Guernsey does not have estate tax, gift tax, capital gains tax, lifetime transfer tax or any form of value-added tax (VAT). Guernsey has committed to the OECD’s new framework for international tax reform that applies new rules to the taxation of multinational enterprises.

Although Guernsey’s principal tax is income tax, there is also document duty payable on the acquisition of certain property – eg, import taxes on oil, fuel, cigarettes and alcohol and charges levied on grants of probate in respect of moveable property. 

Individuals

Income tax is determined in accordance with a person’s or entity’s residence (rather than domicile).

Individuals who are solely or principally resident in Guernsey are taxed on income at a rate of 20% and social security contributions are payable at variable rates depending on employment status and/or age. They are taxed on their worldwide income unless they elect to pay the standard charge for that year. There is an annual tax cap of GBP160,000 for non-Guernsey source income and income from certain Guernsey sources (such as bank interest), and individuals can elect the tax cap to apply to their Guernsey source income, although this has the effect of increasing the cap to GBP320,000 per tax year. 

An exemption applies for individuals resident, but not principally resident, in Guernsey (based on a day-count test), who do not pay the standard charge, where their presence is solely or mainly for employment purposes. In order for this exemption to apply, the Guernsey source income must be bank interest and employment income (which must be subject to the deduction of tax by the employer through the Employee Tax Instalment Scheme). Such individuals are, however, liable to Guernsey income tax on foreign income, which they remit to Guernsey.

A non-resident individual will only pay tax on any income from business carried on in Guernsey, employment in Guernsey (except the emoluments of a director), ownership of land and buildings in Guernsey or any other source in Guernsey (except Guernsey bank accounts).

Individuals who become resident in Guernsey (who have not been resident in Guernsey in the previous three years) can claim a tax cap of GBP60,000 in the year they arrive and the subsequent three years if the individual has purchased a property on Part A of the Open Market Register in excess of GBP1.5 million. Such property must have been bought within 12 months before or after they become permanently resident in Guernsey.

Trusts

As regards trusts, where the trustees are Guernsey resident, if all of the beneficiaries are resident outside of Guernsey the trustees are not liable for income tax in Guernsey, except in respect of Guernsey source income (with Guernsey source bank interest being exempt). This is set out in extra-statutory concession M12. If any beneficiaries are resident in Guernsey, or if the settlor was resident in Guernsey, this concession would not apply and, depending on the circumstances, income tax may be payable. 

Income tax is usually assessable on the trustee, where it is payable, and the trustee must file a tax return in Guernsey in relation to this income. Where the settlor is a Guernsey resident, it is possible for income tax to be assessed directly on the settlor if the trust is held to be revocable under the Income Tax (Guernsey) Law, 1975 (as amended).

Companies, Foundations and Partnerships

Companies to which income tax in Guernsey is applicable (being those resident in Guernsey or those that are non-resident but with a permanent establishment in Guernsey) are generally liable to income tax at a rate of 0%, although certain categories of income are taxed at 10% (such as profits from investment, banking, fiduciary and insurance businesses) or 20% (such as income from real property in Guernsey). Pursuant to Guernsey’s commitment to the OECD’s new framework for international tax reform, when the changes are in place multinational groups with at least EUR750 million of global annual revenue will pay a top up tax to bring the effective taxation of their Guernsey resident entities to 15%.

A Guernsey foundation will be taxed on the same basis as a Guernsey company (ie, at 0% unless it derives income subject to the 10% or 20% rate of tax mentioned above).

Partnerships, limited partnerships and limited liability partnerships are transparent for income tax purposes.

Limited liability companies are shortly to be introduced to Guernsey. They will have legal personality, limited liability and tax transparency.

Tax Planning

Income tax planning for Guernsey resident persons and entities is fairly limited in practice. In particular, it should be noted on a more benign level that residential property is often held by a company in order to mitigate income tax payable on the income derived therefrom and businesses are often structured as companies, which offer tax advantages over partnerships, depending on the type of business conducted. Some planning in and around the 0%/10% tax regime also takes place for individuals, which results in them holding investment portfolios and so forth through Guernsey companies.

In general, there is no transfer tax in Guernsey, as mentioned in 1.1 Tax Regimes. As such there are no relevant exemptions.

