Guernsey does not impose any inheritance or wealth taxes and has no capital gains tax. The principal tax for individuals is income tax which is paid at a flat rate of 20% on a Guernsey resident individual’s worldwide income. High net worth individuals can elect to pay a tax cap which will be set at £150,000 for non-Guernsey source income and £300,000 for qualifying Guernsey source income for 2023. The tax year runs from 1 January to 31 December for any given year.

Guernsey companies are subject to income tax at between 0 and 20% depending on the nature of the source of their income. Investment holding companies are generally taxed at 0%.

Non-residents are generally not subject to tax on Guernsey-source income save in certain limited circumstances – these are primarily income from real property in Guernsey and profits from a business with a permanent establishment in Guernsey. 

As Guernsey is a small self-governing Island, it is not necessary to draw a distinction between national and local legislative developments. As such, all relevant developments are noted below under the local legislative heading.

Lasting powers of attorney

The States of Guernsey has, through the Capacity (Bailiwick of Guernsey) Law, 2020 (the CapacityLaw) and The Capacity (Lasting Powers of Attorney) (Bailiwick of Guernsey) Ordinance, 2022 (the LPA Ordinance), introduced into Guernsey law lasting powers of attorney (LPAs), similar to those which have existed under Jersey and English law for some time. 

Whilst it is already possible to grant a power of attorney (POA) under Guernsey law, unlike an LPA, a POA ceases to be valid upon the grantor losing capacity. 

A Guernsey LPA can be made in relation to details regarding health and welfare, or property and financial affairs, or both. 

The principal requirements for granting a valid LPA are as follows:

• the grantor must be over 18 at the time of registration of the LPA;
• the grantor must have capacity and not be under any undue influence;
• the attorney(s) must be over 18 and, if the LPA is in respect of property and financial affairs, they must be over 18 or be a Guernsey licenced fiduciary. There are also eligibility restrictions relating to the bankruptcy and insolvency of a proposed attorney; 
• the LPA can provide for successor attorney(s) to be appointed and if a grantor’s spouse or civil partner is the attorney and they divorce or legally separate, then, unless expressly stated in the LPA, their appointment ceases;
• the LPA must be in a prescribed form available online from the Royal Court of Guernsey or otherwise meet the requirements of the Law and Ordinance but be immaterially different to the prescribed form;
• the LPA must be executed in line with execution guidance provided by the Royal Court of Guernsey; and
• a grantor has to register the LPA in person with HM Greffier and pay a fee.

The LPA requires the attorney to act in the best interests of the grantor, and there are safeguarding restrictions in the Capacity Law and Capacity Ordinance that prevent the LPA from being used to change the grantor’s will or to make gifts of the grantor’s property. In relation to health and welfare LPAs, the new legislation includes provisions relating to advance decisions to refuse treatment and advance care plans, as well as any wishes expressed before the LPA is activated.

In certain circumstances it is possible to amend, terminate or revoke a LPA. Once activated upon the grantor losing capacity (or beforehand if so provided for in the case of a property and financial affairs LPA), there are specific capacity, treatment and assessment requirements for the attorneys to adhere to and submissions to be made to HM Greffier.

Beneficial ownership information

In 2017 the States of Guernsey (the States) approved the Beneficial Ownership of Legal Persons (Guernsey) Law which introduced a non-public register of beneficial ownership of all legal persons domiciled in Guernsey (the UBO Register). It requires resident agents of such legal persons to obtain and submit relevant information to the Guernsey Registry (the Registry), and imposes duties on the beneficial owners to provide the requisite information.

At present the information on the UBO Register is not public, unlike the property register in the UK, and only specified individuals at the Guernsey Financial Services Commission (GFSC), the Financial Intelligence Unit and the Registry can access the information. 

