Guernsey: Personal Taxation
Dwellings Profit Tax
The Dwellings Profits Tax came into force in Guernsey in 1973, and is governed by the Dwellings Profits Tax (Guernsey) Law 1975 as amended. The tax is managed by the Administrator. The purpose of the tax was to deter speculation in land and buildings; it imposes a tax of 100% on the profits from the sale of a dwelling or land, unless used for bona fide residential purposes. The rules are quite complex, but in practice the tax has succeeded in its object and it is not very often imposed. Nonetheless, an investor needs to be aware of it, and to be careful when purchasing or dealing in real estate or companies owning real estate.
With regard to property taxation, stamp duty on property worth GBP150,000 or less was abolished to encourage first time buyers in Guernsey's November Budget 2001.
In January 2009, Guernsey released details of further tax proposals drafted by the government, including the suspension of Dwellings Profit Tax and amendments to the 'proportional relief' system. Regarding the Dwelling Profits Tax, the government stated:
“Collection of tax was never the principal purpose and the tax raised has never been significant – GBP58,000 over the last 14 years. Seven of those years produced no tax at all.”
“But the administrative burden on Income Tax – with a certificate required for every property transaction – takes up three people part-time at a cost of at least GBP17,000 a year. There are implications too for advocates’ offices, with consequent costs for those buying and selling properties.”
“The costs of collection have exceeded tax collected at least four-fold,” said Deputy Charles Parkinson. “And has the tax prevented property speculation and kept prices down? In its present form, my Department believes this tax is not effective in terms of administration costs, or in achieving its objectives.”
The Dwellings Profit Tax was suspended by the States under the Dwellings Profits Tax (Suspension of Law) (Guernsey) Ordinance, 2009. This Ordinance came into force on the 25th March, 2009.