Crown Dependencies agree common policy on global minimum corporate tax rate

Monday, 22 May 2023
Guernsey, Jersey and the Isle of Man have agreed a joint policy on implementing the OECD-wide 15 per cent minimum effective tax rate on large multinational enterprises, known as the 'Pillar Two' policy.
Taxation

The OECD agreement requires groups with more than EUR750 million global annual revenue to pay at least 15 per cent tax on profits made in every jurisdiction in which they operate; however, certain investment funds, real estate investment vehicles and holding entities are exempted. Those that would pay less tax under a jurisdiction's usual rules will have to pay an additional levy.

Jurisdictions around the world, especially those with zero- or low-corporation tax rates, are currently pondering which mechanism they should adopt, how to implement this system and when.

The three Crown Dependencies have been playing an active part in the OECD's Base Erosion and Profit Shifting (BEPS) workstream to address the taxation challenges of the digitalised global economy. They were among the 130 jurisdictions to join the agreed statements in July 2021 and October 2021.

They have now decided to implement an Income Inclusion Rule or 'top-up tax' combined with a domestic minimum tax, starting from 2025. However, all three have reserved the right to adjust their policies in the light of other countries' actions.

'The Islands will monitor implementation internationally and adapt their implementation of the tax rate accordingly to global developments', said the joint statement. In any case, businesses headquartered in or operating from the jurisdictions will not be affected by the implementation of Pillar Two if their income is below the threshold.

'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', commented Guernsey deputy Mark Helyar. 'We will continue to work together as it becomes clear about how the rest of the world will act on Pillar Two.'

  • Ireland has just concluded a public consultation on the same question and is expected to adopt the Qualified Domestic Top-up Tax model.

Sources

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