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Guernsey


Guernsey

HISTORY AND POLITICAL STRUCTURE

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. The island has a land area of 65 sq. km.

Guernsey rises in steps from a plateau in the north to ragged cliffs about 90 metres above sea level. It is drained mainly by northward-flowing streams into deeply-incised valleys. In the low-lying north, the soil is made up of blown sand, raised beach deposits and the fill of old lagoons.

Guernsey enjoys a maritime climate; snow and severe frost are rare. Annual rainfall is between 75 and 90 centimetres, but water on the island is sometimes in short supply, being supplemented by seawater distillation.

The main town is St Peter Port, which has the character of a traditional fishing village, and is overlooked by the mediaeval Castle Cornet.

The population of Guernsey is just under 65,500 (July, 2009, est). English is the main and official language, although French is widely spoken, and a Norman patois is used in the countryside.

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. When in 1204 King John of England lost Normandy to the French, the Channel Islands remained part of the British Isles, and have done so ever since despite numerous attempts by the French to regain them. The islands were occupied by the Germans 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.

Guernsey is a self-governing British Crown dependency. The Queen of England, as Duke of Normandy, is Head of State, and she is represented on the Island by the Lieutenant Governor, who is appointed by the Crown for a five year term. The Government of the United Kingdom 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, and has 45 seats. The nearby islands of Alderney and Sark have their own parliaments. The virtual absence of party politics encourages a high degree of consensus and contributes to political and economic stability.

The island has its own courts. 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. Some UK legislation is adopted as such by Guernsey by agreement with the British Government. The ultimate court of appeal is the English Privy Council.

ECONOMY

Guernsey’s economy is stable, with an expanding financial services sector that accounts for over half of the island’s total income. Unemployment is very low (0.86%, 2008); inflation was -1.2% in March 2009.

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 economic cycle in Guernsey tends to mirror that of the UK. GDP has risen more than 300% since 1965, and in 1998 topped GBP1bn for the first time. GDP stood at an estimated USD2.7bn in 2005 with GDP per head of USD44,600 at purchasing power parity.

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 island’s currency is the British pound; there are no exchange controls.

In 1998 the British government announced that there would be a review of financial regulation and structure in Jersey, Guernsey and the Isle of Man. The review was carried out by Anthony Edwards, a former senior Treasury civil servant, and was published in November 1998. Saying that ‘the islands are in the top division of offshore centres’ Mr Edwards

 gave the islands a generally satisfactory report, making a number of recommendations that applied to Guernsey. The great majority of these covered matters that were already in the legislative pipeline or were readily agreed to by the administration. Some recommendations however were more contentious for the island. It is fair to say that Mr Edwards himself did not expect all recommendations to be accepted. His report concluded (in part): “They (the islands) have infrastructures of legislation, judiciary, prosecution, regulation and law enforcement, mostly based on UK models, which for the most part are extremely good for such relatively small jurisdictions. In many areas they have co-operated well, sometimes remarkably so, with the authorities of other countries in the pursuit of crime and regulatory breaches.”

In 2008 the British government saw the need for yet another review of the Crown Dependencies (Jersey, Guernsey and the Isle of Man) in response to the financial crisis which rocked the country’s banking industry throughout that year. According to the UK Treasury, the review, chaired by Michael Foot, Chairman of the UK office of Promontory Financial Group, will look at “the immediate and long-term challenges facing British offshore financial centres in the current economic climate,” including: financial supervision and transparency; taxation, in relation to financial stability, sustainability and future competitiveness; financial crisis management and resolution arrangements; and international cooperation. Another review questioning financial supervision and transparency, taxation in relation to financial stability and international cooperation in Britain’s three Crown Dependencies (Guernsey, Jersey, and the Isle of Man) and six Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos Islands) was released in late 2009. Authored by Michael Foot, former Chairman of the UK office of Promontory Financial Group, the report
was largely complimentary of the way in which the Crown Dependencies conduct their economic and fiscal policies. Indeed, Foot concluded that these territories made a significant contribution to the liquidity of the UK market during his review, providing net financing to UK banks of USD332.5bn, with Jersey by far the largest net contributor. Foot also noted that the Crown Dependencies have good frameworks for tackling money laundering and terrorist financing, as recognised by the Financial Action Task Force (FATF) and that all three had met the Organization of Economic Cooperation and Development (OECD) standard for tax transparency by the G20 meeting in April 2009.

WHY CHOOSE GUERNSEY WHEN STARTING A BUSINESS?

Guernsey’s favourable political climate and tax laws make it the preferred choice for many international families to stay. The island is a Crown Dependency, which means it is neither a part of the United Kingdom nor a member of the European Union. It has its own government, which is run on a consensus rather than a political party basis, and it is renowned for its political stability.

