What is Exempt Company (Guernsey)?
A Guernsey Exempt Company is a company incorporated in Guernsey that holds an exemption from corporate income tax granted by the Revenue Service. Historically used for offshore structures, the formal exempt company regime was largely superseded by the zero-10 regime (which made 0% the standard rate). Today it primarily means a company with non-resident shareholders that pays an annual fee and is confirmed exempt from tax on income derived outside Guernsey.
Current Rate (Annual fee payable on 1 January)
£600 annual exemption fee (not a tax)
Example
An international holding company incorporated in Guernsey with all non-Guernsey-resident shareholders applies for exempt status, pays the £600 annual fee, and receives confirmation it is not subject to Guernsey income tax on overseas income.
How Exempt Company (Guernsey) works in Guernsey
The exempt company regime predates the zero-10 reform. When Guernsey moved to a universal 0% corporate tax rate for standard companies in 2008, the distinction became less commercially significant, since all standard companies now pay 0% without needing formal exemption.
**Why seek exempt status today?** The formal Exempt Company designation is still used for certain structures: - International holding companies wanting written confirmation of their tax position - Structures needing to demonstrate tax residency or status to foreign counterparties - Companies with Guernsey-resident shareholders who want clarity on the treatment of income
**Requirements** - Incorporated in Guernsey under the Companies (Guernsey) Law - Shareholders must be non-resident in Guernsey (or, for some categories, majority non-resident) - Annual exemption fee paid to the Revenue Service by 1 January each year - Declaration that the business is not conducted in Guernsey in a way that creates taxable income at local rates
**Exempt companies and substance** The OECD/EU substance requirements introduced in 2019 apply to certain types of income regardless of exempt status. A company earning passive income (royalties, interest, finance income) must still demonstrate Guernsey substance if it wants to benefit from Guernsey's 0% rate internationally.
**Contrast with a standard company** For most practical purposes, a standard Guernsey company incorporated after 2008 is already subject to 0% corporate tax without needing formal exempt status. The exempt company label is increasingly a legacy classification used in pre-2008 structures.
Related terms
Guernsey operates a 0% corporate income tax rate for the vast majority of companies. Standard trading companies pay zero corporation tax on profits. Only specific regulated sectors face a 10% rate: banking businesses, domestic insurance licensees, insurance managers/intermediaries, fiduciaries, and fund administrators. The 0% rate is one of Guernsey's primary commercial attractions and applies regardless of the company's level of profit.
A Principal Company in Guernsey's insurance context refers to an insurer licensed in Guernsey that is the primary insured entity, often used in captive insurance structures. More broadly, 'principal' in Guernsey trust and company law refers to the ultimate beneficiary or controlling party behind a structure. In tax terms, the principal company concept is relevant in controlled and affiliated company rules.
An International Business Entity (IBE) is a specific form of Guernsey company designed for use in international transactions and structures, introduced under the Companies (Guernsey) Law 2008. IBEs have certain restrictions (they cannot conduct business with Guernsey residents or own Guernsey land) but benefit from administrative flexibility. They are primarily used by non-residents for international holding and trading.
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