Company limited by shares
Guernsey is a highly-reputable jurisdiction with a track record of financial and political stability supported by a robust and mature financial and professional legal and accounting infrastructure.
Companies incorporated in the island benefit from a pragmatic regulation and an attractive tax regime. A 0/10 corporate tax rate, where corporations are subject to income tax at 0%, except businesses conducting financial services regulated by the Guernsey Federal Services Commission, which pay tax at 10%.
Furthermore, there are no taxes on capital gains, inheritance, capital transfer, wealth, value added nor general withholding taxes and exchange controls in Guernsey.
Single-owned companies are available, and ownership can be transferred easily. No authorized capital or capital maintenance requirements, other than a statutory solvency test on dividend distributions. In turn, this means no share premium account requirements and the ability to redeem or repurchase shares out of any capital account.
The incorporation process is a straightforward electronic registration, being possible to do it within 24 hours.
Guernsey companies are easy to manage and it is possible to indefinitely waive annual general meeting and audit requirements.
Its geographical proximity to London and the EU makes it an interesting jurisdiction to establish headquarter of companies doing business in the continent.
There is not a distinction between private and public companies and therefore any company limited by shares may offer their securities to the public.
Furthermore, the Channel Islands Securities Exchange is a recognized exchange for UK tax purposes and is an affiliated member of the International Organization of Securities Commissions and is based in Guernsey.
Guernsey was a pioneer in the establishment of legislation of innovative corporate vehicles as protected cell companies and incorporated cell companies.
Protected cellular companies are entities made up of a core and several ring-fenced protected cells, creating separate portfolios of assets and liabilities which are statutorily segregated.
Although the cells of a protected cell company do not have a separate legal personality, assets and liabilities of each cell must be kept separated and separately identifiable from the assets and liabilities of the protected cell company (core) and of each of the others cell.
Cellular companies have both core capital and cellular capital, which is the capital invested in individual cells.
Creditors of a cell are unable to seek recourse from the assets of any of other cells or of the core. This corporate vehicle provides protection contagion to fund promoters as an umbrella unit trust.
In addition, this corporate structure provides several cost savings such as avoiding to setting up new entities, lower costs on corporate governance, company administration and compliance.
Incorporated cell companies, is similar to a protected cell company, but each cell is a separated legal entity. The rights of the shareholders in the cells of an incorporated cell company are fettered in that the board of each cell is the same as the board of the ICC. Cells cannot act independently of the incorporated cell company that created them but allows each cell to act as independent legal entities with the capacity to contract amongst themselves.
The ICC submits a combined annual validation and only the core company is required to create separate accounts.
Both protected cell companies and incorporated cell companies have become a popular corporate vehicle with the investment fund industry and with the insurance industry, especially captive insurers.
Guernsey tax resident entities conducting relevant activities are subject to meet certain economic substance tests such as having an adequate physical presence according to its business activities and size.
A Guernsey company would be treated as a tax resident in Guernsey if it is controlled and managed from Guernsey, or it is incorporated in Guernsey.
However, a Guernsey company will cease to be tax resident in Guernsey if it is tax resident in another jurisdiction, it is controlled and managed from another jurisdiction, and either the company is tax-resident in another jurisdiction due to a Guernsey tax treaty or the jurisdiction where the company is controlled and managed from has a corporate tax rate of at least 10%.
Companies carrying out relevant activities will need to fulfill substance requirements. Relevant activities are:
- Banking
- Insurance
- Fund management
- Financing and leasing
- Headquartering (provision of senior management or provision of management advice)
- Shipping Business
- Distribution and service center – purchase goods from (to resell) or provide services to non-resident affiliates
- Intellectual property business
- Pure equity holdings
To meet substance requirements, relevant businesses will need to be controlled and managed from Guernsey, conduct its core income-generating activities within Guernsey, meet the adequacy test: an adequate level of qualified employees, an adequate level of expenditure and adequate physical presence (e.g. offices) according to the relevant activity.
With respect to high-risk intellectual property businesses, like in other jurisdictions, more comprehensive requirements will need to be met.
Companies subject to economic substance requirements will need to provide an annual return to the relevant authorities to assess whether they have met applicable requirements.
Guernsey is a high-reputable low tax jurisdiction and an option to consider for international transactions, for investment funds, co-investment vehicles, movable and immovable asset holding, and financial services providers.
Legal
Country code – GG
Legal Basis – Mixed (Customary, French civil and Common)
Legal framework – Companies (Guernsey) Law, 2008
Company form – Company limited by shares (LTD)
Liability - The liability of the shareholders is limited up to the amount of the shares they hold.
Economic Substance – Guernsey addressed economic substance concerns of the OECD by enacting the Income Tax (Substance Requirements) (Guernsey) (Amendment) Ordinance, 2018 and the Income Tax (Substance Requirements) (Implementation) Regulations, 2018.
