Guernsey's revised tax system given green light by EU

Changes to Guernsey's corporate tax regime were approved last week by the European Union's Code of Conduct Group.

Previously, the Island's  Zero-10 tax system, which had been introduced in 2008, had been rejected as harmful by the Code of Conduct Group because of its deemed distribution rules, whereby local residents were taxed on a deemed distribution basis, but overseas shareholders were not.  This offended one of the Code of Conduct Group's principles, which forbids a distinction in treatment between locals and non-locals. The refusal by the Code of Conduct Group to approve the previous regime led to a period of unwelcome uncertainty for a finance industry where certainty of tax treatment is a key component of decisions regarding where to locate companies, and so the news this week will be welcomed by many.

The Island's government voted in June to remove the deemed distribution for local residents (as Jersey had previously done) and as a consequence the Code of Conduct Group has now approved the revised regime as compliant, although formal ratification of the decision will still be some months away.