Jersey, Guernsey and the Isle of Man are the UK’s three outlying islands most frequently used by international businesses. Although each is a British Crown Dependency, they are all self-governing. They therefore each represent a distinct jurisdiction based on British law, but with their own legislation passed by local parliamentary systems.
Guernsey’s jurisdiction also stretches to the Sark, Alderney, and several smaller islands in the English Channel. Although under Guernsey’s umbrella, these islands maintain an element of independence. For example, Sark manages its own financial affairs and therefore its taxation.
Guernsey corporate tax
As is the case in Jersey and the Isle of Man, Guernsey operates a zero-10 tax regime for companies. Unregulated businesses that do not make income from real estate benefit from the 0% tax rate, meaning that the majority of entities registered in the jurisdiction are not required to pay tax.
Many of the businesses regulated by the Guernsey Financial Services Commission are subject to the 10% rate of tax. As a result, banks, domestic insurers, insurance brokers and fund administrators pay 10% tax in Guernsey. Local trust companies, which carry out company registration in Guernsey for foreign clients, are also subject to the 10% tax rate.
On the other hand, fund vehicles are given the tax-neutral, 0% tax treatment. This concession helps to maintain the strength of the fund management industry in Guernsey, and in the Channel Islands more generally.
Despite the tax regime being known as “zero-10”, the 10% rate is in fact the “intermediate company rate”, with a higher 20% rate applied to some businesses. This omission is largely down to the higher rate’s limited applicability, as it is paid only by i) regulated utility companies and ii) companies receiving income from the ownership of land and buildings (i.e. rental income).
The company taxes are the only direct business tax in Guernsey, as there is no capital gains tax.
VAT in Guernsey
In addition to the lack of capital gains tax, Guernsey also has no value added tax, sales tax or goods and services tax. This position contrasts with neighbouring Jersey, which does have a 5% GST levy. Jersey’s GST applies only to businesses making local sales however, so the need to charge GST can be avoided through annual renewal of international service entity (ISE) status. Registering your business in Guernsey avoids this extra step and annual compliance cost.
Learn more about Guernsey companies
If you are interested in establishing a company in Guernsey, contact Healy Consultants Group’ experts.