies Restaurant
Le Pollet
St. Peter Port
Tel. 01481 726624
Da Nello Restaurant
46 Le Pollet, St. Peter Port
Guernsey GY1 1WF
Tel. 01481 721552
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