Introduction
Guernsey and Jersey have today issued a joint statement with the
Isle of Man on their intentions to implement the OECD global
initiative to set a minimum effective tax rate for the world's
largest multinational enterprises, known as Pillar Two.
The Islands have announced their intention 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 ("MNEs"), from
2025.
The Islands will monitor implementation internationally and adapt
their implementation of the tax rate accordingly to global
developments.
Pillar Two
Pillar Two is a new set of international tax rules that seek to
establish a global minimum corporate tax rate. Global anti-base
erosion rules ("GloBE
rules") will impose top-up taxes where the
effective rate of tax of a MNE in a jurisdiction is below the
global minimum corporate tax rate of 15%.
This means that in-scope MNEs are required to pay a 15% minimum
effective rate of tax in every jurisdiction in which they operate.
GloBE rules will apply to groups with more than €750 million
global annual revenue, and there are exclusions for investment
funds, real estate investment vehicles and certain holding
entities.
Essentially, once the GloBE rules are implemented, where a Guernsey
or Jersey tax resident company that is part of an in-scope MNE has
an effective tax rate in Guernsey or Jersey that is below the 15%
minimum, it must pay a top-up tax to bring its effective tax rate
up to 15%. This top-up tax is the "income inclusion
rule".
Walkers' comment
These rules only apply to groups with more than €750 million
global annual revenue, and there are various exemptions, including
those for investment funds, real estate investment vehicles and
certain holdings entities. May companies will therefore fall
outside the scope of the new GloBE rules.
Walkers' Channel Islands' regulatory
team
Walkers' has a team of regulatory experts in Guernsey and
Jersey spanning all practice areas who regularly advise on all
aspects of Guernsey and Jersey regulation, including financial
services, AML, sanctions, data protection, economic substance,
FATCA and the CRS.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
