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Company and Jurisdictions

Guernsey

Exempt Company

Legislation: Standard capital:
The Companies (Guernsey) Law, 1994-1996; Protected Cell Companies Ordinance, 1997; Guarantee Companies Ordinance, 1997; Amalgamation of Companies Ordinance, 1997; Migration of Companies Ordinance, 1997; Protected Cell Companies (Amendment) Ordinance, 1998; Companies (Financial Assistance for Acquisition of Own Shares) Ordinance, 1998; Companies (Purchase of Own Shares) Ordinance, 1998; and Companies (Shares of No Par Value) Ordinance, 2002. GBP 10,000 is the maximum figure for which minimum costs apply.
Annual government fees: Corporate Taxation:
GBP 100 filing fee and GBP 600 exempt duty. 20%, but flat annual rate of GBP 600 payable for exempt companies.
Time to incorporate: Ready-made companies:
21 working days. No.
Minimum members: Registered office required:
Two, individual or corporate. Yes, must be maintained in Guernsey at the address of a licensed management company or law firm.
Local registered agent: Minimum number directors:
Yes. One, individual or corporate. A register of directors must be filed at the registered office and with the Registrar and is open to public inspection.
Officer to be locally resident: AGM required:
Directors need not be resident, but a local secretary is required. No.
Annual return required: Financial statements to be prepared and/or audited:
An annual return which gives details of the current directors and shareholders and any change in the shareholders since the last return or, in the case of a company filing its first annual return since the date of incorporation, must be filed at the public registry in January of each year and a filing fee of GBP 100 is payable. It should be noted that fines are payable for late filing. Yes.
Balance sheets to be filed: Share register required:
No. Yes, at registered office
To be filed with Registrar: Open to public inspection:
No. Yes.
Exchange controls: Redomiciliation permitted:
No. Yes, in and out.
Language of incorporation: Confidentiality:
English. No specific statutory provisions governing confidentiality in relation to companies, but English law, which applies within the jurisdiction imposes a common law duty on professionals to keep the affairs of their clients confidential.
Bearer shares permitted:  
No

 


Advantages

Disadvantages


  • Blue chip reputation.
  • Expensive.
  • Details on beneficial owner must be disclosed to the authorities prior to registration.
  • Cumbersome and difficult to arrange.

International Agreements

OECD Harmful Tax Practices

Guernsey was among 35 jurisdictions identified by the OECD in June 2000 as meeting the technical criteria for being a tax haven. On 21 February 2002, the Guernsey government signed a commitment to improve the transparency of its tax and regulatory systems and establish effective exchange of information for tax matters with OECD countries by 31 December 2005.

Tax Information Exchange Agreement (TIEA)

On 19 September 2002, the US and Guernsey signed a Tax Information Exchange Agreement. The agreement provides for the exchange of information on a variety of tax investigations, paving the way for audits that could uncover tax evasion or money laundering activities. It was to have effect from 1 January 2004 or sooner with respect to criminal tax matters and from 1 January 2006 with respect to all other tax matters. Currently, similar agreements are being negotiated with other countries, among them members of the European Union.

EU Savings Tax Directive

The EU Savings Tax Directive is to be applied to all Member States, as well as their associated and dependent territories. Guernsey elected to apply the withholding (retention) tax option rather than the automatic exchange of information. The retention tax will only be introduced at the same time as EU member states and the named third countries, including Switzerland, which means 1 July 2005 at the earliest. The retention tax regime does not rule out an option for customers to choose exchange of information instead, it just gives them that choice if they wish.

Financial Action Task Force (FATF)

Guernsey regulatory regime was reviewed by the FATF in 2000. It was found to have a “comprehensive” anti-money-laundering system and was not therefore identified by the FATF in June 2000 as a non-cooperative country or territory (NCCT) in the fight against money laundering.

Mutual Legal Assistance Treaties (MLATs)

Guernsey is able to assist overseas authorities through participation in Mutual Legal Assistance Treaties (MLATs) between the UK and other countries. After its extension to the Bailiwick, Guernsey enacted the necessary legislation to implement the 1959 Council of Europe Convention on Mutual Assistance in Criminal Matters, the 1990 Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime, and the 1988 UN Drug Convention. The 1988 US-UK Agreement Concerning the Investigation of Drug Trafficking Offences and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996. The Bailiwick has requested that the UK Government seek the extension to the Bailiwick of the UN International Convention for the Suppression of the Financing of Terrorism.

