11 September 2012 Last updated at 12:43 ET

Guernsey tax changes approved by European Union

Changes to Guernsey's corporate tax regime have been approved by the European Union's Code of Conduct Group.

In June the States approved the removal of part of the Zero-10 system called deemed distribution.

Under the Zero-10 system most corporations in Guernsey pay no tax, while others pay 10% and a small number pay 20%.

The conduct group found the tax system compliant. It is due to be formally ratified at the end of the year.

Deemed distribution of business profits means island residents who are shareholders of island companies pay personal income tax on any unallocated company profits, while anyone living off-island does not.

The Zero-10 system was introduced in the island in 2008.

Similar changes to the Isle of Man and Jersey tax systems were approved by the European Union at the end of last year.