Since middle of May, a new act on LLP companies is in force in Guernsey, providing unique opportunities for tax planning. Precisely since May 13th, 2014, a limited liability partnership (LLP) can be incorporated in Guernsey, with separate legal personality and unlimited legal capacity. Such company is capable of owning assets and its great advantage lies in its flexibility.
What specific benefits can a Polish company gain by becoming a member of a Guernsey registered LLP? A starting point for evaluation of the unique tax advantages of such solution for Polish investors is the lack of income tax at company’s level. Its members however may be taxed in their countries of residence, hence on one hand there is no income tax like in regular tax havens; on the other hand Guernsey was removed from the list of uncooperative states and territories adopting harmful tax practices in 2013, which is the result of ratification of a tax information exchange agreement between Poland and the Bailiwick of Guernsey and its entry into force.
Let’s address this issue: Guernsey was on the list of uncooperative states and territories adopting harmful tax practices contained in the regulation of the Minister of Finance since May 16th, 2005. The island is no longer there following the regulation’s amendment last year due to the fact that its government has made some concessions by signing two agreements with Poland: one concerning avoidance of double taxation in relation to enterprises using vessels or aircrafts in international carriage of goods, the other one concerning avoidance of double taxation of some income of natural persons.
There is no capital gains tax, inheritance tax or VAT tax in Guernsey, whereas income tax is much lower than in the UK. Also, a special tax regime is in force stipulating three different CIT rates: 0% for companies operating on the territory of the island; 10% for companies with profits from specific kind of financial activities (specified banking activities, trust services, insurance services); 20% for companies receiving income derived from business activity subject to supervision of the Office of Utility Regulation and income from exploitation of land and property development and rental income – with reference to land and buildings situated in Guernsey.
There is one more valid advantage of the new solution in terms of LLPs. The partnership agreement is not publicly available – as a result there is no need to disclose the rules governing relations between the members to any third persons.
103 investment funds were registered in 2013. The assets in management over all these kinds of entities amount to GBP 266 billion. The first LLP company incorporated in the new legal environment was BlueCrest Holdings LLP, an entity managing assets in the value of USD 32 billion (according to Bloomberg).
Characteristics of an LLP company registered in Guernsey:
- it must have at least two members; these can be both natural and legal persons;
- members are subject to limited liability for acts and/or omissions of other members and persons subordinate to other members’ management. Limitation concerns solely liabilities which arose due to operations managed by other partners (main difference in relations to LP companies); liability is limited to the amount of capital contributed by the member, as per the LLP agreement;
- it has to be transparent for Guernsey’s tax purposes;
- it must have a written agreement defining rights and obligations between the members and between the members and the LLP, which is binding on all members and on the LLP itself;
- each member has the right to individually represent the company, acting as its agent;
- members have almost complete freedom in determining ownership rights and in managing the LLP;
- each LLP has to appoint a representative residing in Guernsey (Resident Agent) – this is either a natural person or a legal entity providing corporate services;
- the names and addresses of LLP members must be notified at the register of companies, yet there is no requirement to disclose other details.
Interesting facts about the Bailiwick of Guernsey
It has the status of a British Crown dependency which means that the UK is responsible for defence and international representation, whereas the local government is in charge for internal affairs. The islands are inhabited by the British, Portuguese and Latvian people. English and French are official languages but Dgèrnésiais (Guernsey French, related to the Norman language) and the Sercquiais dialect (which came from the neighbouring island of Jersey with the first settlers) are also spoken. The average life expectancy is as much as 80 years. This is where Victor Hugo wrote ‘Les Misérables’ and there is currently a museum administered by the city of Paris in his home Hauteville House in Saint Peter Port. David Cameron, the Prime Minister of the United Kingdom, as well as the local government is opposed to calling Guernsey a ‘tax haven’.
Aleksandra Danielewicz, Piotr Rosik