Guernsey and the other Crown Dependencies published a joint announcement on 19 June 2019 in respect of their commitment to bring each of their registers in line with EU standards (the Commitment). The legislative framework has not been fully fleshed-out and this is a developing area to monitor over the coming years. In October 2022, the States published a consultation paper in respect of one aspect of the Commitment; namely, to open up access to the UBO Register to “obliged persons”. Obliged persons are those subject to AML/CFT requirements and the intention is that they will be able to gain access to certain information held on the UBO Register by way of notification to the Registry. The consultation covers aspects of the mechanics of such access and the scope of any exemptions. In response to a recent decision of the Court of Justice of the European Union (Joined Cases C-37/20) on the incompatibility of public registers with the right to respect for private life, the States announced on 22 December 2022 that the introduction of access to registers for obliged entities would be delayed pending further advice being taken.

As noted above, Guernsey does not distinguish between national and local case law.

There have been no relevant local case law developments in this area. 

Guernsey’s status as a leading international finance centre, committed to meeting all applicable global standards, means that it continues to attract high value and complex structures for international families. The increasingly high regulatory burdens (and associated costs) means that the structures which are being established now tend to be higher value and fewer in number. Advisors in Guernsey now need to be well versed not only on how to structure wealth for clients but also as to how that wealth will be reported under the Automatic Exchange of Information (AEOI) framework.

There were no relevant laws which were changed as a result of the pandemic. There was, however, a recognition by the Guernsey Revenue Service that restrictions on international travel may have made it more difficult for companies to comply with the economic substance requirements in Guernsey and this was taken into account when assessing compliance with such legislation. 

As noted above, all relevant developments are set out under local legislative developments below.

New charities legislation

Guernsey has introduced new charities legislation to further strengthen the regulatory position of charities in the jurisdiction.

The Charities etc. (Guernsey and Alderney) Ordinance, 2021 (the Charities Ordinance) and The Charities etc. (Amendments, Exemptions, Governance and Specified Amount) (Guernsey and Alderney) Regulations, 2022 (the Charities Regulations) set out which charities and non-profit organisations (NPOs) are required to register on the Register of Charities and provide governance guidelines. 

NPOs are organisations that are established solely or principally either for the non-financial benefit of their members or for the benefit of society. On the other hand, a charity is a NPO that meets the following two additional requirements:

1. all the purposes of the entity are charitable in nature, or incidental to any of its charitable purposes; and
2. the entity provides or intends to provide benefit to the public or a section of the public locally or internationally to a reasonable degree in giving effect to its purposes. 

A non-exhaustive list of charitable purposes have been set out in the Charities Ordinance and include the prevention or relief of poverty, education and religious causes. Both NPOs and charities benefit from preferential income tax rates on profits. Charities also receive tax rebates on the donations that they receive, subject to certain limitations.

NPOs must register on the Register of Charities if they reach a certain financial threshold (essentially having gross assets of GBP 100,000 or more – subject to a few exemptions) or they reach the international threshold, meaning they raise and distribute assets abroad. 

There are certain concessions from some of the more onerous governance requirements under the Charities Ordinance afforded to NPOs that are administered, controlled or operated by a person regulated by the Guernsey Financial Services Commission (the GFSC), meaning that the NPO need not comply with the following requirements:

• the board must consist of a chair, secretary and treasurer each filled by a separate person;
• a majority of the board is Guernsey or Alderney resident; and
• that board members must be persons of integrity and probity who have suitable and appropriate skills and experience.

The Charities Regulations introduced fairly stringent and prescriptive provisions for NPOs and their governance requirements. In addition to the board requirements as detailed above, further detail is required in the constitutional documents, meaning that certain registered charities and NPOs will need to amend their constitutional documents within the timeframes described in The Charities etc (Commencement and Transitional Provisions) (Guernsey and Alderney) Regulations, 2022. Further, NPOs will also be required to keep financial records and to file annual these annually. There are also requirements to keep minutes and records of meetings and other records to ensure providence, financial probity, and transparency.

