In light of the Coronavirus (COVID-19) pandemic, the Director of the Revenue Service in Guernsey has indicated that it will take a pragmatic approach in applying Guernsey's economic substance legislation. This has been communicated to the public by the Guernsey Society of Chartered and Certified Accountants (the GCSSA) and the Guernsey International Business Association (GIBA), respectively.
The statements given by the GCSSA and GIBA make reference to a number of discussions with the Revenue Service on the matter, from which it is understood that the Revenue Service would take a similar approach to their Jersey counterparts, referring to the statement made by Jersey's Minister for Treasury & Resources on 11 March 2020 that where companies have had to adjust their operating practices to compensate for the Coronavirus outbreak, the Jersey Comptroller will not determine that they have failed the economic substance test and noting that Guernsey's Chief Minister had endorsed such pragmatic approach.
The respective bodies made it clear in their statements that the pragmatic approach will apply only to adjustments required to mitigate the threats from the pandemic and would be likely to be taken so long as a company maintains and retains the relevant records to demonstrate its relevant policy regarding restrictions on travel for the company officers and the period of time such policy was in place. The statements go on to say:
"This will ensure that companies can demonstrate where COVID-19 restriction measures prohibited the company from holding an adequate number of board meetings in the Island or required meetings to temporarily be held virtually, such as conference call, video conferencing, Skype or similar. It should [be] noted that the normal protocols for such meetings should be observed, as far as possible. "
While the Revenue Service's indications are helpful, businesses should continue to conduct their affairs as far as possible in line with their existing procedures, including giving consideration to the ability to appoint alternate directors who are Guernsey resident to address the practical difficulties arising. In their statements, the GCSSA and GIBA referred to the existing guidance issued by the Crown Dependencies which recognises there are times when meetings may need to be held overseas and includes other guidance that is relevant in the circumstances.
News bulletin dated 18 September 2020, on the 2020 Guernsey Substance Amendment Regulations and the treatment of funds under the substance regime can be found here.