Guernsey tax resident entities conducting relevant activities are subject to meet certain economic substance tests such as having an adequate physical presence according to its business activities and size.
A Guernsey company would be treated as a tax resident in Guernsey if it is controlled and managed from Guernsey, or it is incorporated in Guernsey and it does not have a tax-exempt company status.
However, a Guernsey company will cease to be tax resident in Guernsey if it is tax resident in another jurisdiction, it is controlled and managed from another jurisdiction, and either the company is tax-resident in another jurisdiction due to a Guernsey tax treaty or the jurisdiction where the company is controlled and managed from has a corporate tax rate of at least 10%.
Companies carrying out relevant activities will need to fulfill substance requirements. Relevant activities are:
- Banking
- Insurance
- Fund management
- Financing and leasing
- Headquartering (provision of senior management or provision of management advice)
- Shipping Business
- Distribution and service center – purchase goods from (to resell) or provide services to non-resident affiliates
- Intellectual property business
- Pure equity holdings (subject to a narrowed economic substance test where the entity does not need to be directed and managed from Guernsey or conduct its core-income generating activities in Guernsey)
To meet substance requirements, relevant businesses will need to be controlled and managed from Guernsey, conduct its core income-generating activities within Guernsey, meet the adequacy test: an adequate level of qualified employees, an adequate level of expenditure and adequate physical presence (e.g. offices) according to the relevant activity.
With respect to high-risk intellectual property businesses, like in other jurisdictions, more comprehensive requirements will need to be met.
Companies subject to economic substance requirements will need to provide an annual return to the relevant authorities to assess whether they have met applicable requirements.
Share capital – There is no minimum capital requirement for a Guernsey Limited Company. There is no statutory requirement for capital to be fully or partly paid on incorporation. Capital may be denominated in any currency.
Shares may be issued with par value or with no par value. Guernsey companies are not required to state in the memorandum and articles of incorporation a limit on the share capital which the company may issue.
Shares must be issued in registered form with or without a share certificate. Bearer shares are not permitted. Fractional shares may be issued.
Subject to shareholder approval, a company may hold shares it has purchased as treasury shares instead of canceling them. Treasury shares do not have any voting or other rights. The maximum number of shares of any class held as treasury shares must not at any time exceed 10% of the total number of issued shares of that class at that time.
Shareholders – Limited companies may be formed by one or more shareholders, who can be either natural or legal persons, residents or non-residents. Details of shareholders are not publicly disclosed.
Directors – At least one director is required, who may be a natural person or a legal entity, resident or non-resident. Directors’ details are available to the public.
Secretary – The appointment of a secretary is not mandatory.
Registered Address – All companies in Guernsey must have a registered office in Guernsey and must have a Resident Agent, who must either be a Licensed Service Provider or a Guernsey resident director.
General Meeting – Annual general meetings are mandatory but can be held anywhere. The first annual general meeting must be held no later than 18 months from the incorporation of the Guernsey Limited company. Thereafter, annual general meetings should be held in intervals not more than 15 months. However, shareholders may pass a resolution to waive the requirement for annual meetings.
Electronic Signature – Permitted.
Re-domiciliation – A foreign entity can be re-domiciled as a Guernsey LTD, and vice versa.
Compliance – Companies must keep accounting records for 6 years, which may be kept in or outside Guernsey and in any currency. An annual return must be submitted by the end of January each year. A tax return must be filed within 1 year and 15 days after the end of the tax year.
Companies may be exempted to have their accounts audited, except those who meet 2 of the following 3 conditions in a financial year and the previous one: Annual turnover of £6.5m or more; net balance sheet of £3.26m or more; an average number of employees of 50 or more. However, members of a company may pass a waiver resolution exempting the company from the requirement to have their accounts audited. The waiver resolution must be passed in the financial year before the financial year to which it relates. The waiver may be for a year, several years or indefinitely.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Mixed (Customary, French civil and Common) Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- - Minimum issued capital
- - Minimum paid up capital
- GBPAny Capital currency
- Anywhere Location of annual general meeting
- 2017 AEOI
Taxes
Tax residency – A company is tax resident in Guernsey if it is incorporated in Guernsey or its place of central management and control is in Guernsey.
Basis – Resident companies are taxed on a worldwide basis, while non-resident entities are subject to tax on their income derived from Guernsey.
However, a Guernsey company will cease to be tax resident in Guernsey if it is tax resident in another jurisdiction, it is controlled and managed from another jurisdiction, and either the company is tax-resident in another jurisdiction due to a Guernsey tax treaty or the jurisdiction where the company is controlled and managed from has a corporate tax rate of at least 10%.
Tax rate – The corporate tax standard rate is 0%.