Recent and upcoming deadlines in relation with the changes introduced by the Regulations and the Ordinance are:

• from 1 August 2022, registered NPOs must identify donors and beneficiaries if they receive a donation from outside the Bailiwick or provide assets to a beneficiary outside the Bailiwick of GBP 15,000 or more in any one year, or if they receive a donation which they consider to be unusual;
• any international payments over GBP 100,000 made on or after 1 August 2022 must be reported to the Registrar (excluding the donation of physical items, payments that are incidental to the purposes of the NPO to support a person from the Bailiwick who is residing elsewhere for reasons connected to the payment, or payments to an affiliated organisation in the UK, Jersey, or the Isle of Man);
• all NPOs must carry out a risk assessment and put in place mitigating measures where necessary — internationally focussed NPOs must have completed this by 30 November 2022 and domestic NPOs by 31 March 2023; and
• internationally focussed NPOs must also have a written anti-financial crime policy in place and filed with the Registrar by 30 November 2022.

New fiduciary legislation

A new suite of comprehensive Regulatory laws have recently been introduced and are now in force, the most relevant of which are:

• the Banking Supervision (Bailiwick of Guernsey) Law, 2020 (the Banking Law);
• the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the POI Law); and
• the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (the Fiduciary Law), which was accompanied by the Fiduciary Rules and Guidance, 2021 (the Rules).

The primary aims of this overhaul were to consolidate the existing framework and to ensure compliance with international standards ensuring effective overall supervision. 

The Rules

The Rules are much more detailed than the previous code of conduct, and include new requirements on handling client money that ensure Guernsey’s regulatory regime is in line with the Standard on the Regulation of Trust and Corporate Service Providers issued by the Group of International Finance Centre Supervisors.

Lending

With Guernsey’s executive, the States approval of the Lending Credit & Finance (Bailiwick of Guernsey) Law, 2022 separate licensing requirements will be introduced in relation to the provision of credit services. The primary aim of the legislation is to improve consumer protection but, with the public consultation on the guidance and implementation of the law having closed in September 2022, details of the extent of any impact on the provision of lending within trust arrangements are expected imminently.

Updated probate procedure

On 3 June 2020, the States passed a resolution approving the transfer of jurisdiction for grants of representation from the Ecclesiastical Court to the Royal Court. However, by 2021 these plans had been abandoned by agreement between the Dean of Guernsey and the States, whereby the Ecclesiastical Court retained responsibility for the probate service but committed to transferring any net surplus of the Court’s fees to the States Social Investment Fund. As a result of the revised plan, the probate service has now been rebranded as the Guernsey Probate Registry and a more structured and efficient procedure put in place to receive applications for grants. 

As noted above, all relevant developments are set out under local legislative developments below. 

In the Matter of the K Trust [2020 GLR 312] the Court of Appeal clarified the meaning of the term ‘share’ as used in a trust instrument. The K Trust instrument directed the trustees to, at their discretion split the Trust Fund equally between the Settlors’ two daughters. If a daughter was to die with no issue, then her ‘share’ of the K Trust property was to be split, with half going to the other daughter and half to another trust. One of the daughters died in infancy and, thus, the Trustees applied for directions as to the true construction of the instrument. 

The Court of Appeal found that the deceased daughter did have a share as the term was not a defined legal term in Guernsey trust law. It could refer to both a present and future interest. The Court thereby directed the Trustee to follow the directions in the instrument and split her share. 

None.

There were no pandemic related legal developments in this area.

As noted above, all relevant developments are set out under local legislative developments below. 

New summary civil forfeiture procedure

The Forfeiture of Money etc. in Civil Proceedings (Bailiwick of Guernsey) (Amendment) Ordinance 2022 amends the Forfeiture of Money etc. in Civil Proceedings Law, 2007 by:

• introducing a summary forfeiture procedure for cases where the law enforcement authorities have refused to consent to a transaction involving particular assets; 
• reversing the burden of proof in standard civil forfeiture applications, so that where the court has frozen assets that are suspected to be linked to criminality and His Majesty’s Procurer then applies for a forfeiture order, the court must make the forfeiture order unless satisfied on the balance of probabilities that the assets are not linked to criminality; 
• giving the Committee for Home Affairs the power to make Regulations to introduce a procedure under which a forfeiture order can be reconsidered if new evidence comes to light; 
• exonerating law enforcement authorities for costs or damages in respect of a civil forfeiture application, except for loss caused by an act or omission made in bad faith.