Tax Treaties

As a matter of policy Guernsey does not normally enter tax treaties. However, double taxation agreements exist with the UK and Jersey.  Article 10 of the UK treaty provides that the relevant taxation authorities may exchange such information as is necessary for carrying out the provisions of the Arrangement, for the prevention of fraud or for the administration of statutory provisions against legal avoidance in relation to the taxes which are the subject of the Arrangement. It further provides that any information so exchanged shall be treated as secret and not be disclosed to any persons other than those concerned with the assessment and collection of taxes.


General Info

Full Country Name: The Bailiwick of Guernsey
Status: British crown dependency
Area: 65 sq. km.
Population:

65,031(July, 2004, est.)

Capital City: St. Peter Port
Nationality: Channel Islander
People: British and Norman-French descent
Languages: English, French, Norman-French dialect spoken in country districts
Currency: British pound (GBP); note - there is also a Guernsey pound
Government: Parliamentary British crown dependency with internal self-government
Legal system: English law and local statute; justice is administered by the Royal Court
Head of State: HM Queen Elizabeth II

Geography

The Bailiwick of Guernsey includes the inhabited islands of Guernsey, Alderney, Sark, Herm, Jethou, Brecqou and Lihou. Guernsey itself is the second largest of the Channel Islands and is roughly triangular in shape. It is situated in the Gulf of St Malo, 130 kilometres south of England and only 48 kilometres west of Normandy, France.


History

In the 11th century the Channel Islands, including Guernsey, belonged to the Duchy of Normandy, and formed part of the combined kingdom of England and Normandy after the Battle of Hastings. In 1204 King John lost Normandy to the French and the Islanders chose to remain loyal to the English Crown, and have done so ever since despite numerous attempts by the French to regain them. As a reward they gained rights and privileges, which to this day are not subject to the British Parliament but only to the Queen - or King - in council.

The constitutional relationship with the UK is the product of 800 years of custom and usage and is not affected by changes of government in the UK. This relationship has been confirmed by Royal Charters, which over the centuries secured the independence of the Island's judicial system from the English courts and granted important privileges including freedom from taxes.

The Germans occupied the islands during the Second World War. Culturally, the Channel Islands owe far more to England than to any other source, although there are traces of French culture, and the legal and administrative systems are a hybrid of Anglo-Saxon and Continental forms.

Government and Politics

Executive branch
Head of State: Queen Elizabeth II (since 6 February 1952)
Head of Government: Lieutenant Governor and Commander-in-Chief Lt. Gen. Sir John Foley (since 2000) and Bailiff de Vic Graham Carey (since 1999)
Cabinet: Advisory and Finance Committee appointed by the Assembly of the States. President of the Advisory and Finance Committee – Deputy Laurie Morgan
Elections: None; the monarch is hereditary; lieutenant governor appointed by the monarch; bailiff appointed by the monarch
Legislative branch

Unicameral Assembly of the States; consists of the bailiff, 10 Douzaine (parish council) representatives, 45 people's deputies elected by popular vote, 2 representatives from Alderney, Her Majesty's Procureur (Attorney General), Her Majesty's Comptroller (Solicitor General) and Her Majesty's Greffier (Court Recorder and Registrar General); note - Alderney and Sark have their own parliaments

Elections:last held 12 April 2000 (next to be held NA 2004)

Election results: seats - all independents

Judicial branch

Royal Court. Historically, the legal system has continental (Civil Code) origins, but over time English common law has come to have greater influence. Commercial and business law is mostly Anglo-Saxon in nature, and English precedents are often followed. The ultimate court of appeal is the English Privy Council.

Political parties and leaders

None; all independents.

Guernsey is a self-governing British Crown dependency. The Government of the UK is responsible for the conduct of the external relations and defence of the Island. Internal affairs of Guernsey are governed by the island's parliament, The States of Deliberation. The States, as it is usually referred to, is both the legislative and executive body. The virtual absence of party politics encourages a high degree of consensus and contributes to political and economic stability. Some UK legislation is adopted as such by Guernsey by agreement with the British Government.


