Building Trust and Credibility

How Guernsey’s Economic Substance Regime reinforces business integrity and how Beauvoir Group partners with you to achieve your strategic goals

Guernsey has long been recognised globally as a trusted, well-regulated financial centre, built on a robust foundation of stability, strong governance, regulatory flexibility, and deep industry expertise developed over decades. This enduring reputation has attracted a diverse range of international businesses and investors seeking a credible and reliable jurisdiction.

Since the introduction of its economic substance regime in 2019, Guernsey has reinforced this longstanding commitment by ensuring companies demonstrate genuine local presence, operational integrity, and transparent governance. Far from a new departure, the regime reflects and strengthens Guernsey’s ongoing dedication to international standards and best practices, adapting to evolving global requirements while protecting the island’s esteemed reputation (States of Guernsey - Economic Substance).

Why Substance Matters

The economic substance regime applies to all tax-resident companies in Guernsey engaged in clearly defined relevant activities, including:

Banking
Insurance
Fund management (excluding regulated Collective Investment Vehicles, unless self-managed)
Finance and leasing
Shipping
Intellectual property
Distribution and service centres
Headquartering
Pure equity holding companies

This focused scope ensures that substance requirements apply where meaningful economic activity occurs (Carey Olsen Insight).

Collective Investment Vehicles (CIVs) - The Exclusion Caveat

It is important to note that regulated, externally managed Collective Investment Vehicles (CIVs) are generally excluded from Guernsey’s economic substance requirements. This exemption recognises that CIVs themselves often do not carry out the relevant economic activities directly; instead, these activities are performed by their managers or service providers who fall within the regime’s scope. However, self-managed funds - those acting as their own managers without an external management function - are required to comply with substance requirements to the extent they generate relevant income (Ogier Guidance; States of Guernsey).

Principles-Based, Globally Aligned

Guernsey’s regulatory framework aligns with international standards from the OECD and the EU Code of Conduct Group. The regime maintains necessary flexibility while upholding strict substance principles, ensuring real operational presence and robust governance (KPMG Economic Substance Summary).

Substance Requirements Flowchart

Key criteria for substance compliance include:

Tax residency in Guernsey
Engagement in a relevant activity sector
Classification considerations (e.g., pure equity holding or High-Risk IP companies)
Direction and management conducted in Guernsey
Presence of adequate personnel, premises, and expenditure
Performance of Core Income Generating Activities (CIGA) within Guernsey

Full compliance confirms substance; failure to meet any step risks penalties (Mourant Guide PDF).

What Constitutes Adequate Substance?

Direction & Management: Board meetings locally held with physical quorum, documented strategy decisions on-island.
People, Premises & Expenditure: Proportional to business scale and sector characteristics.
Core Income Generating Activities: Must be performed in Guernsey (e.g., investment decision-making for fund managers) (KPMG PDF).

Governance and Oversight

Directors must possess expertise, maintain company records locally, and effectively supervise any outsourced activity within Guernsey to meet governance standards (Walkers Insight).

Sanctions for Non-Compliance

Failure to comply can lead to:

Information exchanges with international tax authorities
Escalated financial penalties
Strike-off from Guernsey’s company register
Automatic reporting requirements for High-Risk IP companies (Saffery Insight).

Regulatory Updates and the Importance of Legal Advice

Since its inception, Guernsey’s substance regime has undergone important updates, including amendments effective from 1 October 2020 addressing self-managed funds, extension of substance requirements to partnerships in 2021-2022, and alignment with global standards (Carey Olsen Guide 2023; PwC Corporate Issues 2019). The legal and regulatory environment continues to evolve, and it is essential to obtain up-to-date professional legal advice to ensure full compliance with all current laws and regulations.

Strategic Implications

By reinforcing robust substance standards, Guernsey protects and enhances its reputation as a premier financial centre. Businesses are encouraged to embed real, effective substance into their operations, promoting trust and sustainable success rather than mere regulatory box-ticking (PwC Tax Summary).

How Beauvoir Group Supports Your Substance Compliance

At Beauvoir Group we act as your trusted partner, working closely to develop tailored, practical solutions that align with your strategic priorities while ensuring credible compliance with Guernsey’s substance requirements.

Our Group has been at the forefront of substance-led structuring for over 26 years - originally founded as Active Group, named to reflect the belief that offshore business should be pro-active, not passive, we have long championed the principles that underpin today’s substance requirements. Well before formal substance regulations were introduced, our group recognised the importance of operational integrity, governance, and credible presence, values that now form the backbone of Guernsey’s economic substance regime.

Guernsey’s regulatory framework supports this hosted model, recognising the value of outsourcing and supported infrastructure in a way that enables businesses to meet substance requirements without the burden of a full physical build-out.

We understand the importance of safeguarding Guernsey’s global reputation and provide experienced Directors, company secretarial and corporate governance services, and operational infrastructure. Our relationship-driven approach embeds genuine economic substance, balancing rigorous compliance with your commercial objectives.

Through partnership, we empower your business to confidently meet regulatory obligations while advancing your strategic goals, preserving credibility without compromise.

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(This article is a general guide and does not constitute legal advice. Beauvoir Group works closely with legal experts and can assist in introducing you to trusted advisers and help develop practical, tailored solutions to meet your substance obligations confidently and sustainably.)