Israel – Guernsey Tax Treaty

Business Activity in Guernsey

Guernsey has the essential infrastructure to connect to global markets and customers. A £1 billion data center is being built, and the island is linked to the UK and France by seven fiber optic cables, with two more on the way. 4G mobile technology is already being introduced, and a smartphone payment system is planned.

The Guernsey investment sector offers a broad range of services to the international clientele such as stockbroking, investment advice and management, fund promotion, fund management, fund administration, and asset custody. Guernsey’s investment sector is closely linked to that of London City plus those in the European Union (EU), North America, Southern Africa, and Asia. The International Stock Exchange Authority Limited, serving Guernsey, Jersey, and the Isle of Man, is headquartered in Guernsey. All these components make Guernsey a great place to do business.

Applicability of the MLI

Both Guernsey and the State of Israel have signed the Multilateral Convention, commonly known as the MLI. The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework.

Israel signed the MLI on the 7th of June 2017, with its provisions entering into force on the 1st of January 2019. Guernsey affixed its signature to the MLI on the 7th of June 2017, and its provisions became effective as of the 1st of June 2019.

Residency for Tax Purposes in Guernsey

Residence of an Individual

The national taxation law defines three categories of individual residency for tax purposes:

Principally Resident: Individuals who spend at least 182 days in the country within a year.

Solely Resident: Individuals who spend at least 91 days in the country and do not spend 91 days or more in any other jurisdiction.

Resident Solely: Individuals who stay in the country for 91 to 181 days in a year.

Additionally, under Guernsey tax rules, individuals qualify as residents if they spend at least 35 days in the country in a given year and a cumulative total of 365 days over the previous four years.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

It is controlled or centrally managed in Guernsey, or it is incorporated in Guernsey and not tax-exempt.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Guernsey

Guernsey Tax Authority is called the Revenue Service

Income Taxation: 20%

Taxation of Companies and Branches:  0%, 10%, 20%

VAT: Does not apply

Capital Gains Tax: Does not apply

Withholding Tax

Relocation to Guernsey

Guernsey’s investment industry provides a broad selection of services to clients in and around the world, such as stock broking (transactions in) and financed advice and activities in the field of funds, such as promotion, management, administration, and custody of assets. The industry is infamous for its stringent rules and tough requirements, guaranteeing asset investor safety, and proper functioning of financial operations.

The industry is well related to global financial centers (e.g., London, the EU, North America, Southern Africa, and Asia). It is also home to the International Stock Exchange Authority Limited, which is licensed to operate in Guernsey, Jersey, and Isle of Man. Collective investment funds are one of the strengths of the Guernsey financial market.  These contributions combine contributions from a variety of investors to construct heterogeneous portfolios. Open- or closed-ended funds can be freely traded as shares by investors, while shares of a closed-ended fund can only be held until the fund has closed. All funds based in Guernsey are locally administered to protect high levels of supervision.

In addition to its home market, Guernsey promotes global fund management for investment funds based elsewhere. Departments of most fund promoters work closely with Guernsey financial regulators to ensure that their businesses adhere to the highest standards. Furthermore, the industry also consists of firms providing advisory services on an individual basis, individual and institutional stockbroking, and portfolio management of non-funds.

Guernsey’s investment industry emphasizes trust, stability, and professionalism. Stringent regulatory controls help to make certain that all companies provide themselves as competent, responsible, and capable of safeguarding investor interests whilst further enhancing Guernsey’s position as a premier international financial center.

Real Estate Taxation in Guernsey

Guernsey property is taxed by area and is classified as a tax on real property (TRP) and calculated by area of land. Income from land and buildings in Guernsey is taxed at a rate of 20%.

Transfer of Funds from Israel to Guernsey

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met. Our firm handles withholding tax matters with the Israeli Tax Authority.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Guernsey

Sole Trader – A sole proprietorship where a single individual owns and operates the business, with no legal distinction between the owner and the business. This structure is simple to set up but offers no liability protection.

Partnership – A business formed by two or more individuals sharing profits, liabilities, and responsibilities. Partnerships in Guernsey can be general or limited, with limited partnerships offering liability protection for some partners.

Private Company Limited by Shares (Ltd) – The most common type of business entity, where shareholders’ liability is limited to their investment in the company. It requires registration and compliance with Guernsey’s company laws.

Limited Liability Partnership (LLP) – A hybrid structure offering the flexibility of a partnership while providing liability protection for partners. LLPs are often used by professional services firms.

Unlimited Liability Company – In an unlimited Liability Company shareholders are personally responsible for the company’s debts, even after they stop being shareholders, for up to one year. This is similar to a partnership, where members share financial responsibility, but an unlimited liability company is a separate legal entity, so creditors must go through a legal process to claim debts from shareholders.

Guernsey Double Tax Treaties