Economy

Basic economic facts

GDP: USD 2.59 billion

Growth rate (2003 est.): 3%

Per Capita GDP: USD 40,000

Main industries: tourism, financial services

Financial services - banking, fund management, insurance - account for about 55% of total income in this Channel Island economy. Outside the financial arena, the main business sectors are manufacturing, tourism and agriculture, although their relative importance has declined in the face of a booming financial sector. Income derived outside Guernsey by wealthy immigrants also makes a substantial contribution to the island's economy.

The government of Guernsey has consistently favoured development of the island's offshore sector, but the island's economic success puts pressure on internal resources, so that the administration operates a highly selective immigration policy for both individuals and businesses. For the same reason, the island offers no incentives, grants or exemptions to inward investors.

The development of the island as a centre for financial services in the last 25 years owes much to the care taken by the administration to admit only reputable businesses. In the early days selection was exercised informally, but in the last 15 years a formal regulatory structure has been put in place, culminating in the formation of the Guernsey Financial Services Commission (FSC). Following a three-year programme to introduce additional regulation affecting almost all types of offshore activity, the island now offers a high level of regulatory control.

There is no exchange control in Guernsey. Guernsey companies may be freely incorporated with a share capital denominated in any currency and there are no restrictions on inward or outward investment or on the repatriation of dividends, interest and profits. Bank interest on deposit payable to non-residents is exempt from income tax. Royalties are treated for the purposes of tax in the same way as interest. However, under the EU's Savings Tax Directive, as from 1 July 2005, Guernsey will be obliged to deduct withholding tax, initially at 15%, from returns on savings paid to citizens of EU Member States.

There are 16,071 companies registered in the Bailiwick. Non-residents own approximately half of the companies, and they have an exempt tax status. These companies do not fall within the standard definition of an international business company (IBC). Local residents own the remainder of the companies, including trading and private investment companies. Exempt companies are not prohibited from conducting business in the Bailiwick, but must pay taxes on profits of any business conducted in the islands. Companies can be incorporated in Guernsey and Alderney, but not in Sark, which has no company legislation. Companies in Guernsey may not be formed or acquired without disclosure of beneficial ownership to the FSC.

Guernsey has 59 banks, all of which have offices, records, and a substantial presence in the Bailiwick. The banks are licensed to conduct business with residents and non-residents alike. There are 597 international insurance companies and 496 collective investment funds. There are also 19 bureaux de change, which file accounts with the tax authorities. Many are part of a licensed bank, and it is the bank that publishes and files accounts.

Guernsey has put in place a comprehensive legal framework to counter money laundering and the financing of terrorism. The Proceeds of Crime (Bailiwick of Guernsey) Law 1999, as amended, is supplemented by the Criminal Justice Proceeds of Crime (Bailiwick of Guernsey) Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Regulations, 2002. The legislation criminalises money laundering for all crimes except drug trafficking, which is covered by the Drug Trafficking (Bailiwick of Guernsey) Law, 2000. The Proceeds of Crime Law and the Regulations are supplemented by Guidance Notes on the Prevention of Money Laundering and Countering the Financing of Terrorism, issued by the Commission. There is no exemption for fiscal offences. The 1999 law creates a system of suspicious transaction reporting (including about tax evasion) to the Guernsey Financial Intelligence Service (FIS). The Bailiwick drugs trafficking, anti-money laundering, and terrorism laws designate the same foreign countries as the UK to enforce foreign restraint and confiscation orders.

On 1 April 2001, the Regulation of Fiduciaries, Administration Businesses, and Company Directors, etc. (Bailiwick of Guernsey) Law of 2000 ("the Fiduciary Law") came into effect. The Fiduciary Law was enacted to license, regulate and supervise company and trust service providers. Under Section 35 of the Fiduciary Law, the FSC creates Codes of Practice for corporate service providers, trust service providers and company directors. Under the law, the FSC must license all fiduciaries, corporate service providers and persons acting as company directors of any business. In order to be licensed, these agencies must pass strict tests. These include "know your customer" requirements and the identification of clients.