Individuals who are solely or principally resident in Guernsey are taxed on income at a rate of 20% and social security contributions are payable at variable rates depending on employment status and/or age. They are taxed on their worldwide income unless they elect to pay the standard charge for that year. There is an annual tax cap of GBP160,000 for non-Guernsey source income and income from certain Guernsey sources (such as bank interest), and individuals can elect the tax cap to apply to their Guernsey source income, although this has the effect of increasing the cap to GBP320,000 per tax year.

Non-residents are liable to be taxed on income arising or accruing from the ownership of lands and buildings situated in Guernsey.

Guernsey does not impose inheritance, estate or transfer taxes. The Guernsey Probate Registry does impose a charge on grants of probate with respect to moveable property, and has done so for a long period of time. These charges are based on an infrequently changed, low tariff.

With respect to estate planning for Guernsey residents, or where using Guernsey structures for estate planning purposes for those resident outside of Guernsey, it is helpful that the Guernsey tax regime has not changed significantly for a long period of time, although it should be noted that Guernsey introduced economic substance legislation effective as of 1 January 2019. Supplementing this legislation is guidance issued in 2019 by the tax administrations in the Crown Dependencies and furthermore, in light of the outbreak of COVID-19, the Guernsey Revenue Service issued guidance confirming that there would be some flexibility if a company has had to make adjustments due to travel restrictions during that period. Following the lifting of travel restrictions, this guidance was withdrawn for accounting periods commencing on or after 1 November 2022.

Economic substance requirements only affect companies, and (as of 1 July 2021) partnerships, that are tax resident in Guernsey and require such companies, if carrying out certain activities, to demonstrate that any income earned is commensurate with the activities carried out in Guernsey. Those with existing structures resident in Guernsey or looking to set up a company tax resident in Guernsey should be aware of this regime.

As the amount of tax planning for local taxes is fairly limited in practice, there has been limited need for Guernsey to make changes to address perceived deficiencies and loopholes in its domestic tax system.

However, as mentioned in 1.5 Stability of the Estate and Transfer Tax Laws, Guernsey introduced economic substance legislation which has led to the OECD Forum on Harmful Tax Practices finding that Guernsey’s legal framework is in line with agreed standards and that Guernsey does not have a harmful taxation regime with regard to the economic substance of legal persons. The introduction of the economic substance legislation does not appear to have had a significant impact as Guernsey companies were already predominantly meeting such requirements in light of the existing regulatory regime.

Guernsey is strongly committed to meeting international standards of tax transparency. It has implemented a significant number of tax information exchange agreements as well as intergovernmental agreements, such as the US Foreign Account Tax Compliance Act (FATCA), the convention on mutual administrative assistance in tax matters and the Common Reporting Standard (CRS).

Guernsey is on the OECD exchange of tax information “white list”, and has been since it was first published in 2009, and is a party to the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

Guernsey has actively participated in meetings with the OECD and the Global Forum and is often at the forefront of transparency and information exchange initiatives, and has been for a significant period of time. Guernsey values its reputation as a leading offshore financial centre and is dedicated to maintaining its status. On 19 May 2023, Guernsey, Jersey and the Isle of Man made a joint statement on an intended approach to implementation of the OECD Pillar Two global minimum tax framework for large multinational groups, and Guernsey recently confirmed it is in the process of implementing this. Each island intends to implement an “Income Inclusion Rule” and domestic minimum tax from 2025, while continuing to monitor global implementation.

The introduction of such regimes should not affect the planning considerations of clients using Guernsey structures, as robust transparency and regulatory requirements in the island have been in place for some time and the economic substance legislation is in line with the professional and well-regarded financial industry on the island. 

Guernsey’s succession laws were previously based on Norman customary law and reflected the feudal regime that had been in place for many centuries. Importance was placed on keeping family units and property ownership together, and a forced heirship regime applied. These provisions favoured legitimate men but ensured that wives and children were cared for.

However, on 2 April 2012, Guernsey introduced a new succession regime similar to that in the UK, such that there is now freedom of testamentary disposition, which applies if anyone creates a new will after that date. Guernsey’s forced heirship rules, which applied prior to 2 April 2012, will continue to apply in respect of wills executed prior to that date, even if amended by a later codicil (unless they state that the new law should apply).