In Guernsey, 10% corporate tax applies to the following activities -
- Banking business.
- Domestic insurance business.
- Insurance intermediary business.
- Insurance management business.
- Custody services business.
- Licensed fund administration business.
- Regulated fiduciary activities.
- Regulated investment management services to individual clients (excluding collective investment schemes).
- Operating an investment exchange.
- Compliance and other related activities provided to regulated financial services businesses.
- Operating an aircraft registry.
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 GBP 500,000 and income derived from the importation and/or supply of hydrocarbon oil and gas are also taxed at 20%.
Income derived from the cultivation of cannabis plants and income from the use of those cultivated cannabis plants or parts of those cultivated cannabis plants or licensed production of controlled drugs is taxable at 20%.
Capital gains - Capital Gains are exempt from taxation.
Dividends - Dividends are generally subject to tax at applicable rates.
Interests - Interest income is taxed at a 0% tax rate.
Royalties – Royalty income is taxed at a 0% tax rate.
Foreign-source income – Foreign-source income is usually taxable at applicable rates. Tax credits for foreign tax paid are usually available up to Guernsey tax payable.
Withholding taxes – There are no withholding taxes in Guernsey.
Losses – Losses arising from taxable income may be carried forward indefinitely. Carryback of losses is permitted under certain circumstances.
Inventory – Inventories are usually valued at lower of cost or net realizable value valuation. First in first out method (FIFO) is permitted, but the Last in first out method (LIFO) is not allowed for taxation purposes.
Anti-avoidance rules – Guernsey has not enacted transfer pricing regulations, but an anti-avoidance provision in tax law may be applied by the Comptroller of taxes if a transaction leads to avoidance or reduction of Guernsey income tax.
Thin capitalization and controlled foreign companies rules are not applicable.
Labor taxes – Employers must withhold a contribution to Social security fund at 6.5% on resident employees’ gross earnings up to GBP 138,684.
Personal income tax – An individual is considered solely resident in Guernsey if he or she spends 91 days in a year in the jurisdiction and do not spend more than 91 days in a year in another jurisdiction. An individual who spends 182 days or more in Guernsey is deemed to be principally resident. Individuals in Guernsey between 91 and 183 days are considered resident only.
Principally residents and solely residents are subject to tax on their worldwide income. Resident only individuals are taxed on their worldwide income, but they may elect to pay a flat GBP 30,000 in respect of non-Guernsey source income.
Personal income is subject to a 20% tax rate. Residents may opt for a tax liability cap of GBP 110,000 on non-Guernsey-source income, and the liability cap can be increased to GBP 220,000 on worldwide income.
Capital gains are not taxable.
Other taxes – There is no value-added tax in Guernsey.
Customs duties apply for goods imported from outside of the European Union.
A Stamp duty from 2% to 4% applies to the transfer of Guernsey real property.
There are no additional property taxes more than the 20% income tax payable from rental or development of land and property.
There are no inheritance and wealth taxes in Guernsey.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 0% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 2 Losses carryback (years)
- Indefinitely Losses carryforward (years)
- 6.60% Social Security Employee
- 0.00% Social Security Employer
- 20% Personal Income Tax Rate
- 0% VAT Rate
- 0 Tax Treaties
Country details
The Bailiwick of Guernsey is a dependency of the British Crown located in the English Channel, specifically to the west of the coasts of Normandy, France.
The territory comprises the island of Guernsey (which forms the largest part) and its neighboring islands Alderney (2400 inhabitants), Sark (610 inhabitants) and Herm (60 inhabitants), as well as other very small islands such as Jethou, Brecqhou, Burhou, Lihou, and other islets.
Guernsey is part of the Channel Islands archipelago together with the Jersey Bailiwick. Although his defense is the responsibility of the United Kingdom the bailiwick is not part of it, but a possession of the British Crown.
Its population is about 65,000 inhabitants, of which 17,000 live in its capital, Saint Peter Port.
The native population has as its mother tongue French, more exactly a subdialect of the Norman dialect. However, the most widely used language today is English.
Its official currencies are the Guernsey Pound (GGP)) and the Pound sterling (GBP).
The head of state is the British Queen Elizabeth II of the United Kingdom represented by the lieutenant governor.
The Guernsey Parliament officially called the Deliberative States and chaired by the Bailiff, are composed of 45 deputies, elected in districts of one or more representatives every four years. There are also two representatives of Alderney, an independent dependency of the Bailiwick, but Sark does not send any representative. There are also two non-elected members, both appointed by the monarch as legal officers and without a vote.
About a third part of its gross national product is supported by financial services (banking, fiduciary, captive insurance, and fund management). Other traditional sources of income are agriculture, tourism, optical, engineering and horticulture, mainly tomatoes and cut flowers. Major imports include coal, gas, oil, electricity, machinery, and equipment.
Services
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