Offshore Tax Advice

Guernsey's senior politicians on Friday officially proposed a set of economic and taxation changes that include a zero rate of corporate tax and the capping of personal tax at GBP250,000.

The measures contained in the newly confirmed package include:

• A zero rate of income tax on company profits, except for specific banking activities which will be taxed at 10%; Guernsey residents continue to pay tax at 20% on assessable income; Personal tax capped at GBP250,000 on non-Guernsey income and investment income; Wealth taxes like inheritance tax and capital gains tax will not be introduced; Taxation of Guernsey-resident shareholders on distributed company profits only; 1% increase in Social Security contributions for employers only, with a GBP60,000 ceiling; No goods and services tax in the short term; Increase in indirect taxes such alcohol, tobacco and petrol; and
• Running a budget deficit to be funded over 3-5 year by up to GBP100m from the contingency reserve plus 5% annual economic growth.

Although many of the measures had already been flagged up by Guernsey's authorities, no official proposals had been made until the release of the package last week."This is a great package for the finance industry," observed Peter Niven, Chief Executive of GuernseyFinance, the promotional agency for the island's finance industry."Guernsey already has a proven track record as a leading international finance centre and these measures really will enhance the environment for doing business in the island.""These proposals reinforce the message that Guernsey is very much open for business and welcomes high net worth individuals. They clearly promote enterprise within the economy as a whole, in particular high-earning, low footprint activities and the feeling within the finance industry is that they will help attract new business to the island, especially niche activities like hedge fund managers," he concluded.

The States of Guernsey will debate the proposals of the Policy Council at its June sitting, which starts on Wednesday 28 June. If approved, the main strands of the package will come into effect from 1 January 2008.