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Guernsey Companies

Tax Haven Jurisdictions

Synopsis:

British Crown Protectorate. Effectively self-governing in all matters save foreign policy, in theory, the ultimate power rests with the Crown. Excellent efficiency. The official language is English. Leading offshore location. Guernsey's economy is mainly based on it's financial and tourist sectors. Good air and sea communications with the United Kingdom and France. Residents may be taxed on their world-wide income. There are three main types of offshore company; non-resident, exempt and international. Legal system based on English common law. The only significant tax is income tax at 20%. There are no capital gains or inheritance taxes. The Double Taxation Treaty with the UK does allow for the disclosure of information to the British authorities. Very detailed information required on registration including the reasons why a Guernsey company is being formed and whether such registration has any anti-avoidance impetus vis-a-vis British taxation. Apart from Jersey there are no other significant tax treaty provisions. The local currency is Sterling, there are no exchange controls. Politically very stable.

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Location

Situated at the tip of the Iberian Peninsula at the opening of the Mediterranean Sea with the Atlantic Ocean, north of Morocco and south of Spain. The coast of Africa is only 12 kilometres away across the Straits of Gibraltar. Gibraltar is approximately 5 kilometres long and 1.2 kilometres wide, with a population of approximately 30,000.

Relationship with the UK

Gibraltar has been a full member of the EU since 1973, when it joined as a UK Dependent Territory (see Article e 227(4) Treaty of Rome). The Common Agricultural Policy, Common Customs Tariff and VAT, however, do not apply.

General Guernsey Advantages

Guernsey law is governed by the Companies (Guernsey) Law 1994. There are three types of company: limited by shares, guarantee or shares and guarantee. For tax purposes there are resident, exempt and international companies. Residence for tax purposes is determined by whether its shareholder control is in Guernsey or if its registered in Guernsey, it maintains a place of business in Guernsey and a substantial part of its activities are conducted in Guernsey

  • A Guernsey resident company is subject to tax on its world-wide income.
  • A non-resident company is subject to Guernsey income tax on its Guernsey sourced income ( other than bank interest ) unless a double taxation treaty applies. Non-resident companies are exempt from tax on Guernsey sourced bank interest. Companies with non-resident ownership will mostly be exempt or international in structure.
  • Exempt companies are companies registered in Guernsey but beneficially owned by persons not resident or carrying on business in Guernsey. Administration and board meeting do not constitute conducting business. Exempt companies do not pay income or withholding taxes but are subject to a prospective annual duty of £500.00 plus an annual filing fee of £100.00. Foreign companies may have their "Branch" designated as an exempt entity.
  • Exempt status must be elected each year. It cannot be changed mid-year. Exempt companies do not benefit from the UK/Jersey tax treaties.
  • International companies negotiate their tax level with the administrator of Income Tax.
  • The rate is based on business plans and the international circumstances of the company and are fixed five years and vary between 0% to 30%. The normal rate is around 10% -15%. To become an international company beneficial ownership must be outside of the Guernsey jurisdiction. The company cannot have been formally exempt or resident. Beneficial ownership must be disclosed and a certificate must be applied for each year. There is a debate as to whether the UK/Guernsey Tax Treaty will apply where the IC has elected to pay less than 24.75% on its profits ( UK anti-avoidance legislation only becoming applicable on companies subject to a tax rate below the aforementioned ). Interestingly, it has been suggested that it may be possible for IC companies to "asset strip" before becoming subject to the negotiated Guernsey tax rate. This seems also to be the case in the Isle of Man.
  • If a resident company is required, it is still possible to obtain a ruling from the tax office providing for a tax rate much lower than the 20% standard rate.
  • Specific benefits exist for banks and insurance companies owned by non-residents.
  • No minimum capitalisation and no statutory limitation of borrowing powers.
  • For non-resident companies, there is no disclosure requirements for filing annual returns other than information relating to registered shareholders and company directors.
  • For resident companies, an annual income tax return must be filed with annual accounts, but these accounts are filed with the tax office and are not publicly available. Full disclosure of beneficial ownership may also be required. Guernsey has a double tax treaty with the UK which does include provisions for the exchange of information.

Taxation

The only significant tax is income tax at flat rate of 20% for companies and individuals. There is no estate duty, capital gains, inheritance, capital transfer, wealth or gift taxes. Dividends are generally paid net of a 20% withholding tax, although it is possible to obtain agreement from the administrator of taxes for no tax to be withheld if certain conditions are met. Guernsey only has double tax treaties with Jersey and the UK and a very limited treaty with France. In general, Jersey and UK tax is relieved in full. Unilateral relief on double tax is available up to an effective maximum rate of 15% for other countries.The Administrator of Taxes has broad powers to adjust assessable tax where in his opinion tax has been deliberately avoided

How to Incorporate an IBC

A company may be fonned for any legal purpose. There are restrictions on the formation of new trust companies. Special rules apply for financial service undertakings. All new companies need the approval of the States Advisory & Finance Committee via the Financial Services Committee.There is no distinction between private and public companies, although if a company wishes to offer shares to the public, it must allot the minimum subscription and file a return to that effect before starting trading. Every company must have a Memorandum & Articles of Association. The Articles may be registered up to 6 months after the date of registration. Particulars of beneficial ownership must be submitted, although this is treated as confidential and not generally disclosed outside of Guernsey. There is a 0.5% duty on the authorised share capital, with a minimum of £50.00 payable. The maximum is £5,000.00. An auditor must be appointed.

Corporate Requirements

Name: Names which are similar to existing names are generally excluded. Also excluded are misleading names such as those which denote Royal approval or imply unwarranted size or importance. All companies must end with "Limited", "with limited Liability" or "avec responsabilite limitee".

Capital: There is no minimum value and it may be denominated in any currency. Fractional shares may be issued.

Registered Office: A registered office must be maintained in Guernsey and notified to the Greffier within 28 days of incorporation. Subsequent changes are only effective when notified. The company's name must be displayed in a conspicuous place within its registered office.

Registered Agent/Nominees: Nominees are used for the majority of companies to afford a degree of anonymity for the ultimate beneficial owner(s)

Board of Directors: There is no statutory control over the number, nationality and residence of directors, although their residence is important to determine whether the company is resident or non-resident for tax purposes. Corporations may hold this office.

Shareholders: The minimum number of shareholders is two and each must hold a minimum of one share. There are no nationality or residency restrictions.

Books, records and seal: The company registers must be maintained at the registered office. It must detail the shareholders and their holdings and are open for public inspection. Each person must appoint a resident of Guernsey as a secretary.

Powers of attorney: All companies may grant a specific or general power of attorney to any person, to act on it's behalf, to execute contracts, agreements, deeds and other instruments. These powers are not a matter of public record.

Certificates of good standing: Certificates of good standing can be applied for proper application to the Guernsey authorities.

Bearer shares: Bearer shares cannot be issued.

Annual Meetings: All companies must hold an annual meeting. The first must be no later than 18 months from the date of incorporation and thereafter every calendar year and not more than IS months may elapse between meetings. A quorum is two members holding at least 1 /20th. of the issued shares. The accounts must be sent to the members 10 days before the AGM.

Trusts: The law on trusts is governed by the Trusts (Guernsey) Law 1989, amended 1990. Trusts are taxed in the same way as companies and individuals. If allthe beneficiaries are non-resident the trust is exempt from tax (subject to specific exclusion of non-residents if the beneficiaries are not known with certainly ). There are restrictions on the formation of new trust companies.