Guernsey

*Updated October 2019*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

Mixed common and civil law.

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Inheritance and succession

Succession

The Inheritance (Guernsey) Law, 2011 (the 2011 Law) creates a regime for succession that will apply to individuals whose wills are executed after 1 April 2012 or who die intestate after this date and are domiciled in Guernsey. The pre-2011 Law regime is preserved for wills executed before the commencement date unless a suitable declaration was made that the 2011 Law applies. Where the deceased dies domiciled in Guernsey and is survived by various categories of persons and the 2011 Law applies, such persons may apply to the Royal Court for an order on the grounds that the deceased’s will or intestacy failed to make reasonable financial provision for the applicant. There is no distinction between legitimate and illegitimate heirs.

Family law and defined inheritance rules

Immovables situated in Guernsey are subject to Guernsey succession law, regardless of the individual’s domicile. Movables are subject to the succession law of the deceased’s domicile. Guernsey’s rules of forced heirship have been abolished going forward. Freedom of testamentary disposition now applies.

Probate process

There is no inheritance tax in Guernsey. In relation to immovables, the property vests directly in the heirs. In relation to movables, the estate vests in:

• the executor, where there is a will;
• the administrator upon the issuing of the Grant of Letters of administration.

The executor must establish title to Guernsey-situated movables by obtaining a Guernsey Grant of Representation to gather the assets. If the deceased died intestate, the person entitled under the law of the deceased’s last domicile must obtain a Grant of Letters of administration for this purpose, with Guernsey law determining precedence as to entitlement to administer.

A foreign Grant of Probate is not generally recognised. Where a grant has been obtained in the UK or France, although it must be re-admitted to probate in Guernsey, no evidence as to foreign law is required. Where a Grant has been obtained elsewhere, the Registrar of the Ecclesiastical Court (the Registrar) may require evidence by affidavit in relation to the law of that jurisdiction.

The death certificate, will and/or grant, details of the Guernsey assets, and a valuation and details of the personal representative (PR) must be supplied to the Registrar who may require translations of any will and/or Grant that is not in English or French and an apostille.

The Registrar draws up the oath leading to the grant. An attorney administrator is usually appointed to administer the Guernsey estate if the PR is overseas. Office copies of the grant are supplied on request, which provide evidence of the PR’s right to deal with the estate.

If the PR places an advertisement in a Guernsey newspaper in two successive weeks, requesting claims against the estate and giving details of the intended distribution of the estate, they can distribute the movable estate after three months free of any claims against them as PR, other than those of which they have notice.

If there is no will, the PR must post a bond as security for twice the value of the estate. This is not required where the PR appoints an advocate of the Royal Court as their attorney.

Mental capacity

A power of attorney executed under Guernsey law lapses on supervening mental incapacity. Enduring or lasting powers of attorney made by non-resident donors and deputyship orders that are effective under the law of the competent foreign jurisdiction may be recognised by the Royal Court.

Where an individual suffers from infirmity of mind or body (the patient), application is made to the Royal Court by the person wishing to be appointed as their curateur (guardian). Evidence of infirmity can be given orally or by affidavit. Up to five members of the patient’s family or friends act as advisors. The guardian must look after the patient’s property. No security is required. The States are currently investigating the introduction of lasting powers of attorney.

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Estate planning

Use of trusts in estate planning

The Trusts Law applies to trusts created both before and after its commencement. With foreign trusts it applies with respect to enforceability in Guernsey but has limited applicability otherwise. The court in Guernsey has jurisdiction over trusts where a trustee is resident in Guernsey, where any property of the trust is situated or administered in Guernsey, or where the terms of the trust provide that the court in Guernsey is to have jurisdiction. The role of the court is to rule on procedural and incidental matters arising under Guernsey law. Trustees may apply to the court for directions in managing the trust. Trustees may compromise and settle claims. Where the terms of a trust direct or authorise or the court directs, a trust dispute may be referred to mediation or arbitration (ADR). Where such ADR takes place all beneficiaries are bound by the result of the ADR provided they were represented or had notice.

A properly constituted trust is generally valid and enforceable in Guernsey. A trust is invalid if it purports to do anything contrary to the law of Guernsey, has no identifiable or ascertainable beneficiary (unless it has charitable purposes or enforceable non-charitable purposes), or the court declares it invalid. The court may determine that a trust is invalid and unenforceable where the trust was established by duress, fraud, mistake, undue influence, misrepresentation, or in breach of fiduciary duty. Trust property that has been dealt with in breach of trust can be traced and recovered, unless it is no longer identifiable or it is in the hands of a bona fide purchaser for value without notice of the breach.

