Companies that open a branch in Guernsey are interested in expanding their business activities, and at the same time wish to maintain a high level of control over the activities of their Channel Islands counterpart. The branch is not a separate business form from the overseas company, and it will engage in the same business activities.
Guernsey is the second largest of the Channel Islands, after Jersey, and it is a preferred location for company formation, given the favourable conditions for starting up a business, and the general ease of doing business in this location. Moreover, the location is also advantageous, as the Islands are close both to the United Kingdom (as a Crown Dependency), as well as France.
Our Jersey company formation specialists highlight the main characteristics of the branch, as well as the issues investors should be aware of. For more information about company formation in the Channel Islands, including in Jersey, please reach out to our team.
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The Guernsey branch
The branch is an extension of the parent company abroad and it is successfully used in many different business fields, most notably in banking and financial services. Apart from being required to operate in the Channel Islands under proper licensing (that is, to apply for any and all relevant special permits and licenses that may be required in its field, such as those for banking and financial services), the branch will also need to observe certain requirements set forth by the Financial Services Commission.
Our team highlights some of the most important aspects listed in the Code of Practice for Branch Operations in Guernsey:
- Have a local place of management;
- Maintain separate accounts;
- Have a bank account;
- Have a general representative;
- Submit a business plan as part of the registration process;
- Localise sufficient assets and, if needed, appoint an Actuary.
Our agents specialising in company formation in Jersey can give you more details about the requirements listed herein.
We remind interested investors that a branch is a business form that does not protect the foreign company from liability. It does not have a legal personality or legal and procedural capacity. The foreign company is liable for its debts and obligations. If this is an issue you need more information on before you open a branch in Guernsey, our team will answer your questions.
Guernsey branch requirements
The branch in Guernsey will need to be properly registered for its business activities and it will need to function based on a license. For branches operating in banking and financial services, this license is issued by the Guernsey Financial Commission and, for this purpose, the Commission may communicate with the regulator in the parent company’s country of origin.
Companies in the insurance industry that set up a branch in Guernsey will also be subject to the Insurance Business Rules and will need to comply with the mandatory requirements for their types of activities as part of their application to open a branch.
The Guernsey Financial Services Commission may request additional information about the branch and its activities and, as the Commission may see fit, it can also use prudential powers, according to the nature of the branch business, and other particularities.
Special conditions can apply to UK-authorised insurers who open a branch in Guernsey. Our team can give you more details if you are opening a branch here and your company is based in the UK. For all other jurisdictions in which the parent company is located, our team will give you country-specific information.
Guernsey tax requirements for branches
For the purpose of taxation, a branch is considered a permanent establishment in Guernsey, according to the Income Tax Law. Branch income is taxed as the income of locally registered companies, and at the same rates, according to the activities of the branch.
Guernsey is an advantageous location in terms of taxation, this being one of the main reasons why investors can choose to set up a branch in Guernsey. The business will be subject to the following taxes:
- 0% corporate income tax for most business activities;
- 10% corporate income tax for banking and lending operations, as well as for fund administration and fiduciary companies, among others;
- 20% corporate income tax rate for rental income as well as for property development in Guernsey, and the exploitation of land.
When there is no Guernsey resident individual who has interest on the transfer of profits abroad (to group companies), no tax is withheld.
Guernsey and the United Kingdom have in place an intergovernmental agreement (FATCA) under which companies can be subject to certain disclosure requirements that are mandatory.
In terms of tax administration, the branch is required to file an annual tax return. This is done online, as per the applicable deadlines. Failure to complete and submit the returns within the permitted period results in penalties.
The OECD model for country-by-country reporting is relevant to branches, as Guernsey has committed to implementing these regulations. For example, companies are required to provide a comprehensive description of their global business, based on their cumulated data from all the countries where they operate (have branches).
Guernsey has signed double taxation agreements with several countries, among which the United Kingdom, the Isle of Man, Estonia, Luxembourg, Hong Kong, Singapore, and others.
For investors who wish to open a branch in Guernsey, our team will provide detailed information as needed on the disclosure of business operations in the case of group taxation. Alternatively, we also offer information on setting up a business in Jersey and how branches here can be affected by these reporting requirements and the disclosure of business operations.
Being located close to the UK, Guernsey is a location that offers a geographical advantage for many types of companies focused on international activities. If you would like to know more about company formation in Jersey, or Guernsey, our team will give you the needed information about the main steps for starting up a business here.
Other options for foreign companies in Guernsey
While the branch remains dependent on the parent company (and the latter remains liable for its branch), a different rapport exists between the foreign legal entity and its subsidiary in Guernsey.
For those foreign companies that wish to establish their presence in Guernsey, or the Channel Islands, company formation in Guernsey through a subsidiary may be advisable, as this option will allow the parent company to control its subsidiary and limit its liability at the same time.
If you are interested in other matters, such as opening a Jersey trust company, you can reach out to our local experts.
The subsidiary is essentially a Guernsey-registered company, formed under the local rules for incorporation and subject to the same favourable taxation requirements as listed above. Investors who are considering their options regarding the most suitable business entity they can establish in Guernsey (according to their business goals and other criteria) can contact us if they have more questions on how to open a branch in Guernsey.