Introduction to Guernsey
Location and history
The Bailiwick of Guernsey consists of the island of Guernsey together with Alderney, Herm, Sark, Jethou and a number of other islets located in the English Channel off the coast of France in the Bay of St. Malo. Guernsey was part of the French mainland until about 6,000 years ago and there is evidence of mankind from the Stone Age. There are Bronze Age earthworks and it was occupied by the Romans.
Guernsey became part of the Duchy of Normandy in 933 and since that time has been the property of the Duchy, represented in modern times by the British Crown. Guernsey was a safe haven for refugees from the French revolution and Victor Hugo spent several years in exile there during which time he wrote Les Miserables. A further reflection of the French history is that Guernsey did not adopt English as its official language or tie its currency to the British pound until 1926.
The main industries are tourism, agriculture and financial services. Guernsey is a major centre for captive insurance companies and offshore collective investment schemes. Many well known banks have branches there. Financial services are concentrated on the island of Guernsey but are also available on Alderney.
Guernsey Government
The legislature in Guernsey is called the States or, to give it its full title, the States of Deliberation. It consists of 45 members who are elected for four years. The Attorney General and the Solicitor General are non-voting members and the States is presided over by the Bailiff, hence Bailiwick. The Lieutenant Governor is the representative on Guernsey of the British monarch.
Guernsey Taxation
Guernsey is a low tax jurisdiction. Residents pay an income tax of 20% and there is no capital gains tax, no gift tax, no estate tax and no value added tax. It is the low tax regime, which led to the growth of Guernsey as an international financial centre. There is a Dwellings Profit Tax designed to curb speculation in property.
At the present time (2006) a company incorporated in Guernsey is taxed at 20% if it is resident in Guernsey, but if it is owned by non-residents and complies with various other conditions can obtain exemption from taxation and instead pays a fixed annual amount.
In order to comply with its international obligation not to operate a system, which discriminates against any particular group of taxpayers, i.e. not to discriminate against residents in favour of non-residents, Guernsey is changing its tax system. The Guernsey exempt company, also known as the Guernsey Corporation Tax Company will no longer be available from 2008 and all companies will be taxed at a zero rate. This will bring Guernsey into line with changes in Jersey and the Isle of Man, two of its major competitors.
Guernsey is subject to the European Savings Tax Directive. An individual deriving savings interest from Guernsey sources has the option, if resident in a territory to which the Directive applies, of suffering a withholding tax on his savings interest or to have Guernsey report the interest to the tax authorities in his country of residence.
Regulation of the Guernsey Financial Services sector
The Guernsey Financial Services Commission strictly regulates the financial services industry in Guernsey. This is the statutory body responsible for the licensing and supervision of banks, insurance companies, fund management companies and businesses providing company formation and management and trustee services.
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