Guernsey: Double Tax Treaties
As a matter of policy Guernsey did not normally enter tax treaties. However, a double taxation treaty conforming to the OECD standard was signed with Malta on March 12, 2012. It came into force on March 10, 2013. Since the signing of the Malta DTA, Guernsey has signed a further seven agreements and those with the Isle of Man, Jersey and Qatar are in force. Those signed with Hong Kong, Lithuania, Luxembourg and Singapore are awaiting ratification. All of the aforementioned conform to the OECD standard model treaty. The double taxation with the United Kingdom does not conform to the OECD standard model treaty. Its main features are as follows:
- The profits derived from an industrial or commercial enterprise in one country will not be taxed in the other country except to the extent that they are attributable to a permanent establishment;
- Profits of shipping or air transport attributable to a resident of either country are not taxed in the other country, regardless of 1;
- An individual resident in only one of the two countries is exempt from tax in the other country on personal, including professional services performed in the other country on behalf of a resident of his own country (but they must be taxed in his own country);
- If despite the above, tax is payable in both countries, the tax paid in one country is allowed as a credit against tax due in the other.
The agreement specifically excludes dividends and debenture interest from its provisions. Exempt and International Companies (abolished since January 1, 2008) are not entitled to the benefits of the UK double tax treaty.
Guernsey has also signed a Tax and Information Agreement (TIEA) with the UK, and has agreed to amend the provisions of the 1952 arrangement to add provisions on the taxation of income from pensions and a mutual agreement procedure.
Guernsey, along with its fellow UK dependent territories Jersey and the Isle of Man, is party to the EU's Savings Tax Directive, which went into force in July 2005. Under the agreement with the EU, Guernsey applies a withholding tax (initially 15%) on savings income paid to the citizens of EU member states. The withholding tax increased to 20% from July 1, 2008 for a period of three years, after which it rose to 35%.
In July 2009, the Guernsey government released a statement regarding the Isle of Man’s decision to switch from a withholding tax system to the automatic exchange of information from July 1, 2011, when the withholding tax option currently available to customers having accounts with Isle of Man banks as part of a transitional arrangement was to be withdrawn.
The Guernsey government underlined that it had always considered the withholding tax arrangement to be transitional, and began a consultation with industry about a review of the position in the island.
Mike Brown, Chief Executive of the States of Guernsey commented at the time that:
"The international climate is changing with regards to exchange of information. We are fully aware of those developments and have had the position under review for some time.
"Guernsey’s commitment to the highest international standards in transparency is constant."
The move to automatic exchange of information was passed by the States of Deliberation on November 24, 2010, and paying agents had to implement the change between January 1, 2011, and June 30, 2011.