One of the advantages of retaining a will executed prior to 2 April 2012 is that the old regime did not permit any challenges to a will on the basis that it failed to make reasonable financial provision for any person, which is now permissible under the new succession regime.

Guernsey wealth-structuring vehicles are often used to address undesired or unfavourable succession legislation in foreign jurisdictions. 

The Trusts (Guernsey) Law, 2007, for example, includes what are known as firewall provisions. These provisions stipulate that a Guernsey trust cannot be held as void because it avoids or defeats a claim under foreign laws relating to marriage, civil partnership or forced heirship. This law can be a strong defence to any challenges to the validity of a trust by foreign courts where such challenges are a result of certain matters, such as the capacity of the settlor or the administration of the trust. The provisions prevent the application of foreign laws in determining such matters.

Guernsey succession law previously operated pursuant to a forced heirship regime derived from Norman customary law, but this regime was abolished in 2012 and there is now testamentary freedom.

Under the old regime, it was important to distinguish between real and personal property, as the heirs to moveable and immoveable property could differ. 

Most often, a will of real property and a will of personal property were, and continue to be, drafted separately. The reason for this is that a will of real property will form part of the title and is more publicly accessible after filing. 

Real property can be left either to one or more individuals, or as a successive interest in the property known as a usufruct.

There was, and continues to be, no need for an executor in a will of real property due to the fact that it is the act of death that transfers property to those entitled.

There were certain rules as to whom real property could be left, depending on whether the deceased had descendants. The rules focused on providing for a spouse during their lifetime, while the real property immediately became vested in the descendants. 

The intestate succession rules under the new regime have been modernised to reflect, for instance, the need for a spouse to have the use of the entire matrimonial home.

The rules with regard to personal property are quite different. Under the old regime, there was an element of forced heirship in favour of a spouse and children.

Until 2008, illegitimate children were not provided for unless expressly included in the terms of a will.

A grant of probate is not a necessity by law, but one may be required by an asset holder depending upon the nature or value of the asset. Personal property vests in the estate upon death and an executor or administrator will need to distribute such property. As noted in 1.5 Stability of the Estate and Transfer Tax Laws, grants of probate and letters of administration are dealt with by the Guernsey Probate Registry (formerly known as the Ecclesiastical Court).

The Matrimonial Causes Law (Guernsey), 1939 established the Matrimonial Causes Division of the Royal Court of Guernsey, which is constituted by the Bailiff, or a person appointed by the Royal Court as a Judge in Matrimonial Causes, sitting alone or with a minimum of two jurats. The Matrimonial Causes Division of the Royal Court has wide discretions to vest, transfer and/or divide any interest in real and personal property belonging to one or other or both of the parties to a marriage, and has jurisdiction on matters of divorce, judicial separation, nullity of marriage, presumption of death and dissolution of marriage.

With effect from 19 July 2024 the whole of the Matrimonial Causes Law (Guernsey), 1939 was repealed and replaced with the Matrimonial Causes (Bailiwick of Guernsey) Law, 2022.  The Matrimonial Causes (Bailiwick of Guernsey) Law, 2022, introduces what is commonly known as "no fault divorce" and the ability for the court to "sell" property interests. The new law has brought Guernsey in line with the recent change of law in the UK, following the case of Owens, and will allow for a divorce without a period of separation if either party decides the marriage is over. It will also remove the ability for a person to defend a divorce (where, for example, a spouse either refuses to agree that the marriage has “irretrievably” broken down or does not agree with the contents of the divorce petition). This means that the court is no longer obliged to consider the possibility of reconciliation.

As in England and Wales, the overall aim of the court in ancillary relief proceedings is to achieve a fair outcome. The starting point is an equal division of the assets. In reaching a decision, the court will consider all the circumstances of the case, including the factors set out in Section 25 of the English Matrimonial Causes Act, 1973.

The starting point is that all jointly-owned property and property owned by spouses individually is matrimonial property, although the parties can seek to argue that certain types of property are non-marital property, such as pre-marital property or inheritances, although the bar is high in establishing this. In cases where the marital assets are sufficient to meet the needs of the parties and the children of the family, the court may move away from the principle of equality in relation to such non matrimonial property.

