Local tax specialists from BDO in Guernsey examine the many benefits of relocating to Guernsey.
Besides the main feature of income tax at only 20%, and no capital taxes, Guernsey offers many other attractive features. Where an individual spends under six months of a year in the island, he/she can limit the Guernsey tax liability to just £30,000 per annum as a “resident only” person (see more below). Where an individual is fully resident, a tax cap arrangement allows him/her to limit the tax liability to £110,000 per annum on non-Guernsey income (see more below). There is no “minimum” amount of tax contribution required in order to become Guernsey resident.
No Inheritance Tax, no Wealth Tax, no Capital Gains Tax, no Value Added Tax and no Goods & Services Tax.
A Guernsey tax year is a calendar year and tax residence status is determined on the number of days spent in the Island. An individual will be treated as “principally resident” in a calendar year if they spend:
- at least 182 days in Guernsey during the year, or
- at least 91 days in Guernsey during the year and, during the four preceding calendar years, have spent at least 730 days in Guernsey.
A principally resident individual is liable to pay tax in Guernsey on worldwide income.
An individual can be treated as “Resident Only” if they spend:
- between 91 and 181 days in Guernsey during the year, or
- 35 days or more in Guernsey in a year and, during the four preceding years, have spent 365 days or more in Guernsey.
The Standard Charge
An individual who is only in Guernsey for part of the year will be treated as “resident only” for tax purposes and is able to limit annual tax liability to a Standard Charge of £30,000 on worldwide income.
Tax Rates – Personal and Corporate
There is a flat rate of personal income tax for individuals of 20%. The standard rate of tax for Guernsey resident companies is 0%. An intermediate tax rate of 10% is applied to companies carrying on regulated banking, fiduciary, insurance and fund administration activity. A higher tax rate of 20% is applied to income from Guernsey property.
Guernsey Social Security
This is payable by individuals ordinarily resident in Guernsey. Rates vary from 2.9% to 10.5% depending on whether the individual is employed, non-employed or selfemployed and there is an upper income limit of approximately £138,000 which applies to all classes of contribution.
Tax Cap Arrangements
Tax resident individuals are able to limit their annual liability to tax on non-Guernsey source income to £110,000. The limit can be extended by a further £110,000 if appropriate to include Guernsey source income. Individuals electing for the tax cap are not required to make a declaration of their personal income.
For those happy to move to the smaller Channel Island of Alderney a lower cap of £50,000 applies. Note that the same tax residence rules apply in Alderney as they do in Guernsey.
Pre-arrival income and relief for overseas tax suffered
There is a favourable regime for dealing with income arising to overseas companies in the years prior to the arrival of the beneficial owner for residence in Guernsey. Such income will not be liable to Guernsey tax provided it is distributed within two years of the year of arrival.
Also, income which arises to an overseas company, after the arrival of the beneficial owner in Guernsey, which has suffered corporation tax overseas on its profits will attract double taxation relief in Guernsey on a distribution to the beneficial owner.
Transfers of pension funds from the UK into a Guernsey Retirement Annuity Trust Scheme (“RATS”) are possible provided the scheme is registered with HM Revenue & Customs as a Qualifying Recognised Overseas Pension Scheme (“QROPS”) and provided the member is resident in Guernsey.
The taxation treatment of a QROPS will be the same as that in the UK except that Guernsey tax rates will prevail.
Alternatively, a UK pension paid to a Guernsey resident can be paid without a liability to UK tax (assuming the recipient is non UK resident) in accordance with the Guernsey/UK Double Taxation Arrangement.
Other Guernsey Highlights
- No Inheritance Tax
- No Wealth Tax
- No Capital Gains Tax
- No Value Added Tax or Goods and Services Tax
Immigration and Housing
There are two categories of housing in Guernsey, “Open Market” and “Local Market”. Local market properties are generally occupied by the indigenous population and Open Market occupied by those moving to Guernsey.
Moving to Guernsey can be very straightforward for anyone holding an EU passport. Simple rental or acquisition of an Open Market property will be sufficient to obtain a housing permit. Note that in Alderney, all residential property is available for occupation by new residents in the Island.
Housing permits are also available to occupy a Local Market property if linked with an employment in Guernsey and the skills required for that employment are in short supply amongst the local population.
Non-EU passport holders are able to occupy property in Guernsey but the Guernsey Border Agency will be involved in assessing the housing licence application to ensure that immigration requirements are met.
Non-EU passport holders are required to obtain an entry clearance (visa) prior to arrival in Guernsey.
For further advice or information please contact our Guernsey tax specialists.