Guernsey to Introduce Substance Requirements in Tax Law

Guernsey to Introduce Substance Requirements in Tax Law

Guernsey’s Government is consulting businesses on a law that would require companies tax-resident in Guernsey to demonstrate they have sufficient substance in the island.

The proposal follows the screening of a large number of non-EU jurisdictions undertaken by the European Commission Code of Conduct Group in 2017 to assess, among other things, compliance with measures to prevent base erosion and profit shifting. In November 2017, Guernsey made a commitment to the Commission to address these concerns and to develop proposals that would meet this commitment by December.

The proposed law would require companies that are tax-resident in Guernsey, and engaged in key activities identified by the EU, to demonstrate that they meet minimum substance requirements as part of their annual tax return.

Lyndon Trott, Vice-President of the Policy and Resources Committee, said: “This area of work is important to demonstrating our continued commitment to maintaining Guernsey’s reputation as a well-regulated, transparent, and co-operative jurisdiction. We have worked very closely with our colleagues in Jersey and the Isle of Man to develop these proposals to ensure they meet both the needs of local industry and our commitment to the European Union.”

“When we talk about substance we are referring to real people, making real decisions in real time. These proposals establish that point unequivocally. They are a reasonable and proportionate response to the concerns raised by the Code of Conduct Group for Business Taxation. I would encourage companies engaged in any of the core income generating activities to participate in the consultation,” Trott said.

The consultation closes on August 31.