Trusts are used for both private and commercial purposes, the latter giving rise to a range of structures including those used for share schemes, pensions, investments (including unit trusts), securitisations and insurance arrangements. Trusts may be varied, provide for maintenance, advancement and accumulation of income. Protective trusts also exist. There are no registration or filing requirements for Guernsey trusts.

All trustees acting in a professional capacity must be licensed by the Commission. Trustees are entitled to a non-possessory lien over the trust property, including trust property that has been distributed to beneficiaries, for all expenses and liabilities properly incurred. An indemnity given in writing by a trustee or beneficiary expressed to be in favour of a previous trustee is enforceable by that trustee notwithstanding that such trustee is not a party. The overriding duties of a trustee are to observe the utmost good faith and to act as a prudent person exercising reasonable skill and care. Subject to the terms of the trust, trustees must not profit from their trusteeship or cause or permit any other person to profit from the trusteeship and must act impartially between beneficiaries or charitable purposes. Trustees must ensure that trust property is properly held/vested/controlled by them, and, subject to the terms of the trust, preserve and enhance the value of the trust property.

The courts will not invalidate a Guernsey trust where it has been properly constituted, even if the transfer of assets into the trust is in breach of any foreign rule of forced heirship. All questions arising in relation to a Guernsey trust are to be determined in accordance with the law of Guernsey (such law to exclude other rules of international private law). Guernsey trusts are frequently used by settlors who wish to reserve powers. The reservation or grant of powers by the settlor does not invalidate the trust. A trustee may consult or obtain the consent of another person before exercising any function, who is not, by virtue of being so consulted or giving or refusing such consent, deemed to be a trustee

The Trusts Law permits perpetual trusts. Where there is no identifiable or ascertainable beneficiary, the trust, to be valid, must be created for charitable purposes or, if for non-charitable purposes, must provide for an enforcer of such purposes. A purpose does not require the conferral of benefit and includes the ownership of property and the exercise of functions. Purpose trusts are frequently used to hold shares in a private trust company. Private trust companies may not act as trustee for business or profit. They must act for a clearly defined number of trusts for an identified group of beneficiaries or purposes. Private trust companies may apply to the Commission for a discretionary exemption from licensing for a one-off fee.

Trustees have a duty to provide full and accurate information of the state and amount of trust property to the enforcer of a non-charitable purpose trust upon request and, unless the terms of the trust provide otherwise, to beneficiaries, settlors and trust officials. Subject to the terms of the trust, trustees are not obliged to disclose documents that reveal their deliberations or letters of wishes. The Codes of Practice issued by the Commission states that trustees who are subject to the guidance notes should ‘maintain confidentiality except where disclosure of information is required or permitted by any applicable law or by guidance published by the Commission, or authorised by the person(s) to whom the duty of confidentiality is owed’.

There is no central register of trusts.

Use of foundations in estate planning

Guernsey foundations may be used in most circumstances as an alternative to a trust. Foundations may not be used for trading. A foundation may act as a trustee. The Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 (the Beneficial Ownership Law) applies to foundations.

Types of entities

Commonly used legal entities include companies limited by shares or by guarantee, protected cell companies (PCCs) and incorporated cell companies (ICCs), all pursuant to the Companies (Guernsey) Law, 2008, as amended (the Companies Law), limited partnerships, pursuant to the Limited Partnerships (Guernsey) Law, 1995, as amended, and limited liability partnerships (LLPs), pursuant to the Limited Liability Partnerships (Guernsey) Law, 2013.

Companies are registered with the Companies Registry and may have a single subscriber to the memorandum of incorporation of the company. Companies are formed by corporate service providers who hold fiduciary licences regulated by the Commission. Subject to the requisite client due diligence (CDD) being held, a company may be formed within 15 minutes. The Companies Law abolished the concept of authorised capital for companies formed from 1 July 2008. Shares may be issued, if the articles allow, for no par value as well as with a nominal, or par, value. There is no limit on the number of directors, but there must be at least one director who is also an officer. Corporate directors are permitted. If there is no resident director the company must have a resident agent. A company may, but need not, have a secretary. Companies may be formed for all legal purposes, but there are restrictions on formation of companies undertaking regulated activities, for example trust companies.

The ICC permits the existence of separate legal entities (incorporated cells) within another legal entity. Unlike a PCC, which has separate and distinct ‘cells’ whereby assets and liabilities of one cell are largely segregated from those of the other cells, an ICC has one or more incorporated cells within it, each ring-fenced by virtue of its separate legal existence from other incorporated cells and the ICC itself.

The Beneficial Ownership Law applies to a company incorporated under the Companies Law and to an LLP.

