Crown Dependencies: Details on plans to implement Pillar Two global minimum tax
All islands have expressed intention to work cooperatively, but each is adopting a different approach.
The Crown Dependencies of Isle of Man, Guernsey, and Jersey have released further details on their commitment to the OECD's Pillar Two project, which requires multinational enterprises (MNEs) with a consolidated annual turnover exceeding €750 million to pay a minimum tax rate of 15% on profits generated in each jurisdiction they operate in.
- The Isle of Man plans to introduce a qualified domestic minimum top-up tax (QDMTT) from 1 January 2025 so that MNEs operating on the island pay a minimum of 15% tax on profits. The decision on whether to introduce an income inclusion rule (IIR) will be made later in 2024.
- Guernsey also plans to introduce a QDMTT from 1 January 2025 and has indicated its intention to implement an IIR from the same date. Guernsey will engage with the business community on specific design elements of the QDMTT.
- Jersey plans to introduce an IIR from 2025 and instead of a top-up tax, proposes a new domestic tax measure—the multinational corporate income tax (MCIT) —alongside its existing 0/10 corporate income tax system. The MCIT will align with the OECD’s global base erosion (GloBE) model rules, so that in-scope MNEs pay an effective rate of 15% on their taxable profits.
While all islands have expressed their intention to work cooperatively, each is adopting a different approach based on unique economies, client bases, and administrative considerations.
The table provided below provides a summary of the state of play as of May 2024 (questions remain as to whether the Isle of Man will introduce an IIR and whether there will be any further clarification of the Isle of Man and Guernsey’s approach concerning the UTPR).