Guernsey, Jersey and the Isle of Man (‘the Islands’) have made a joint statement on their intentions in respect of the global initiative to set a minimum effective tax rate for the world’s largest multinational enterprises. The Islands intend to implement an “Income Inclusion Rule” and a domestic minimum tax to provide for a 15% effective tax rate for large in-scope multinational enterprises, from 2025. Although they will monitor implementation internationally and adapt accordingly to developments which may require adjustments to our own implementation plans.
The Islands have been playing an active part in the major current BEPS workstream in the OECD to address the taxation challenges of the digitalised global economy. They were among the 130 jurisdictions to join the agreed Statement after the OECD Inclusive Framework meeting on 1 July 2021 and among the 137 to join the following Statement on 8 October 2021. These agreements propose a two-pillar solution to address the tax challenges arising from the digitalisation of the economy, including the option for a robust global minimum rate of tax (known as Pillar Two) to be applied to profits of certain multinational enterprises (“MNEs”). This sets a new global benchmark for the taxation of the world’s largest cross-border groups (with a turnover over €750m per annum) ensuring that they will pay a minimum effective rate of 15% corporate tax in every country they operate in. Businesses in Guernsey below the threshold will not be affected by the implementation of Pillar Two.
The joint statement (included below) sets out the Islands’ plans in respect of Pillar Two for the benefit of MNEs that are either headquartered in or operate from our respective jurisdictions. This statement outlines the intention of the Islands in terms of timing and approach for the implementation of new tax measures in response to Pillar Two. There is much technical work still to do to finalise how this global initiative will work in practice and the Islands will continue to work together within the OECD to help to shape these details as they develop.
Deputy Mark Helyar, Vice-President of the Policy & Resources Committee, said:
“Guernsey has consistently championed the need for a level playing field in tax cooperation and we have a long track record of maintaining the highest standards in tax transparency and fairness. In its implementation of the OECD Pillar Two initiative, Guernsey wants to provide certainty and stability for businesses in the island.
As the rest of the world is looking at how to respond to the OECD’s global initiative to establish a globally applied minimum effective rate for corporate tax, it is significant that Guernsey, Jersey and the Isle of Man are in lock step about the approach to implementation. We will continue to work together as it becomes clear about how the rest of the world will act on Pillar Two.
This will ensure that Guernsey remains competitive while staying at the forefront of emerging global norms in tax matters.”
The Joint Three Crown Dependencies Statement
“The governments of Guernsey, Jersey and the Isle of Man (‘the Islands’) announce that they have reached a decision on a joint approach to the OECD’s Pillar Two framework, based on current international implementation of Pillar Two and discussions at the OECD. This decision ensures certainty for businesses in each of the three jurisdictions.
Our intention is that this approach will comprise the implementation of an “Income Inclusion Rule” and a domestic minimum tax to provide for a 15% effective tax rate for large in-scope multinational enterprises, from 2025. The Islands will continue to work together, monitoring implementation internationally and adapt accordingly to developments which may require adjustments to our own implementation plans, and remain committed to continuing to offer attractive and globally competitive investment environments.
The Islands will continue to engage with diverse and widespread stakeholders – across a very broad range of sectors and geographies – to gather further information and to provide appropriate notice to allow businesses to prepare for these changes.
Our Islands have well-established and stable corporate income tax systems, and longstanding and independently assessed track records of meeting international standards. We are proud of our global leadership in tax cooperation, combatting money laundering and countering the financing of terrorism, and in providing appropriate and effective transparency.”
 Pillar 2 establishes the framework for a global 15% minimum effective tax rate for large multinational groups, calculated at a jurisdictional level, with a top-up charge imposed on any low-taxed profits.