The Island is equipped with the vital infrastructure to allow access to global markets and customers; a new £1bn data centre is being developed on the Island, seven fibre optic cables connect Guernsey with the UK and France and two new cables are currently underway. In addition, faster 4G mobile technology is already being implemented and a smartphone mobile payments system is soon to be established.
There is no question that Guernsey is well equipped with infrastructure which competes with other leading jurisdictions. However, relocating your business, or deciding where to set it up, isn’t a simple choice as there are a number of challenges to consider, least of all in relation to navigating various rules and legislation.
Guernsey is ready for growth in the high-value information and communications technology sector
The Organisation for Economic Co-Operation and Development (the “OECD”) launched an initiative to combat perceived loopholes in the international tax laws that were believed to lead to abuse and tax avoidance. This initiative is known as Base Erosion and Profit Shifting (“BEPS”). One of the immediate impacts of BEPS is that a number of multinational companies have the spotlight focussed on their tax affairs which has created reputational risks that in many cases resulted in a negative impact on their bottom line.
Guernsey is well positioned to effectively deal with any such increased scrutiny. One of the key themes of the BEPS agenda is substance; Tax authorities will be challenging whether the relevant activities and board competencies of regional holding companies or entities justify the level of return being received in those entities. Companies should be asking themselves what functions and activities are most important to driving value within their businesses and mapping these across geographies. Going forward, tax authorities will scrutinise operations where this does not clearly align with the distribution of profit within a group.
Substance can often be a challenge for companies in the digital space. It’s easy to operate from any jurisdiction and hence justifying profit sharing between locations can be difficult, especially when staff are located in various different, often higher-tax, jurisdictions. The straightforward solution is to establish a real presence in Guernsey by employing full time staff here, who deal with high-value transactions and are involved in strategic decisions.
The Island has long had a clear and transparent tax system, without the secret rulings and agreements that have caused concern, especially for the European Commission. In addition, through Tax Information Exchange Agreements (“TIEAs”) and other international agreements, Guernsey has adopted a policy of being fully cooperative with international standards as they develop.
Furthermore, the knowledgeable and experienced local population, as well as the sizeable operations that many businesses have on the Island, provide support for the local substance. Whereas the OECD is focused on abusive “letter box” companies, Guernsey companies with real substance and control of important functions will be well positioned.
For organisations searching for a location to conduct business, Guernsey is an attractive choice. Moving to the Island is straightforward and the diverse community welcomes all newcomers into the heart of island life. Situated between the south coast of England and France, Guernsey is one of the most southerly islands in the British Isles, is packed with beautiful beaches, scenic landscapes, has a temperate climate and there is barely a commute to speak of. Guernsey also boasts one of the lowest crime rates in the world.
If you’re looking to set up in Guernsey, we can provide an experienced and responsive team to support you every step of the way. Our well established relationships with the key individuals you’ll need to deal with on the Island, help make the process seamless and maximise opportunities.