In the absence of an injunction, there is nothing to prevent one spouse transferring marital property in their sole name to a third party without the consent of the other spouse, but such property would still be likely to be taken into account in the overall division of matrimonial assets.

A key difference in Guernsey, as compared with England and Wales, is that the court in Guernsey does not have the power to make a pension sharing order, other than with the consent of the parties (and the pension provider). The discretion of the court is, therefore, limited to offsetting pension and non-pension assets.

English case law is persuasive and is generally followed by the Matrimonial Causes Division of the Royal Court of Guernsey, so a prenuptial or postnuptial agreement would be a relevant factor for the court to take into consideration, provided there had been a full disclosure of assets and both parties had received legal advice prior to any agreement being entered into. In the case of a prenuptial agreement, there would also need to be a reasonable period of time between the conclusion of the agreement and the marriage itself. If children are involved and the agreement makes no provision for children, this would be a significant factor that would be taken into consideration and it would be likely that significantly less weight would be placed on the agreement. Such agreements do not preclude the jurisdiction of the court and would not necessarily be determinative, particularly if the family circumstances had changed since the agreement was entered into.

There are both reported and unreported judgments of the Guernsey courts confirming that prenuptial and postnuptial agreements are relevant considerations for the court.

As Guernsey does not levy any form of capital gains tax or inheritance tax, a transfer of property has no bearing on the cost basis of the property so transferred, whether during the transferor’s lifetime or upon death.

As Guernsey does not levy any form of capital gains tax or inheritance tax, a transfer of assets has no bearing on the cost basis of the assets so transferred, whether during the transferor’s lifetime or upon death.

Guernsey law does not specifically provide for how digital assets are treated for the purposes of succession and there has yet to be any case law in this regard.

Guernsey trusts, foundations, companies and limited partnerships are used for tax and estate planning purposes, either individually or together as part of a larger structure.

The most suitable structure will depend on various factors and it is important that tax and legal advice be obtained in appropriate jurisdictions relevant to the structure.

Legislative changes over the last few decades – with respect to trusts, foundations and other wealth-structuring vehicles – have focused on increasing their advantages and increasing Guernsey’s offering within the international finance industry. 

For example, many commentators praised the Trusts (Guernsey) Law, 2007 as being modern and at the forefront of trusts legislation. Similarly, the Foundations (Guernsey) Law, 2012 was seen as being appealing to common law jurisdictions (to whom the foundation was a fairly new concept), yet still sympathetic to the civil law roots of the foundation (which date back centuries).

Any reduction in the benefits of trust planning, foundations or similar entities is as a result of changes to legislation in foreign jurisdictions, not in Guernsey.

Trusts are recognised in Guernsey and have been for a significant period of time (including prior to the introduction of initial legislation in 1989). Guernsey has a long-standing reputation for trust services, having a number of local and international professional trust service providers. The UK ratification of the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1985 was also extended to Guernsey and incorporated into Guernsey law, further cementing the recognition of Guernsey trusts. 

The courts are well versed in matters of trust law and the jurisdiction benefits from having a number of well-respected trust advisers.

Professional trust service providers must be licensed by the Guernsey Financial Services Commission and must adhere to the regulations and legislation in place. Such regulations include strict compliance and risk requirements, as well as staff training, capital maintenance, sound finances and outsourcing guidance.

Guernsey residents who act as a trustee or administrator of a trust, or a councillor or guardian of a foundation, are not taxed as a result of their role, but will be liable to income tax on any fees paid for the provision of their services. The position is the same where a beneficiary or settlor/founder resident in Guernsey acts as a trustee of a trust or a councillor or guardian of a foundation.

If the trust in question has Guernsey resident beneficiaries, or has been established by a Guernsey resident settlor who can benefit from the trust, then the trustees may be liable to income tax in respect of income generated within the trust if they are treated as being tax resident in Guernsey. Guernsey resident individuals may also be liable to income tax if they are beneficiaries of foreign trusts or foundations or similar entities. 

