The governments of Guernsey, Jersey and the Isle of Man announced on 19 May that they had agreed on a joint approach to implement the OECD's Pillar Two framework to ensure certainty for businesses in each of the three jurisdictions.
The Pillar Two framework sets a new global benchmark for the taxation of large multinational enterprises (MNEs) with a turnover exceeding ?750 million per annum to ensure that they will pay a minimum effective rate of 15% corporate tax in every country in which they operate.
The islands propose to introduce an 'Income Inclusion Rule' and a domestic minimum tax to provide for a 15% effective tax rate for large in-scope MNEs, from 2025. Most businesses in the islands will not be within scope and will continue to be subject to their respective 'zero/ten' corporate tax regimes.
"Our islands have well-established and stable corporate income tax systems, and longstanding and independently assessed track records of meeting international standards," said the joint statement. "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."
"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."
"This announcement will mean large multi-national groups operating from any of the Crown Dependencies will be subject to domestic tax measures which ensure an effective rate of 15% of their taxable profits," said Stephen Hare, Managing Director of Sovereign Trust (Channel Islands). "However, our existing 0/10 corporate tax regime will continue to apply to the majority of businesses which don't meet the threshold."
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