Source: Laura Denooz¸ PKF Malta Researcher
The Bailiwick of Guernsey and the Bailiwick of Jersey form part of the Channel Islands located off the coast of Normandy whereas the Isle of Man is located in the Irish Sea between the Island of Great Britain and Ireland.
These three islands are British Crown Dependencies which are not part of the United Kingdom but their defense is under the protection of the UK.
It’s important to notice that Guernsey¸ Jersey and the Isle of Man are not members of the European Union.
These three islands are often in the headlines because of their attractive taxation regimes.
As far as taxation is concerned¸ Guernsey benefits from an attractive tax system and is considered as an offshore centre by others countries. However bigger nations put pressure on Guernsey to force the country to change its ‘light’ taxation. The Island had in fact undergone some changes in order to comply with OECD rules. These changes came into effect in 2008. One of them was the ‘Zero-Ten’ corporate tax system.
Before 2008¸ the standard rate of income tax for companies was 20%. The same rate was applied for individuals. Although no change was made to the individual rate¸ three different tax rates are in place for companies.
The following rates are applied according to the source of the income:
• Company Standard Rate of 0% (incomes from businesses¸ offices¸ employments and others sources)
• the Company Intermediate Rate of 10% deducted from banking activities and
• the Company Higher Rate of 20% applicable to income from trading activities and from the ownership of land and buildings).
Capital gains tax¸ estate duty¸ gift tax¸ capital transfer tax and wealth tax continue not be levied in Guernsey. The above changes increased the attractiveness of Guernsey’s jurisdiction¸ however these amendments don’t appeal to the EU Code of Conduct Group that considers them harmful.
In 2009 the UK Treasury informed the three Crown Dependencies that some European countries have doubts about the ‘zero-ten’ tax regime. They claim that this regime is not within the spirit of the EU Code of Conduct on Taxation. That’s why in June 2010¸ the Code Group decided to conduct a review with the purpose of examining the tax regime of Jersey and the Isle of Man. On the otherhand¸ Guernsey’s government has the authority to make its own independent review.
Lately¸ Jersey and the Isle of Man were told by the EU Code of Conduct that their corporate tax regime will be in line with European standards after they remove the harmful elements in their legislation namely the abolition of deemed distribution provisions in Jersey and the withdrawal of the attribution regime for individual (ARI) in the case of the Isle of Man.
As far as Guernsey is concerned¸ they are currently reviewing their corporate tax regime to establish the best outcome possible for the country in compliance with European standards.
Picture source: www.thisisguernsey.com