Should a Guernsey resident act as trustee or an administrator of a trust or foundation, in or from within the Bailiwick of Guernsey, by way of business (effectively receiving payment or payment in kind for their services), they will require a licence or exemption from the Guernsey Financial Services Commission pursuant to the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (as amended).

Irrevocable trusts and foundations capable of being altered are permissible in Guernsey pursuant to the Trusts (Guernsey) Law, 2007 and the Foundations (Guernsey) Law, 2012. 

Trusts can be varied in one of three ways:

• pursuant to the terms of the trust if they allow variation;
• with the agreement of all the existing beneficiaries (provided they are adults and not under any legal disability) pursuant to Section 53(3) of the Trusts (Guernsey) Law, 2007; or
• by an order of the court.

If a court application is made, it is likely that the court will look to the English law position and particularly the procedural provisions set out in English law, which do not exist under the Trusts (Guernsey) Law, 2007. An example of these procedural provisions is consideration of whether an advocate should be appointed to represent the interests of minors and the unborn.

As regards foundations, the purpose can only be amended if allowed in the constitution or by an order of the court in certain circumstances (such as when the purpose cannot be fulfilled). The charter and rules can only be amended if provided for therein or by order of the court, which is limited to authorising the rectification of any error, defect or omission. The founder can only reserve a power to amend or vary if such powers are set out in the constitution.

Reservation of Powers

It is also possible, in respect of both trusts and foundations, for certain other powers to be reserved for the settlor or founder, or for others appointed by them. However, these powers should not be extensive otherwise the integrity of the trust or foundation may be challenged and/or tax consequences may arise. 

The Trusts (Guernsey) Law, 2007, in particular, provides a list of powers which, if reserved, will not invalidate a trust. These include:

• a power to revoke, vary or amend the terms of the trust;
• powers to advance, appoint, pay or apply the income or capital of the trust property or to give directions in this regard;
• the power to appoint and remove trustees and investment managers; and
• the power to change the proper law. 

The foundations legislation provides that a founder may only reserve a power to amend, vary, revoke or terminate the foundation and, even then, only for a limited period of time.

A recent trend is the desire to draft trust and foundation documentation in such a way that they are flexible enough to deal with evolving obligations in transparency and disclosure, and building into the structure constitutional documents with the flexibility to adequately and properly deal with such requirements as they develop.

The most popular method of asset protection in Guernsey is the use of discretionary trusts, which are, among other things, flexible and versatile and afford a limitation of liability to trustees. They can also be of unlimited duration. 

In addition, a Guernsey trust is protected from challenge and being rendered null by reason that it avoids or defeats claims under foreign matrimonial, civil partnership or forced heirship laws. The Trusts (Guernsey) Law, 2007 provides that questions arising in relation to a Guernsey trust, or any disposition of property to or upon such a trust, are to be determined in accordance with the law of Guernsey without reference to the law of any other jurisdiction, thus limiting the ability of foreign courts to challenge a Guernsey trust.

Two of the most popular business succession-planning structures are companies and trusts, and the two are often used together. 

Non-charitable purpose trusts are particularly popular vehicles to hold shares in family companies, as they allow the ownership of the business to remain intact because the trustee owns the shares. This can also help to avoid conflicts between those family members who may wish to sell their share of the business and those who wish to keep the business within the family. While the trustees may change over time the shares will remain held on trust, thus the structure will remain intact for future generations.

Transfers of property during lifetime or at death are not taxable in Guernsey and therefore there is no planning undertaken to reduce the value of property. The value of a partial interest, even though there may be a lack of marketability or control, is therefore not a tax issue.

In terms of estate disputes, following the introduction of the Inheritance (Guernsey) Law, 2011 it is now possible for certain persons to apply to court for payments out of the estate of a deceased person on the ground that the disposition of the deceased’s estate effected by their will, by the law relating to intestacy, or by a combination of both, does not make reasonable financial provision for the applicant. While there have not yet been a significant number of cases, it is anticipated that, over time, the courts will see more and more applications of this nature.

Although the Guernsey courts have not yet seen any significant cases relating to foundations (given how recently they were introduced), they have seen a number of significant trust disputes over the past few years. 

