Updates to joint guidance on economic substance legislation in Guernsey and Jersey

The Guernsey and Jersey tax offices have released updates to the joint guidance notes on the application of economic substance legislation, which were previously issued on 26 April 2019.

Economic substance legislation has effect in both Guernsey and Jersey and applies to companies that are tax resident in those jurisdictions and generating gross income from relevant activities in a financial period commencing on or after 1 January 2019. The revised guidance provides a welcome update, particularly in respect of certain clarifications for funds and the location of decision making.

Notably, the revisions to the joint guidance provide additional guidance covering insurance, intellectual property, high-risk intellectual property and shipping. Additional detail is also included on areas including pure equity holding companies, the directed and managed test, fund management and distribution and services activity.

Particular areas to note include clarifications that regulated funds are out of scope (although there is an intention that corporate self-managed funds will, in the future, be brought into scope for their fund management activities, subject to future changes to legislation). There is also further clarification on the basis on which certain isolated decisions can be taken outside the island, provided this does not outweigh decisions taken in the jurisdiction. There is also more specific guidance on the treatment of cell companies.

The updated guidance notes are available here. Mourant has remained closely involved with the work of the governments of both Guernsey and Jersey in this area. Updated client guides are available summarising the position.