Guernsey’s legal system is unique to the island and is historically based on Norman French Law. However, its modern trust and company law has the benefit of UK influences, and in practice the island courts look to England and Scotland for precedents.

Guernsey residents and companies pay Guernsey Income Tax at 20%. There are no capital gains taxes, inheritance tax nor sales taxes such as VAT. In general Guernsey trusts and Guernsey Exempt Companies are not subject to Guernsey tax on non-Guernsey source income. Of course, it should be remembered that taxation is always subject to change. Situated in the Channel Islands and English speaking, the Island of Guernsey shares the same time zone as London, conveniently placed between the Americas and the Far East and has good communication links to London and other parts of the United Kingdom and Continental Europe.

Guernsey is independent in legislative and fiscal matters and is not part of the European Union. As such, most EU directives do not apply in Guernsey.

Guernsey has a history of political stability and good governance and has legislation that is up-to-date, workable and in compliance with international standards.

Guernsey company law broadly follows English law principles and was updated in 2008 to simplify formation and improve corporate flexibility.

Guernsey trust law was updated in 2007 and is now one of the most modern trust laws available.

A well-established network of fiduciary, legal, accounting and banking service providers is located in Guernsey, providing a competitive and professional environment and ensuring high standards are maintained.

Guernsey is self-governing and not part of the UK. It is a British Crown dependency (although the UK is responsible for foreign relations and defense). Guernsey is not a member of the European Union, which means that it is under no obligation to harmonise tax or other legislation with other EU jurisdictions. Protocol No 3 of the UK’s Treaty of Accession defines the island’s relationship with the EU. Effectively, while benefiting from trade liberalization within the EU, Guernsey has no EU obligations.

Advantages of the Jurisdiction of Guernsey

There are many advantages in forming a Guernsey company which include the following:

  • A person domiciled outside of the United Kingdom wishing to invest in the country can do so through such a company in order to avoid the incidence of United Kingdom inheritance tax on those United Kingdom assets in the event of their death (investment in their own residence excepted).
  • A person resident in an appropriate jurisdiction may be able to arrange for a Guernsey company to hold their assets for exchange control reasons, or to avoid personal taxation.
  • Holding or commercial companies may be utilised for all manner of operations such as financing, ship chartering, aircraft leasing, film making, property development, and oil development and production.
  • The invoicing of goods received from one overseas company to another overseas company may be arranged through a Guernsey company that may retain a proportion of the profit for the services that it genuinely renders.
  • Trademarks, patents, royalties etc., can be held by a Guernsey company which derives a profit from them by granting leases, rights, sole agreements, etc, to residents of other countries throughout the world.
  • Companies and partnerships may be operated for the benefit of individuals subject to high personal taxation who earn irregular income outside their country of residence, by the sale to such entities of the sole right to their services.
  • Advertising and consultancy services may be provided by a Guernsey Company on a service fee basis.
  • Investment holding companies can be incorporated to protect assets from possible sequestration in the country in which the beneficial owner is resident.
  • Yacht owning companies are commonly employed to facilitate registrations on the British Register of Shipping and to avoid VAT or equivalent in appropriate circumstances.
  • Legislative and fiscal independence, allowing the island to respond quickly to the needs of business. In addition, the continuity achieved through the democratically elected parliament, without political parties, helps deliver political and economic stability.
  • A unique relationship with the European Union (EU) provides a number of the advantages of being in the EU without all of the implications of operating as a full EU member state.
  • A wide range of internationally respected business sectors. These include company management, trust administration, insurance (Protected Cell Companies) and fund management. To meet the needs of these professional sectors, a highly skilled workforce has developed in Guernsey.
  • An enhanced position as an international base for Intellectual Property (IP), due to changes in the law in 2006. Legislation is modern and innovative and the island has its own IP Registry and is fully TRIPS* compliant.
  • It is worth mentioning that companies incorporated in other jurisdictions can be often used to undertake the activities mentioned above.

Placing an order for the formation of a company

The establishment and operation of companies in Guernsey is regulated under the Companies (Guernsey) Law, 2008. This law consolidated a number of earlier laws with regard to companies and their operation in Guernsey.   In general the principles contained in the Guernsey legislation are based on English company law.

The formation of a Guernsey International Business Company can take place by using an order form which can be provided by the Registry Agent.

Off-the-shelf companies are not available due to the requirement to disclose beneficial ownership and trading activi-
ties.

The Registry Agent will check the name availability of the company (whether there is no company under such name already). In Guernsey the law requires that all financial service providers know the identity of their client so the actual contact details must be indicated at the Registry Agent.   This information remains confidential.