Some of these cases resulted from the financial crisis of 2008 and 2009. As a result of financial losses suffered by trustees, claims for breach of trust were made against trustees for acting negligently in their investment of trust funds or in the lending of trust assets.

More recently, a number of cases have come before the Guernsey courts where the parties have sought to either rectify mistakes in the trust documentation, vary the terms of the trust or terminate them altogether, pursuant to the power under Section 53(3) of the Trusts (Guernsey) Law, 2007 (such case law leading to a discussion of the differences between this statutory provision and the so-called rule in Saunders v Vautier).

There has also been litigation about the priority of claims in “insolvent” trusts, including priority between former and current trustees for their indemnity. In 2022, the Judicial Committee of the Privy Council gave judgment on this issue in two related cases from Guernsey and Jersey, finding that successive trustees’ interests ranked pari passu (equally) where the trust assets were insufficient to meet the claims against them. Although both cases concerned trusts governed by Jersey law, the same approach would apply in Guernsey.

It is yet to be seen whether the long term effects of the COVID-19 pandemic will influence the types of trust disputes seen in the future. However, it is clear that branches of some families are splitting off because they have different approaches to the issue.

The majority of wealth disputes are heard by the Royal Court of Guernsey, which has jurisdiction to hear civil claims of over GBP10,000 and full discretion to order a payment to the successful party; such orders are based on the alleged loss. The court also has discretion to award costs, either on the standard basis or on an indemnity basis (which is the most generous form of costs order).

Corporate fiduciaries are often used to act as a trustee, director, administrator or councillor or guardian, among other roles. Where a corporate fiduciary is acting as a fiduciary in, from or within the Bailiwick of Guernsey by way of business (effectively receiving payment or payment in kind for their services), they must be licensed or be exempted by the Guernsey Financial Services Commission. 

A corporate fiduciary wishing to obtain and maintain a licence must meet certain standards set out in the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (as amended). They must consider and follow not only regulatory laws but also rules, codes and guidance issued by the Guernsey Financial Services Commission. Guernsey’s regulatory framework for financial services businesses was recently updated, effective from 1 November 2021.

There is no case law in Guernsey concerning whether it is possible to pierce the veil of a trust, but a case of this nature has been heard in Jersey. Such a case would be persuasive, although not binding, for the Guernsey courts. In the case of Re Esteem Settlement [2003] JCR 092, the Royal Court of Jersey held that the corporate veil of a company could be pierced where a shareholder acted illegally, but that this was not possible in the case of a trust where the settlor improperly had effective management and control over the trust assets, rather than the trustees.

To date, there has not been any similar case on foundations, which is not surprising given the lack of case law on foundations generally. Arguably, there is no “veil” with regard to a foundation as a foundation does not have any shareholders. However, a founder can structure the foundation such that they can have a level of control. 

It is possible for trustees to limit their liability to a certain extent. In this regard, it is common for trust instruments to include exculpation clauses and trustees will often obtain indemnities before distributing trust funds. However, a trustee cannot be relieved by the trust instrument of liability for a breach of trust arising from their own fraud, wilful misconduct or gross negligence.

A trustee may also delegate certain functions to professional agents. Except where the terms of a trust specifically provide to the contrary, a trustee may delegate the management of trust property to, and appoint, investment managers, and may appoint professional persons to act in relation to the affairs of the trust or to hold any trust property.

Similar limitations apply to councillors of foundations, where the limitations on liability are the same for councillors as for trustees.

A company director cannot be indemnified from liability for negligence, default, breach of duty or breach of trust by the company itself. However, insurance covering such liability can be purchased. 

It is common for fiduciaries to hold professional negligence insurance.

As the investment of assets held in a trust, foundation, company or other structure is specific to that structure and the types of asset held, it is difficult to specify in legislation how investments should be made. 

However, the Guernsey Financial Services Commission has issued codes of practice and guidance relating to trust, foundation and corporate services providers which provide that investment and custody of assets should be managed professionally and responsibly. The appointment of professional agents and managers should be considered.

