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Guernsey To Amend Record-Keeping Requirements

Wednesday, June 27, 2012

The Income Tax (Keeping of Records, etc) (Amendment) Regulations, 2012, are expected to be adopted soon, introducing new tax record retention rules in Guernsey from July 1, 2012.

The new regulations would update the Income Tax (Keeping of Records, etc) Regulations, 2006, which introduced specific record keeping requirements in Guernsey for the first time. Prior to the regulations, Guernsey Income Tax Law did not specify what type of records should be kept for tax purposes, nor for how long these records should be retained. These regulations introduced rules that people who received income from a business or income from letting a property, should retain specified records for a period of six years following the end of the year in which the relevant income tax return was submitted. The Regulations did not extend to persons who did not complete a Guernsey income tax return.

The new regulations, due to be laid before the States of Guernsey on June 27, 2012, would amend the rules to apply these rules to persons who are not required to make an income tax return. The Regulations also set out specific requirements for persons who receive income other than from businesses or from the letting of property, for the first time.

Under the new rules:

  • Records must be kept of all amounts received, arising or accruing and from whom they were received, arose or accrued, and the periods to which the amounts relate;
  • Documents which contain or may contain information relevant to any liability to tax to which that person may be subject, or the amount of any such liability, also have to be retained, and;
  • All supporting documents relating to the records and documents referred to above also have to be kept, including (without limitation) accounts, contracts, leases, licenses or other agreements, vouchers and receipts.

Documents referred to above must be kept for a period of six years, where the documentation relates to the income of a trust or foundation; for six years if the person concerned is a legal person (such as a company); and two years in the case of individuals living on pensions or investment income. In each of these cases, the period for which records have to be retained runs from the end of the year in which the relevant income tax return is submitted, or where no such return is required to be submitted, from the end of the year in which the record or document was created, received or obtained.

The Regulations also for the first time introduce guidelines on persons in charge of records or documents stored outside of Guernsey. These persons must ensure that they remain within their control and power, and that they can be brought back to Guernsey if the Director of Income Tax requires to see them for the purposes of calculating or assessing a liability to tax, or if they are required to be produced and disclosed in Guernsey under the Income Tax Law, or any other Law. Anyone who fails to comply with this requirement may be subject to a penalty of up to GBP2,500.

Commenting on the changes. Rob Gray, Guernsey's Director of Income Tax, said:

"At the Income Tax Office we are constantly looking at ways to improve the service that we give to the island's taxpayers and to reduce the burden of complying with income tax obligations. With reducing public service resources, one way to achieve this is to take away the need for persons with very straight forward income tax affairs to complete a tax return every year. If we do that, however, it is important that those persons must continue to keep records of their income, just in case it becomes necessary to raise enquiries at some point in the future. That is one reason why the Keeping of Records Regulations are being extended to cover all persons, whether or not they are required to send in a tax return. For the majority of people, such as employees, pensioners and those living on investment income, they are still only required to keep the records for a period of two years. It is only where income relates to a trust, a foundation or where the person concerned is a legal person (such as a company) that they will be required to keep records for six years."

"We also live in an era when international finance centres, such as Guernsey, are often, very unfairly, criticized by other countries and international organizations. It is very important, therefore, to the continued well being of Guernsey's finance sector (and therefore Guernsey's economy) that we take all steps necessary to protect and enhance Guernsey's reputation as being a compliant and well regulated jurisdiction, by observing international standards in exchange of information for tax purposes. Guernsey performed extremely well in a very thorough review of its rules and procedures relating to, amongst other things, the need for persons in the island to keep records of financial transactions. Only some very minor deficiencies were found and these changes address those."