Pillar Two legislation published - Jersey Update

On 14 August 2024 the Minister for Treasury & Resources lodged draft legislation in the Island’s Parliament (the States Assembly) setting out the Island’s proposed implementation of the OECD’s Pillar Two framework.

Two separate pieces of draft legislation were lodged:

1. Legislation proposing the introduction of an Income Inclusion Rule (“IIR”) – see: Draft Multinational Taxation (Global Anti-Base Erosion – IIR Tax) (Jersey) Law 202- (gov.je)
2. Legislation proposing the introduction of a new standalone Multinational Corporate Income Tax (“MCIT”) – see: Draft Multinational Corporate Income Tax (Jersey) Law 202- (gov.je)

The proposed rules will apply only to multinational groups of enterprises (“MNEs”) with more than €750 million global annual revenue. All other businesses that are below the €750 million threshold will see no impact and will remain under Jersey’s existing zero/ten corporate income tax regime. For those large MNEs that are in scope, the new rules will apply for accounting periods beginning on or after 1 January 2025. 

Under the MCIT, Jersey companies and Jersey branches of in scope MNEs will pay an effective rate of 15% on their Jersey profits; whilst under the IIR, Ultimate Parent Entities and/or Intermediate Parent Entities based in Jersey will be subject to a top-up tax in Jersey on their non-Jersey profits, in certain limited circumstances.

Consistent with the communication released by the Government of Jersey in May 2024, it has been confirmed that Jersey will not be implementing an Undertaxed Profits Rule at this time. 

The draft legislation is scheduled for debate in Jersey’s Parliament on 1 October 2024. 

Legislation implementing changes of a similar nature is expected to be published in Guernsey and the Isle of Man in due course.

If your group is potentially impacted by the proposed rules, please get in touch with KPMG to find out more.