The Trusts (Guernsey) Law, 2007 and the Foundations (Guernsey) Law, 2012 do not list the types of investments that may be made by trustees of Guernsey law trusts or Guernsey foundations. However, in each case the trustees or council must consider whether a proposed investment is consistent with their fiduciary duties and the terms of the trust or foundation. As Guernsey structures are frequently established to hold high-risk investments, reserved-powers structures (whereby the settlor or another person can direct the investment of the trust fund) are becoming increasingly popular. 

An active business can be held in a trust or foundation; for example, by the trustees or the foundation holding shares in a company. In addition, a trust can itself be an active business, although this would be somewhat unusual save for in the case of unit trusts, in light of the fact that a trust has no separate legal personality from its trustees. A foundation, on the other hand, cannot carry out any commercial activities except those necessary for, and ancillary or incidental to, its purpose.

If the shares in an active business company are held in a trust or foundation, this does not automatically mean that the trustees or councillors effectively run the business. The business is run by the directors of the company; the trust or foundation documentation will specifically carve out a requirement for the trustees or councillors to be involved in the underlying business (known as an anti-Bartlett clause).

Although Guernsey is not part of the UK and has its own separate legal system, the local immigration requirements are closely tied to those in the UK.

Individuals of certain nationalities require immigration permission and/or a visa to enter and remain in Guernsey, regardless of the purpose of their stay. Because Guernsey forms part of the Common Travel Area (with the UK, Jersey, Isle of Man and Ireland), an individual holding immigration permission and/or a visa to enter the UK is also permitted entry into Guernsey.

The rights of EU, EEA and Swiss citizens to migrate to the Island changed on 31 December 2020. For those EU, EEA or Swiss citizens resident in Guernsey who moved prior to 31 December 2020, and who wished to remain living in Guernsey after that date, it was necessary for them to apply to remain in Guernsey under the EU/EEA/Swiss Settled Status Scheme before 30 June 2021.

Residency

For income tax purposes, the Income Tax (Guernsey) Law, 1975 (as amended) distinguishes between those who are resident, solely resident or principally resident in Guernsey. 

A person is resident in Guernsey if they spend 91 days or more in Guernsey in a tax year or if they spend 35 days or more in Guernsey in that tax year and have spent 365 days or more in Guernsey during the four preceding tax years. 

A person is solely resident in Guernsey if, in any particular tax year, they are resident in Guernsey and are not resident in any other place. 

To be principally resident in Guernsey, a person must spend 182 days or more in Guernsey in that tax year or must have spent 91 days or more in Guernsey in that tax year and spent 730 days or more in Guernsey during the four preceding tax years or have taken up permanent residence in Guernsey in that tax year.

In respect of domicile, a person who was not born in Guernsey can acquire Guernsey as their domicile of choice. Whether they become domiciled in Guernsey will depend on the rules in place in their original place of domicile. They must also consider any residency or domicile “hangover” from their country of origin or the country they left before moving to Guernsey.

Citizenship and Housing

As regards citizenship, Guernsey falls under the British Nationality Act, 1981 as a part of the British Islands together with Great Britain, Northern Ireland, the remaining Channel Islands and the Isle of Man. Individuals with Islander status (broadly those linked to the island by birth, adoption or naturalisation) are therefore British citizens. There is also a process for individuals resident in Guernsey who do not fall into this category to obtain British citizenship (for which see 7.2 Expeditious Citizenship).

In terms of obtaining the right to remain in Guernsey on an indefinite basis the rules are complex and specific advice should be obtained. Broadly, the criteria for obtaining longer term residency is linked to the number of years for which an individual has been resident in Guernsey.

Guernsey has its own housing regime divided into the Local market and the Open market. Subject to standard checks, the Open market is accessible to British citizens or anyone with a right to live in the UK. The Local market has various other stipulations attached to it that need to be met in order to be accepted into this class of housing. It is worth pointing out that anyone can buy any type of property in Guernsey, but in order to live in the property, a person must meet one of the Open market or Local market requirements.

If a non-British citizen resident in Guernsey wishes to apply for British citizenship, they must make an application through the Office of the Lieutenant Governor to be either naturalised or registered as a British citizen under the British Nationality Act, 1981. The Immigration & Passports Division of the Guernsey Border Agency initially considers such applications. 

Naturalisation is generally applied for by adults, while registration is primarily for minors and persons already holding British nationality other than citizenship. In some cases, there is an entitlement to register. 

