Guernsey, Channel Islands
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:
- Fund management (this does not include companies that are collective investment vehicles).
- Finance and leasing.
- 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.
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)
On 11 March 2020, The Government of Guernsey passed legislation introducing MDR aligned to The OECD Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.
At the time of writing, although the law had been made, it had yet to be brought into force.
Once in force, the law will require promoters, service providers, and, in some circumstance, users of CRS avoidance arrangements and opaque offshore structures to provide the Director of the Revenue Service with information about those arrangements and structures within a 30-day window of, broadly, the arrangement being made available.
It is intended that information relating to users resident in other jurisdictions will be exchanged with the tax authority of that jurisdiction in accordance with the terms of the Multilateral Competent Authority Agreement on the automatic exchange regarding CRS avoidance arrangements and opaque offshore structures, also ratified by the States of Guernsey on 11 March 2020.