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Taxation

Income tax system

Income tax is payable by an individual solely or principally resident in Guernsey on their total income, wherever such income arises or accrues. The tax year is on a calendar year basis.

Certain loan interest reliefs are available to be offset against income tax, including loan interest relief on moneys, to the limit of GBP400,000, borrowed against the principal private residence (PPR) in Guernsey. The cap on tax relief for PPR is GBP9,500 (doubled for married couples where each spouse is a borrower). The maximum amount of deductible interest that can be claimed will be reduced until the relief is removed altogether by 2025.

Income tax is payable by an individual resident but not solely or principally resident in Guernsey on total income, wherever such income arises or accrues, unless:

• They elect to pay the standard charge of GBP30,000. If so, they are only liable to income tax on their Guernsey-source income (other than bank interest arising in Guernsey) and any income remitted to Guernsey. In that case, they are not entitled to any allowances, although the standard charge may be set off against the tax that would otherwise be chargeable on their income arising or accruing in Guernsey in that year of charge.
• The individual is resident for employment purposes, and their only income arising in Guernsey (other than bank interest arising) is employment income taxed at source under Guernsey’s Employees Tax Instalment Scheme (similar to pay as you earn (PAYE) in the UK). Such individuals are taxed on their Guernsey earnings and remittances to Guernsey. They must file a tax return for the year of charge which covers income arising in Guernsey and income remitted to Guernsey during that year. Funds remitted to Guernsey are presumed to be income unless the director is satisfied otherwise.

For Guernsey residents, non-Guernsey-source income qualifies for an annual cap on tax payable of GBP110,000. This equates to liability on taxable income from such qualifying sources of GBP550,000. Those with taxable income from qualifying sources of more than GBP550,000 in a year of charge benefit.

The GBP110,000 tax cap applies only to non-Guernsey-source income. Where the resident has both non-Guernsey- and Guernsey-source income, they can elect within two years after the end of the relevant year of charge that their total tax liability for that year of charge, on both qualifying and non-qualifying income (excluding income derived from Guernsey land and property), be capped at GBP220,000. This is equivalent to tax at 20 per cent on income of GBP1.1 million. Therefore, Guernsey residents with worldwide income of over GBP1.1 million in a year of charge can benefit from the election.

The cap is time apportioned where the individual is resident in Guernsey for only part of the year.

Personal income tax rates

20 per cent.

Corporate income tax rates

There is no separate corporation tax.

• Company standard rate: 0 per cent (income from businesses, offices and employments and other sources).
• Company intermediate rate: 10 per cent (income from banking, including custody services; domestic insurance; fiduciary; insurance intermediary; insurance manager; and fund administration businesses).
• Company higher rate: 20 per cent (income from trading activities regulated by the Director General of the Office of Utility Regulation (OUR), the ownership of land and buildings, the importation/supply of oil or gas in Guernsey and large retail businesses).

Annual validation fees of GBP250 are payable by all companies, other than not-for-profit organisations, which may pay up to GBP100; companies administered by corporate service providers, which pay GBP500; ICCs and PCCs, which pay GBP750; and regulated companies, which pay higher fees.

Capital gains tax

NOT APPLICABLE

Non-residents

Income from real property situated in Guernsey, whether held by the individual or by a company and profits from a business with a permanent establishment in Guernsey. Distributions made to a non-resident individual from a Guernsey company or trust are not subject to income tax in Guernsey, unless the company or trust has Guernsey-source income (other than income from bank deposits). Generally there is no withholding tax, although there are systems to deduct tax in instalments for tax on Guernsey rental income.

Withholding tax rate (non-treaty)

NOT APPLICABLE

Withholding tax rate (treaty)

NOT APPLICABLE

Taxation at death

There is no taxation at death. Probate fees are payable, which equate to approximately 0.35 per cent of the estate, and are capped at GBP100,000.

Other taxes

There is no goods and services tax. There is no gift or wealth tax.

Tax on real property is payable annually, based on the size of the property. The acquisition of real property is subject to document duty on a sliding scale: 2 per cent on land including dwellings valued at GDP250,000 or less; 3.25 per cent where the value exceeds GDP250,000 but does not exceed GDP400,000; 3.5 per cent where the value exceeds GDP400,000 but does not exceed GDP750,000; 3.75 per cent where the value exceeds GDP750,000 but does not exceed GDP1,000,000; and 4 per cent on the remaining amount. Realty, other than dwellings, is charged at 3 per cent. Bonds are subject to document duty at the rate of 0.5 per cent of the secured figure. Duty is also now payable under the Document Duty (Anti-Avoidance) Law on relevant transfers, including on the sale of shares in a company which owns Guernsey real property on the market value of the interest transferred at the rates mentioned above.

