Guernsey’s revised zero-10 corporate tax regime has received EU approval.
Under the tax regime, all companies in Guernsey are taxed at 0 percent except for banks that are liable at 10 percent on certain activities. There is no withholding tax on dividends paid, no capital gains tax and no value added/general sales tax.
But the zero-10 regime included deemed distribution provisions, which meant that local shareholders were taxed on the profits of locally owned companies.
In April, the EU Code of Conduct Group on Business Taxation said that the deemed distribution provisions of the zero-10 regime were harmful to non-Guernsey residents.
It found them to be harmful because they treated residents and non-residents differently.
Guernsey has since removed the provisions, and the code of conduct group has given its approval.
Guernsey's chief minister, Peter Harwood, said: "Obviously this is subject to the standard ratification process but I am pleased that the EU code group confirmed...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."
Fiona Le Poidevin, chief executive of Guernsey Finance, said: "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 EU code group had previously ruled similarly on the zero-10 regimes of both Jersey and the Isle of Man.
