Guernsey’s revised zero-10 corporate tax regime has been given a clean bill of health by the EU.
An April meeting of the EU Code of Conduct Group on Business Taxation concluded that the deemed distribution provisions meant Guernsey’s zero-10 corporate tax regime was harmful. At the end of June, the Guernsey parliament, the States of Guernsey, agreed to repeal the deemed distribution provisions from 1 January 2013.
At a meeting earlier this week, the EU Code of Conduct Group assessed Guernsey’s repeal of the deemed distribution provisions and agreed that this removed the “harmful effects” of the island’s corporate tax regime.
A statement from Guernsey’s Policy Council said that Guernsey’s zero-10 regime without deemed distributions can now be considered to be compliant with the Code of Conduct. This is subject to the usual formal ratification by the EU’s Economic and Financial Affairs Council (ECOFIN) at the end of this year.
Guernsey’s Chief Minister, Deputy Peter Harwood, says: “Obviously this is subject to the standard ratification process but I am pleased that the EU Code Group confirmed yesterday that the repeal of our deemed distribution regime does indeed, as we expected, ensure our corporate tax regime conforms to the EU Code of Conduct.”
Under Guernsey’s zero-10 regime, all companies are taxed at zero per cent, except for the profits of specified financial services businesses which are taxed at 10 per cent (and local utilities at 20 per cent). There is a specific tax exempt regime for collective investment schemes.
Fiona Le Poidevin (pictured), chief executive of Guernsey Finance – the international promotional agency for the island’s finance industry, says: “The deemed distribution provisions primarily affect locally resident shareholders and therefore it is very much a case of business as usual for the international client base of our finance industry.
“However, it is pleasing to hear that the Code Group has assessed our amended regime as Code Compliant. This shows Guernsey is a jurisdiction which is willing and able to move quickly to ensure it continues to meet international tax standards, while also retaining its position as an extremely competitive place to do business.”
The Code Group has previously reached similar conclusions, in terms of both offending elements and remedies, in relation to the Jersey and the Isle of Man zero-10 corporate tax regimes.