The States of Guernsey has agreed a deal with the Government of the Kingdom of Bahrain to eliminate double taxation for anyone with financial interests in both jurisdictions.
The core purpose of this type of agreement is to make sure that income isn’t taxed twice by both countries.
This is done to make it easier and fairer for individuals and businesses that have dealings in both places. It also aims to prevent tax evasion and avoidance.
The legislation was agreed by the 36 deputies present during yesterday’s States vote.
Prior to the vote, Policy and Resources said the agreement would meet “BEPS minimum standards”.
BEPS stands for ‘Base Erosion & Profit Shifting’, which is an initiative by the Organisation for Economic Development & Co-operation (OECD) to tackle international tax avoidance.
Guernsey has previously committed to these standards, so adding a new agreement with Bahrain is keeping to that pledge.
It means that when a company in one country pays dividends to someone in the other country, those dividends are generally only taxed in the country where the recipient lives.
Likewise, when someone in one country receives interestfrom someone in the other country, that interest will generally only be taxed in the country where the recipient lives.
The same can be said for royalties, which are payments for using things like patents or trademarks.
It also means pensions paid from one country to someone living in the other may be taxed in the country where the pension comes from.