Guernsey substance and benefits of the mature NPPR
Guernsey has long been recognised as a mature highly experienced non-EU financial centre.
It continues to be known as a tax transparent jurisdiction working extensively in co-operation with the European Commission among others to ensure it does all it can to co-operate on all transparency and appropriate regulatory matters.
In 2017 the EU Code of Conduct Group 'Code Group' undertook a screening exercise to assess various jurisdictions on their tax transparency anti-BEPS and fair taxation measures. Guernsey was found to be compliant in the first two areas. However concerns were raised around the lack of statutory substance requirements which could have led to a risk that the profits of companies registered in Guernsey may not be commensurate with their activities in the jurisdiction.
In response to the concerns raised by the Code Group Guernsey Jersey and Isle of Man (the Crown Dependencies 'CDs') along with 10 other jurisdictions committed to introduce new legislation requiring resident companies to demonstrate a link between the economic activity carried out and the economic substance supporting the activity.
The work involved in a relatively short timeframe should not be underestimated but working closely together the governments of the three CDs achieved their aim to each have their own legislation in place by the end of 2018 effective 1 January 2019.
On the 12 March 2019 Guernsey's reputation as a transparent and compliant jurisdiction in line with international standards was further enhanced as the Code Group and European Council of Finance Ministers confirmed that the island has satisfied its legal substance requirements for entities operating in or through the jurisdiction.
Strengthening Guernsey's relationships
Guernsey's Government continues to work extensively and in co-operation with the European Commission with its Policy and Resources President Gavin St Pier previously having stated with the current political uncertainty within the UK and the ongoing work to prepare for different possible outcomes in the next few months we are continuing to prepare ourselves to strengthen Guernsey's relationships within the EU after the UK has left.
With Brexit uncertainty in the financial sector both in the UK and the EU to continue at least into 2022 opportunities to use the well-established AIFMD and UCITS route for fund marketing into Europe are likely to be lost to UK promoters. Given that our current access to market into Europe via National Private Placement Regimes 'NPPR' will be unaffected we see this as an opportunity for Guernsey which in 2015 was one of only six jurisdictions to be considered by ESMA and one of only two to be approved for the third-country passporting regime without condition.
With Guernsey's non-EU status and existing cooperation agreements it will continue to be able to offer NPPR marketing into Europe to more than 70 per cent of the nominal GDP across continental Europe. With the existence of this well established process Guernsey's ability to market into Europe will be unaffected by the UK's departure. On the contrary the UK will have to follow in Guernsey's footsteps and negotiate cooperation agreements with the EU jurisdictions.
Benefits of NPPR
Guernsey is a mature highly experienced and transparent jurisdiction operating in cooperation with the European Commission ensuring this is clearly understood and acknowledged.
Particularly where a manager has a targeted list of marketing jurisdictions NPPR via Guernsey can be faster more efficient and more cost-effective than the full AIFMD or UCITS route. With Guernsey being a non-EU jurisdiction pre and post Brexit marketing plans to market into Europe via the well trodden NPPR which Guernsey have established will remain untouched.
International Fund Management Limited provides a fully compliant licensed and independent non-EU Manager (AIFM) service. It has demonstrable substance in Guernsey including its own balance sheet a discrete executive board and employees and independent systems and reporting. It is part of the PraxisIFM Group.
International Fund Management Limited is regulated by the Guernsey Financial Services Commission and licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987 (as amended).
This article was first published in April 2019 by Global Fund Media
Please note that this article is intended to provide a general overview of the matters to which it relates. It is not intended as professional advice and should not be relied upon as such. Any engagement in respect of our professional services is subject to our standard terms and conditions of business and the provision of all necessary due diligence. © Praxis 2023