Economy and Banking Sector of Guernsey

Guernsey is a British Crown dependency, situated in the English Channel. Guernsey is a "self-governing possession" of the British Crown and is considered internationally as a "territory for which the United Kingdom is responsible" rather than a sovereign state. Guernsey is not a part of the European Union, although it's within the European Union's customs area.

Financial services, including banking, fund management, and insurance, are the main contributors to the GDP of Guernsey.

Most of the banks in Guernsey are foreign-controlled banks representing a range of countries with majority of banks having their head offices in the United Kingdom and Switzerland. Banks operating in Guernsey provide quite diversified spectrum of solutions: retail banking services essential to the local community, expatriate deposits, private banking and wealth management. Guernsey's banks also provide custody, foreign exchange and other banking services to investment, fund administration, fiduciary and insurance sectors.

Location Europe; an island in the English Channel
Population (2012)65 345
EU Status not part of the EU
Dependent Territory Of United Kingdom (British Crown Dependency)
Economy
National Currency GBP (Pound sterling)
Credit Ratings (as of Sep 2016)
    Fitch-
    Moody's-
    S&PAA- high grade
Taxation
Withholding Tax 0.0 - 20.0%
Double Taxation Agreements 12 signed agreements
Information Exchange 
    Exchange on Request 57 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 13 December 2013, Model 1
Banking Sector
Deposit Guarantee Scheme 
    Maximum Protected Amount 50 000 GBP
Country Ceiling for Deposits 
    Foreign CurrencyAaa prime
Banking Supervision Financial Services Commission
Banking Sector Structure 
    Number of Banks30
 List of Banks in Guernsey

Taxation in Guernsey

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding tax rates applied on payments of interest and dividends in Guernsey are shown in Table 1.

Dividends Interest
Natural person, resident 20.00.0
Natural person, non-resident 0.00.0
Table 1. Withholding tax rates in Guernsey.
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Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Guernsey signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Hong Kong (Dec 2013)
 Isle of Man (Jul 2013)
 Jersey (Jul 2013)
 Luxembourg (Aug 2014)
 Malta (Mar 2013)
 Mauritius (Jun 2014)
 Qatar (Jul 2013)
 Singapore (Nov 2013)
 United Kingdom

There are also several agreements between Guernsey and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Cyprus (Jul 2014)
 Monaco (Apr 2014)
 Seychelles (Jan 2014)
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Guernsey signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Argentina
 Australia
 Bahamas
 Bermuda (Apr 2014)
 Canada
 Cayman Islands
 China
 Czech Republic
 Denmark
 Faroe Islands
 Finland
 France
 Germany
 Gibraltar (Mar 2014)
 Greece (Mar 2014)
 Greenland
 Hungary (Mar 2014)
 Iceland
 India
 Ireland
 Japan (Aug 2013)
 Latvia (Oct 2013)
 Mexico
 Netherlands
 New Zealand
 Norway
 Poland
 Romania
 Saint Kitts and Nevis (Apr 2013)
 San Marino
 Seychelles
 Slovenia
 South Africa
 Sweden
 United Kingdom
 United States
 Uruguay (Jul 2014)

There are also several agreements between Guernsey and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Austria (May 2014)
 Belgium (Apr 2014)
 Botswana (May 2013)
 Brazil (Feb 2013)
 British Virgin Islands (Apr 2013)
 Chile
 Costa Rica (Mar 2014)
 Indonesia
 Italy
 Lesotho (Jul 2013)
 Liechtenstein (Jun 2014)
 Lithuania (Jun 2013)
 Macau (Sep 2014)
 Montserrat (May 2014)
 Portugal
 Slovakia (Oct 2013)
 Swaziland (Aug 2013)
 Switzerland (Sep 2013)
 Turkey
 Turks and Caicos Islands (Jul 2014)

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Guernsey signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Guernsey has FATCA agreement with the U.S. in effect since 13 December 2013 (Intergovernmental Agreement Model 1). Financial institutions operating in Guernsey are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Guernsey's financial accounts hold in U.S. financial institutions will be reported to Guernsey's authorities.

Further Information:
FATCA and European countries

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Guernsey's Banking Sector

Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Guernsey are summarised in Table 2.

Scheme Participantsall credit institutions operating in Guernsey (including branches of foreign banks), branches of Guernsey's banks abroad
Eligible Depositorsnatural persons
Covered Accountsdeposits by a natural person for his own benefits, account held by a parent for the benefit of his/her child
Maximum Protected Amount50 000 GBP
Paid In CurrencyGBP

Table 2. Deposit guarantee scheme in Guernsey.

Further Information:
Deposit Guarantee Schemes in European Territories

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Foreign currency deposit ceiling for Guernsey] is Aaa (prime).

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Banking Sector Structure

Currently there are 30 credit institutions operating in Guernsey.

All the credit institutions operating in Guernsey can be classified into several categories. Table 3 summarises the number of banks in each category.

CategoryNumber of Banks
Banks14
Branches of foreign banks16

Table 3. Number of banks by category in Guernsey.

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