Guernsey, Channel Islands

Corporate - Other issues

Last reviewed - 20 August 2020

Economic substance

For accounting periods beginning on or after 1 January 2019, companies with geographically mobile activities (or ‘relevant activities’) are required to prove their economic substance in Guernsey. To satisfy the substance requirements, these companies must show that they are directed and managed in Guernsey, that they conduct core income generating activities in Guernsey, and that there are adequate qualified employees, premises and operating expenditure in Guernsey. The ‘relevant activities’ are as follows:

  • Banking.
  • Insurance.
  • Shipping.
  • Fund management (this does not include companies that are collective investment vehicles).
  • Finance and leasing.
  • Headquarters.
  • Distribution and service centres.
  • Holding company (a pure equity holding company).
  • Intellectual property (IP) holding companies. for which there are specific requirements in high risk scenarios.

Please note that tax-exempt Collective Investment Vehicles (CIVs), which were previously out of scope of the Regulations collectively, will now only be out of scope where they are regulated by the GFSC. This amendment to the Regulations took effect from 1 August 2019.

US-Guernsey intergovernmental agreement (IGA)

On 13 December 2013, Guernsey signed an IGA regarding the implementation of Foreign Account Tax Compliance Act (FATCA). The IGA has been ratified by Guernsey's Parliament and is embodied in The Income Tax (Approved International Agreements) (Implementation) (United Kingdom and United States of America) Regulations 2014. Its operative provisions came into force from 30 June 2014.

UK-Guernsey IGA

On 22 October 2013, Guernsey signed a FATCA-style IGA with the United Kingdom (UK-Guernsey IGA) under which mandatory disclosure requirements may be imposed in respect of ‘Investors in the Fund’ who are UK resident or who are non-UK entities controlled by one or more UK resident individuals, unless a relevant exemption applies. The UK-Guernsey IGA has been ratified by Guernsey's Parliament and is embodied in The Income Tax (Approved International Agreements) (Implementation) (United Kingdom and United States of America) Regulations 2014. Its operative provisions came into force from 30 June 2014.

Common Reporting Standard (CRS)

Guernsey adopted global CRS on Automatic Exchange of Information on 1 January 2016. The first reporting took place in 2017.

Mandatory Disclosure Regime (MDR)

The Government of Guernsey, along with the governments of Jersey and Isle of Man, has pledged to introduce legislation by the end of 2019 in response to the EU Code of Conduct Group (Business Taxation) ('Code Group') review, which suggested the MDR as a further transparency measure for jurisdictions involved in the Code Group's work on economic substance. The intention of the Government of Guernsey is to implement these commitments in a manner that allows for consistency of treatment across the three Crown Dependencies.

The preference of the Government of Guernsey is to implement the MDR based on the OECD model, which requires disclosure in two areas, Common Reporting Standard (’CRS’) Avoidance Arrangements and Passive Offshore Vehicles in Opaque Structures.