A person cannot apply for naturalisation until they have been resident in Guernsey for three years if married to a British citizen or five years in other cases. They must pass a citizenship test and meet certain language requirements. 

It can take several months for the application process to be completed. Successful applicants for naturalisation and registration must attend a court ceremony and make certain pledges and oaths. 

There are no expeditious means of obtaining citizenship.

Trusts are a popular vehicle for the provision of benefits to minors and adults with a disability. Unlike in other jurisdictions, there are no specific tax advantages in using certain trusts for the benefit of minors or the disabled, thus any form of trust can be used, depending on the particular circumstances. Often, discretionary trusts and life interest trusts are used, whereby the trustee can decide when, how much and to whom to distribute assets.

A guardian of a minor (known as a tuteur) or of an adult under disability (known as a curateur) is appointed by the court. An application for guardianship should be supported by a family council made up of two or more individuals who know the person who is to be under guardianship.

There is no specific procedure for the ongoing supervision of the court, but the court does have an inherent right to supervise; therefore, should the court’s involvement be required during the guardianship, an application can be made to court.

The provisions of The Capacity (Bailiwick of Guernsey) Law 2020 relating to lasting powers of attorney came into force on 1 April 2022 and provide individuals with the opportunity to designate attorneys in respect of both their financial affairs and their health and wellbeing. These lasting powers of attorney will remain in place after the donor of the power loses capacity, which marks a substantial departure from the position previously applicable in Guernsey.

Guernsey legislation no longer distinguishes between illegitimate, legitimate and adopted children, who are treated as natural and legitimate children under Guernsey inheritance and trusts legislation (and instruments executed after 8 May 2008 will be construed on this basis).

However, Guernsey legislation does not specifically deal with surrogate children or those conceived posthumously. There is, however, legislation dealing with leave for surrogate and adoptive mothers. In the absence of specific legislation with regard to children conceived in these circumstances it is believed that the Guernsey Royal Court would follow the English common law position.

As there is testamentary freedom in Guernsey, there is no legal requirement for a parent to include their child in their will. However, it is possible for certain classes of person, including children, to apply to court if they consider that reasonable financial provision should have been made for them.

As regards a trust or foundation, the class of beneficiaries lies, initially at least, entirely within the discretion of the settlor or founder, so it is possible to exclude illegitimate, legitimated and adopted children from that class.

The Same-Sex Marriage (Guernsey) Law, 2016 came into force on 2 May 2017 and extended the recognition of marriage to those of the same sex; therefore, people of the same sex can now marry in Guernsey and foreign-registered and local same-sex marriages will be recognised.

Under the Income Tax (Guernsey) Law, 1975 (as amended), Guernsey-registered charities are generally exempt from income tax on income earned in Guernsey. The income of a charity includes all monies raised or received, including investment income and donations.

There is also tax relief for donors to Guernsey-registered charities to the extent they are liable to Guernsey income tax. The Guernsey income tax position in respect of charities therefore encourages both the establishment and documentation of charities.

The most common structures used for charities in Guernsey are trusts, companies limited by guarantee and foundations. 

Charitable purpose trusts can be set up for any charitable purpose and can be established for an unlimited duration. While the trustees may change over time, the trust will continue to exist indefinitely (unless terminated). However, trusts are not recognised in all jurisdictions and have no separate legal personality from their trustees.

Companies limited by guarantee are popular because they provide a separate legal entity which is a well-known, registered structure that third parties (such as lenders) are generally comfortable dealing with. A company also provides continuation as it will not cease to exist unless it is wound up or struck off.

Like a company, a foundation has a separate legal personality from its founder or councillors and can continue indefinitely. A foundation is ownerless and has no shareholders. Although foundations are registered, there is limited information available publicly. Clients in civil law jurisdictions are particularly comfortable with foundations, which have been used in such jurisdictions for philanthropic purposes for centuries.

Guernsey introduced legislation to regulate charities. The Charities etc (Guernsey and Alderney) Ordinance, 2021 and the supporting regulations contain a charitable purpose test and impose obligations such as registration, reporting and good governance requirements for Guernsey charities and other non-profit organisations.