Tax treaties

Guernsey has signed 26 double taxation agreements to date, of which 25 are in force.

Tax information exchange agreements

Guernsey has signed 60 TIEAs to date, of which 57 are in force.

Guernsey, together with 50 other jurisdictions including the other Crown Dependencies and the British Overseas Territories, signed the Multilateral Competent Authority Agreement (MCAA) comprising the Common Reporting Standard (CRS) on 29 October 2014. Currently, more than 100 jurisdictions have signed the CRS MCAA and have made commitments for implementing the CRS by 2017 or 2018.

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Residence and domicile

Special rules on becoming resident

An individual is principally resident in Guernsey for tax purposes if they do one of the following:

• Spend 182 days in Guernsey in the year of charge.
• Spend 91 days or more in Guernsey in that year of charge and, during the four preceding years of charge, has spent 730 days or more in Guernsey.
• Take up permanent residence in Guernsey in that year of charge.

Special rules on ceasing residence

None.

Domicile concept for gifts and inheritance

Domicile is relevant in relation to succession insofar as intestacy and real estate are concerned and generally follows the principles of English law. Liability to income tax is determined by residence, not domicile.

Taxation of holdings by non-residents on death and of gifts

• Gifts: none
• Death: none

Reporting/auditing requirements

No.

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Other relevant information

Asset protection laws

No.

Foreign currency restrictions

No.

Foreign ownership restrictions

No.

AML/CDD and other requirements and regulatory procedures for advisors

• To establish a trust: identification and verification is required of the trustees (unless they are regulated), the settlor, any protector and beneficiaries who have a vested interest or who are the object of a power plus identification of the source of funds and of wealth. This is carried out by the service provider who will require certified true copies of photographic identification and two recent documents verifying the address of individuals. Where the settlor is a corporation, identification and verification of the beneficial owners and principals of the corporation is required (see below). An introducer certificate may be accepted in certain circumstances. Where a high-risk relationship is identified, further verification will be required including as to source of funds. Similar requirements apply to establish a foundation.
• For incorporation: for AML/CDD purposes identification and verification of shareholders who have a beneficial interest in 25 per cent or more of the company and of persons who have effective control over the capital of the company (directors, authorised signatories, etc.) in accordance with the process set out above is required. The registered office address and any principal place of business must be verified.
• Directors have to be registered with the Companies Registry prior to acting by providing CDD in order to receive a unique reference number.
• Companies (other than regulated companies) must have a resident agent who is responsible for keeping records of all beneficial owners.
• To open a bank account: identification and verification of the account holder plus identification of the source of funds is required which, as a minimum, will comprise certified true copies of photographic identification and two recent documents verifying the address of the individual.
• Where the account holder is a corporation, identification and verification of the beneficial owners and principals is required. Where individuals are identified as high risk further verification will be required as above.

Other points of interest

Each sector of the finance industry is separately regulated. Advice should be sought whether a licence is required for any activity. In 2012, Guernsey introduced the first legislation creating image rights as a registered right.

Key resources for further information

PUBLICATIONS

• Gordon Dawes, Laws of Guernsey  (Oxford: Hart Publishing, 2003) (caution must be exercised as much is out-of-date).
• Ian Kirk, Kirk on Guernsey Company Law 2nd edition (Oxford: Key Haven Publications, 2016).
• Richard Williams, Arabella Murphy and Toby Graham, A Practical Guide to the Transfer of Trusteeships, 3rd edn (Globe Law and Business, 2017)

WEBSITES

• Channel Islands Aircraft Registry: www.2-reg.com
• Channel Islands Securities Exchange: www.tisegroup.com
 
• Guernsey Bar: www.guernseybar.com

• Guernsey Finance: www.weareguernsey.com

• The Commission: www.gfsc.gg

• Guernsey Legal Resources: www.guernseylegalresources.gg

• Guernsey Registry: www.guernseyregistry.com

• Guernsey Society of Chartered and Certified Accountants: www.gscca.gg

• Income Tax Office: www.gov.gg/ccm/navigation/income-tax/

• Law Officers (The): www.gov.gg/law

• States of Guernsey (government site): www.gov.gg
• STEP Guernsey branch: www.stepguernsey.org

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STEP branches in Guernsey

There is one STEP branch in Guernsey, with over 700 members from Guernsey’s fiduciary sector as well as in related aspects of accountancy, the law, banking, pension management and fund administration.

• STEP Guernsey

Firms in Guernsey

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Members in Guernsey

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