After consultation with local working groups (on which KPMG were represented in all three Islands) the governments of Guernsey, Jersey and the Isle of Man have announced a decision on a joint approach to the OECD’s Pillar Two framework – link to full Joint Statement

In short, the intention is to implement an Income Inclusion Rule and a domestic minimum tax regime which will only apply to large, in-scope multinational enterprises from 2025 (presumably in respect of accounting periods commencing on or after 1 January 2025, albeit this is yet to be confirmed). The effect of this will be that, broadly, members of the largest multi-national groups (i.e. those with worldwide revenues of at least €750m per annum) located in our Islands will be subject to domestic tax measures which ensure an effective tax rate of 15% on their taxable profits (as calculated in accordance with the global rules).

As a reminder, and importantly, the Islands’ 0/10 corporate tax regimes will continue to apply to the vast majority of businesses which do not meet the worldwide revenue threshold outlined above.

Please see this article for further background on the Pillar Two framework and its possible impact on the Crown Dependencies.

This announcement provides welcome clarity over the direction of travel, with the fact that the rules will not be implemented until 2025 being particularly welcome given the practical challenges associated with an earlier adoption and allowing the Islands an opportunity to monitor implementation plans elsewhere.

Following this announcement affected businesses can now better plan their response to the Pillar 2 framework and KPMG in the Crown Dependencies, as one firm across the Crown Dependencies with the ability to access the KPMG global network, is uniquely placed to provide coordinated advice across all three Islands. Please get in touch with one of the below or your usual KPMG contact if you would like to discuss this matter further.