Under Guernsey’s anti-money laundering regime, it is possible for a person to request consent from the Financial Intelligence Unit (FIU) prior to undertaking a relevant act which they anticipate could result in them committing a money laundering offence. If the FIU consents, then the consent acts as a defence. The refusal of consent has to date served as an informal freezing of the assets because the person generally will not proceed with the activity for fear of committing a money laundering offence.

The new summary procedure will enable the court to make an order for the forfeiture of assets in a Bailiwick bank account where a relevant consent request has been refused at least 12 months previously. 

A summary forfeiture notice with details of the court hearing will be served on the bank account holder and the bank at which the account is held. If the account holder does not attend the hearing, the court may make a forfeiture order without further notice to the recipient. If the account holder does appear, they will have to satisfy the court that the funds are not the proceeds of unlawful conduct or intended by any person for use in unlawful conduct.

As noted above, all relevant developments are set out under local legislative developments below 

Equity Trust (Jersey) Ltd (Respondent) v. Halabi (in his capacity as Executor of the Estate of the late Madam Intisar Nouri) (Appellant) (Jersey); ITG Ltd and others (Respondents) v. Fort Trustees Ltd and another (Appellants) (Guernsey) [2022] UKPC 36. 

On 13 October the Privy Council handed down judgment in respect of appeals from the courts of appeal of both Guernsey and Jersey. Both cases concerned the rights of indemnity of successive trustees against trust assets and the ranking of the consequent indebtedness where the trust had become insolvent. The judgment addressed four outstanding questions resulting from the numerous prior judgments at first instance and on appeal concluding as follows: 

• a trustee’s right of indemnity confers a proprietary interest in the trust assets; 
• such proprietary interest survives a change of trustees; 
• a trustee’s proprietary interest ranks pari passu with the proprietary interests of other trustees of a trust without regard to when such interests arose; and 
• a trustee’s indemnity extends to the costs incurred by such trustee in proving its own claim against the insolvent trust. 

The Guernsey courts continue to be busy with trust and estate disputes. The decision in Equity Trust and ITG Ltd by the Privy Council has conclusively answered a number of questions as to priorities between trustees and creditors in insolvent trusts which is an area of law unique to Guernsey and Jersey on account of the jurisdictions’ limited recourse provisions in their respective trust laws.

The global COVID-19 pandemic has demonstrated the resilience of the financial services sector in Guernsey, with fiduciary services providers, the regulator and the Courts all adopting remote working practices. This has enabled business to continue very much as usual with little to no disruption for the end clients. Ironically, the shift away from travel and international mobility has made it easier for those in Guernsey to do business internationally, as video calls have replaced the necessity to meet clients face to face, at least, for the time being.

1. My client would like to establish a trust in Guernsey – what information will be publicly available in relation to the proposed trust?

As trusts are not entities (they are a fiduciary relationship), the trust itself is not registered anywhere and there is no register of trusts. Information about the settlor and beneficiaries would be held by any Guernsey licensed trust company in order to comply with their anti-money laundering and regulatory obligations. That information would be kept confidential save where it is required to be shared with tax authorities, regulators or law enforcement.

2. My client wants to set up a Private Trust Company (PTC) or Private Trust Foundation (PTF) to act as trustee of several family trusts – can they or their family members form part of the board of directors of the company?

It is possible for settlors and their family members to form part of the board of directors of the PTC or council of the PTF but advice should be taken in the jurisdictions in which they are tax resident before appointing them to the role to ensure they do not onshore the PTC or PTF. It is important to also consider whether they are subject to domestic legislation that could be used to obtain detailed information about the PTC/PTF, its underlying trusts and their assets.

3. My client would like to retain some control over investment decisions – what options are there?

The settlor can reserve a power to direct the trustee in relation to investments, or a power to appoint or remove an investment advisor or investment manager. The settlor could even be appointed as an investment advisor or investment manager himself.