You may be familiar with Guernsey’s new EU-driven substance regulations. As this is a very important new set of rules, I make no apology for raising the subject again as I strongly believe all companies, including their administrators, should take steps to review their own situation in order to know that they are compliant. They must have documented this and be in a position to sign compliance next year in a Guernsey tax return declaration. The new rules are already in place, as from 1 January 2019.
These regulations were borne out of commitments made by Guernsey in 2017 to ensure that it remained off the list of non-co-operative non-EU jurisdictions, which it has succeeded in doing, as verified by the recent approval by ECOFIN. Whilst the required law was passed in December for effect from January, some of the guidance has only recently been issued jointly alongside the other crown dependencies’ tax authorities, and more is still unfortunately yet to follow. Don’t be complacent and wait – action needs to be taken now to avoid severe penalties.
A new corporate tax return is being developed with requirements to certify compliance, including a requirement to disclose more information about the company, such as gross income, number of full-time equivalent employees, premises, and a copy of the financial statements.
Finally, I would just mention other recent changes regarding Guernsey’s definition of company tax residence, which deliberately coincides with the substance rules, and also has effect from 1 January 2019.
Aimed on the one hand to help non-Guernsey incorporated companies, which are managed and administered in Guernsey, there has been the introduction of a more typical management and control test (in addition to the existing Guernsey tests of incorporation and shareholder control), which will allow such companies to deal with their substance requirements in Guernsey. Secondly, certain companies controlled by Guernsey shareholders could now be classified as non-Guernsey resident if they meet a test of being managed and controlled elsewhere, allowing them to elect out of the substance requirements. Both measures should again fit within a company’s review.