Guernsey has concluded double taxation agreements with the UK and with Jersey. The agreements are based on an old style treaty which do not reflect the provisions contained in the OECD model. The main provisions of the UK and Jersey agreements are as follows:
- A resident of one, but not both territories, is exempt from tax on industrial and commercial profits arising in the other territory except to the extent that they are attributable to a permanent establishment in the other territory.
- Notwithstanding the above, profits which a resident of one of the territories derives from operating ships or aircraft are exempt from tax in the other territory.
- An individual who is resident in one but not both of the territories is exempt from tax in the other territory in respect of personal, including professional, services performed within the other territory provided that the services concerned are performed for and on behalf of a person resident in his own territory and that the profits or remuneration are subject to tax in the individual's own territory.
- Where the above exemptions do not apply and income is taxable in both territories, the tax paid in one territory is allowed as a credit against tax due in the other territory. However the arrangement with the UK specifically excludes dividends and debenture interest from benefiting from the agreement.
Dividends and debenture interest are not covered in the treaty with the UK. However, provided that the appropriate claim has been made, the Inland Revenue is normally prepared to accept that interest received by Guernsey-resident banks or financial institutions on UK loans is trading income and may therefore be paid without deduction of tax under the provisions of the agreements dealing with industrial and commercial profits.
International companies paying income tax at a rate below 20% are not able to utilise the double tax agreement with the UK.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.