The income tax you pay is calculated based on your residential status for tax purposes. You can be "non-resident", "resident" or "solely or principally resident" and it all depends on the amount of time you have spent in Guernsey in a calendar year.
The Income Tax (Guernsey) Law, 1975, section 3, deals with residence and you can access the full Law here.
In summary section 3 provides that an individual will be treated as "resident" if they are in Guernsey for 91 days or more in a calendar year, or if they are in the island for 35 days or more and they have been in Guernsey for at least 365 days in the previous 4 years.
They will be treated as "solely resident" so long as they are resident as shown above and they are not resident anywhere else in that year (and for this purpose they will be treated as being resident somewhere else if they spend 91 days or more in that place)
Finally they will be treated as "principally resident" if they are
- In Guernsey for 182 days or more
- In Guernsey for 91 days or more and have been in the island for 730 days in the previous 4 years
Additionally they will also be treated a "principally resident" if they move to the island to take up permanent residence and
- they are resident in Guernsey (as shown above) and
- they are solely or principally resident (as shown above) in the year after they arrive and
- they were not resident in Guernsey in the year before they arrive to take up permanent residence in the island.
If someone is in Guernsey less than 91 days and they have not been here before, then they will be treated as being "non-resident" for tax purposes.
Non - Resident
If you are non-resident you will pay tax on any income you have in Guernsey, from:
- Employment (except the emoluments of a director);
- The ownership of lands and buildings; and
- Any other source (for example pensions) but you will NOT pay tax on Guernsey bank interest.
As a non-resident you will be entitled to a proportion of the personal allowances for each week, or part of a week, that you have been employed in Guernsey (except as a director) or are in receipt of a Guernsey pension.
More detailed information on the taxation of non-residents can be found under Chapter IV of Part IV of the Law ('Non-Residents').
The Director of the Revenue Service can issue Statements of Practice and Extra Statutory Concessions - to confirm the treatment of income in certain circumstances. C35, C37 and E29, relate to income received by non-residents.
If you are resident, but not solely or principally resident, in Guernsey, you will pay tax on your total income, wherever that income may come from, unless you elect to pay the standard charge (or if you are in Guernsey just for work *). If you don't elect to pay the standard charge, you will be entitled to a proportion of the personal allowances based on the number of days you spend in the island.
*If the sole or main purpose for you being in Guernsey is to work and (other than bank interest) all your income is from this employment, you will only have to pay tax on your Guernsey income and any other income brought into the island. You will get a proportion of the personal allowance based on the number of weeks you are in Guernsey.
If you elect to pay the standard charge (£40,000 from 2021, previously £30,000) you will have not have to pay further tax on your non-Guernsey source income, but you will need to pay tax on your Guernsey income (other than bank deposit interest). The standard charge paid can be set-off against the tax due on your Guernsey income, as shown in the examples below. If you elect to pay the standard charge you will not be due any allowances, reliefs or deductions.
When independent taxation is introduced (anticipated to be with effect from 1 January 2023), an election for the standard charge will need to be made by each spouse individually.
- Mr I M A Roamer is resident in Guernsey and his total income consists of:
- Guernsey business £50,000
- Guernsey Bank interest £5,000
- UK income £1,000,000
- He elects to pay the standard charge so his tax will be calculated as
- Guernsey business: £50,000 at 20% £10,000
- Guernsey Bank interest: £5,000 no liability
- UK dividends: £1,000,000 no liability
- Standard Charge: £40,000
- As the standard charge may be set against the £10,000 due on the Guernsey business, all Mr Roamer needs to pay is £40,000 which will cover his liability to Guernsey income tax in full.
- Mr Roamer's business makes a profit of £300,000 and he elects to pay the standard charge, his tax will be calculated as:
- Guernsey business: £300,000 at 20% £60,000
- Guernsey bank interest £5,000 no liability
- UK Dividends £1,000,000 no liability
- Standard charge £40,000
- As the standard charge may be set against the tax due on his Guernsey income, Mr Roamer will need to pay the standard charge of £40,000, and an additional £20,000, to clear his liability on his Guernsey business income.
Solely or principally resident
If you are solely or principally resident in Guernsey you will pay tax on your total income wherever it is from. You may be able to claim for tax paid in another territory and further information can be found here on the Double Taxation Arrangements the Revenue Service have.