Since 1988, the FSC has regulated the Bailiwick’s financial services businesses. The FSC regulates banks, insurance companies, mutual funds and other collective investment schemes, investment firms, fiduciaries, company administrators and company directors. The Bailiwick does not permit bank accounts to be opened unless there has been a "know-your-customer" inquiry and verification details are provided. The AML/CFT Regulations contain penalties to be applied when financial services businesses do not follow the requirements of the Regulations. Company incorporation is by act of the Royal Court, which maintains the registry. All first-time applications to form a Bailiwick company have to be made to the Commission, which then evaluates each application. The court will not permit incorporation unless the FSC and the Attorney General or Solicitor General has given prior approval.

In November 2002, the International Monetary Fund (IMF) undertook an assessment of Guernsey’s compliance with internationally accepted standards and measures of good practice relative to its regulatory and supervisory arrangements for the financial sector. The IMF report states that Guernsey has a comprehensive system of financial sector regulation with a high level of compliance with international standards. As for AML/CFT, the IMF report highlights that Guernsey has a developed legal and institutional framework for AML/CFT and a high level of compliance with the FATF Recommendations.

The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law, 2000, furthers cooperation between Guernsey and other jurisdictions by allowing certain investigative information concerning financial transactions to be exchanged. Guernsey cooperates with international law enforcement on money laundering cases. In cases of serious or complex fraud, Guernsey’s Attorney General can provide assistance under the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991. The FSC also cooperates with regulatory/supervisory and law enforcement bodies.

The Channel Islands Stock Exchange ("CISX") commenced operations on 27 October 1998 with 23 founder members. Its aim is to provide trading and listing of investment funds, debt instruments and shares in companies and to bring the expertise available in the Channel Islands to the expanding network of international businesses requiring expert offshore financial services in the European time-zone.

The market capitalisation of the CISX, as at December 2003 was in excess of US $24 billion, covering in excess of 330 listed securities, of which a majority are open-ended funds.

In September 2002, the US Securities and Exchange Commission's awarded the Channel Islands Stock Exchange (CISX) designated offshore securities market status. In December 2003, the CISX gained approval by the UK Financial Services Authority as a Designated Investment Exchange.

On 22 November 2002, the Advisory and Finance Committee announced a new Corporate Taxation Strategy in response to competitive pressures from other financial service centres, both onshore and offshore, as well as emerging international standards in taxation being developed by bodies such as the OECD and the EU.

The Committee outlined the following package of measures as a broad direction of future policy:

  • The general rate of income tax paid by Guernsey companies to be reduced to 0% in respect of tax year 2008 and subsequent years.
  • The profits of certain sectors of companies licensed by the Guernsey Financial Services Commission to be taxed at 10% in respect of tax year 2008 and subsequent years. This category would include banks and fiduciaries, insurance managers and fund managers, but not insurance companies or funds.
  • Special rules to be introduced to ensure that Guernsey resident individuals are taxed on a proportion of the profits of a company in which they have a beneficial interest.
  • Resident individuals would continue to pay tax at 20% on assessable income.

The Committee’s intention is that the rate of personal income taxation and present level of public services is maintained at its current level, and that VAT will not be introduced.

It believes the reform package of measures envisaged by the Committee fulfils the principles of the EU Code of Conduct on Business Taxation. The exact timing and details of the reform package will be dependent on the adoption of such international standards as well as competitive pressures.


International Relations

Guernsey is not a member of the EU. Protocol No 3 of the 's Treaty of Accession to the UK excludes the island from most of the effects of the Treaty, other than those concerning trade in goods.

There is free movement of industrial and agricultural goods between the island and the UK; and between the island and EU and EEA countries. The island applies the external common customs tariff of the EU.

Guernsey does not impose Value Added Tax, and does not form part of the fiscal area of the EU, although it is going to be obliged to apply the EU's Savings Tax Directive when it comes into force in 2005.

The FSC cooperates with regulatory/supervisory and law enforcement bodies. It is a member of the International Association of Insurance Supervisors, the Offshore Group of Insurance Supervisors, the Association of International Fraud Agencies, the International Organization of Securities Commissions, the Enlarged Contact Group for the Supervision of Collective Investment Funds, and the Offshore Group of Banking Supervisors. The FIS is a member of the Egmont Group.




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