Requirements for the Registration of an IBC

  • Director: Minimum of one Director. Corporations are permitted.
  • Secretary: A secretary is required.
  • Shareholder: Minimum of two shareholders.
  • Shares & Capital: Shares issued by a company may be denominated in any currency and different classes of shares may be denominated in different currencies.   Fractional shares and shares of no par value are permitted by the law. The normal authorised share capital is GBP 10,000 (or the foreign currency equivalent), although the minimum authorised capital may be a nominal GBP 2, normally with two shares of GBP 1, or the foreign currency equivalent. All shares issued must be paid in full in cash.
  • Name of the Company: Names of Companies with limited liability must have the suffix Limited or Ltd., or the French equivalent Societe avec Responsabilite Limitee or SARL.
  • Company must have a registered office and a registered agent in Guernsey.

Required Documents to register the company:

  • Notarized copy of your Passport.
  • Notarized Copy of utility bill for address verification less than 3 months old
  • Application documents.

When all the details are confirmed and the payment for the relevant fees received, the Registry Agent will prepare
the Memorandum and the Article of Association of the new International Business Company. These will be filed with
the Registry of International Business Companies in Guernsey. There is no need to sign any statutory info, the initial
company formation documents are prepared and signed on your behalf by the Registered Agent always under the
procedures set by the Companies (Guernsey) Law, 2008. The Registered agent will file the corporate documents of
the company, will pay the applicable registration fees and arrange for the documents to be submitted to the Guernsey

Registrar of companies for registration. All the relevant documents will be kept in the Registered Agents office.

Corporate documents of an IBC

  • Original certification of incorporation of IBC
  • Memorandum and article of Association
  • First minutes and Corporate Resolutions containing the appointment of directors, allocation of shares, share certificates, copies of the Registry of Directors and the Registry of shareholders if they need them.
  • Share transfer forms, trust declarations, appointments of representative (power of attorney) and the Corporate Seal.

The Business Environment in Guernsey is very encouraging and easy to understand.

With flat income tax rates for both personal (20%) and business (0% for non-finance businesses) income and no VAT or sales taxes, it is easy to understand what your costs will be and what profits or income you will retain. All the government departments are helpful in explaining how the Guernsey system works and there are many tax advisors and accountants available for those with more complicated tax arrangments.

There are a wealth of support businesses providing all the infrastructure anyone might need to get their businesses off the ground, from all types of telecoms services, to office supplies and recruitment agencies.
Estate agents will help you hunt down the right property and advise you on the local planning laws. If you plan on bringing in key staff you will need advice on housing licences and you can either talk to us in the initial stages or call the housing department to see what might be possible.

Recruitment Agencies can also help here as often, if you are applying for a Licence for a key member of staff, the local housing department will need to have proof that no-one suitable is available in the Island to carry out that particular role in your business. Recruitment Agencies can also advise you on local Contracts of Employment and Guernsey Employment Law. You should find Guernsey a friendly place to locate your business.

 

GENERAL OVERVIEW

Location

Channel Islands.

Time zone

GMT + 1 hour in summer.

Population

60,000.

Capital

St Peter Port.

Airport(s)

Guernsey.

Language

English.

Currency

Pound Sterling.

Political system

Democracy with a unicameral parliament.

International dialling code

+44 1481.

Legal system

Guernsey has its own legal system-Common Law with statutes.

Centre’s expertise

Banking, funds, captive insurance, fiduciary.

TAX

Personal income tax

20%.

Corporate income tax

No tax as standard, except banks which are levied at 10% on their regulated business. Investment funds can still apply to be exempt companies.

Exchange restrictions

None.

Tax treaties

34 treaties in force

SHARE CAPITAL

Permitted currencies

Any.

Minimum authorised capital

No minimum.

Minimum share issue

One.

TYPE OF ENTITY

Shelf companies

No but standard memorandum and articles of association available.

Timescale for new entities

1 day maximum.

Incorporation fees

Fee dependent on speed of incorporation, starting from £100.

Annual fees

Annual validation fee dependent on typeof company, generally starting from £250. Where applica­ble, continuing tax exempt fee £600.

DIRECTORS

Minimum number

One.

Residency requirements

None unless company is carrying out a regulated activity.

Corporate directors

Yes.

Meetings/frequency

None.

SHAREHOLDERS

Disclosure

Yes.

Bearer shares

No.

Minimum number

One.

Public share registry

No.

Meetings / frequency

Not required.

ACCOUNTS

Annual return

No annual submission of accounts required.

Audit requirements

Yes, although exemption of a broad nature is available.

OTHER

Registered office

Yes.

Domicile issues

None.

Company naming restrictions

Yes, on the use of certain words and names already in use

During 2008 Guernsey introduced a new Companies Law and modernised Company Registry. Therefore information above represents the ar­rangements as they came into place in 2008.

Strength

Our strength is our approach to clients and their business