Guernsey’s zero-10 regime given EU’s final seal of approval
Guernsey’s zero-10 corporate tax regime has been given the final seal of approval by the EU.
Earlier this year, 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.
In September, 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. At a meeting last week, the EU’s Economic and Financial Affairs Council (ECOFIN) formally ratified that Guernsey is now compliant with the principles of the EU Code of Conduct on Business Taxation.
“It is very pleasing that our zero-10 corporate tax regime has now been formally ratified as compliant by the EU,” says Fiona Le Poidevin, chief executive of Guernsey Finance – the promotional agency for the Island’s finance industry.
“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, this decision provides extra reassurance to them that 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.”
Guernsey’s Chief Minister, Peter Harwood (pictured), believes that the importance of compliance was emphasised by last week’s European Commission Communication to the European Parliament and European Council on Fighting Tax Fraud and Tax Evasion.
This proposed minimum standards of (third country) good governance in tax matters. These are defined as third countries which meet both the following criteria: have effectively implemented and applied the international standard for transparency and exchange of information; and do not operate tax measures which are considered harmful in the areas of business tax (and in this respect, applying the principles and criteria of the Code of Conduct are set as guidance).
The Chief Minister says: “It is a testament to the hard work undertaken by all in recent years and the significant European engagement that we are considered both compliant with the principles of the Code of Conduct and also that under the proposals set out by the European Commission we are not considered to be a tax haven. This is a not inconsiderable achievement given the misinformation and misperceptions that continue to be perpetuated in some quarters about our jurisdiction.”
ECOFIN 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.
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