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register for Multinational Corporate Income Tax (MCIT).
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Jersey's States Assembly adopts Pillar Two legislation
On 22 October 2024, the States Assembly unanimously adopted legislation to implement an Income Inclusion Rule (IIR) and a 15% Multinational Corporate Income Tax (MCIT) for in-scope entities for accounting periods beginning on or after 1 January 2025.
Multinational Corporate Income Tax (Jersey) Law 2025
Multinational Taxation (Global Anti-Base Erosion – IIR Tax) (Jersey) Law 2025
Pillar Two technical guidance
The IIR, successfully deemed as Qualified and added to the
OECD central record, was implemented in accordance with the Model Rules (or Pillar Two GloBE Rules) published by the OECD on 20 December 2021 .
The MCIT is also based on the Model Rules and aligns with their principles. However, it is not a top-up tax or a Qualified Domestic Minimum Top-up Tax (QDMTT), but a corporate income tax designed in accordance with the Model Rules.
The IIR and MCIT regimes apply only to Jersey entities that are members of Multinational Enterprise (MNE) groups that report Global annual revenue of €750 million or more in at least two of the four preceding fiscal years, as reported in the group’s consolidated financial statements. As a result, most Jersey businesses remain unaffected and remain subject to the existing parallel corporate income tax regime (better known as 0/10).
Background on the OECD Pillars
Since 2019, the OECD Inclusive Framework has been working to address the tax challenges arising from the digitalisation of the global economy.
This work resulted in a two-pillar solution announced in October 2021, to which a political commitment was made by 137 jurisdictions, including Jersey.
Pillar One is made up of two parts, Amount A and Amount B.
Amount A concerns only the very largest multinational groups of companies which have an annual turnover exceeding €20 billion.
This pillar creates new rules about where tax is to be paid based on where the group's customers are based. Pillar One is still being developed.
Global Anti-Base Erosion Model Rules (Pillar Two) on OECD
Background to Pillar Two GLoBE Rules
Pillar Two is a global framework developed by the OECD to ensure that large in-scope MNE groups pay a minimum effective rate of tax of 15% in every jurisdiction they operate in.
The Pillar Two GloBE Rules apply to MNE groups with consolidated global revenue of €750 million or more in at least two of the four preceding fiscal years. Certain entities, such as investment entities or investment funds that meet certain requirements, may be excluded. Please refer to the
technical guidance for further details on excluded entities.
The starting point to compute the GloBE income or loss is the MNE group’s consolidated financial statements, which are then adjusted in accordance with the Model Rules to calculate the GloBE income or loss for the jurisdiction.
The Pillar Two GloBE Rules operate through the following interconnected charging mechanisms designed to apply a top-up tax where the GloBE effective tax rate (ETR) in a jurisdiction falls below 15%:
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the primary top up mechanism referred to as the IIR; and
- the secondary mechanism (the ‘backstop rule’) referred to as the Undertaxed Profits Rule (UTPR)
The IIR applies first, in a top-down manner. It requires the Ultimate Parent Entity (UPE) in an implementing jurisdiction to pay the top-up tax due across all low-taxed jurisdictions where subsidiaries operate. If the UPE jurisdiction has not implemented the IIR, the obligation shifts to the next qualifying Intermediate Parent Entity (IPE) in the group structure.
Any remaining top-up tax not collected under the IIR is then collected under the backstop UTPR. The UTPR is levied right across the group’s subsidiaries, based on the proportion of tangible assets and employees in each jurisdiction that has implemented a UTPR.
Jersey's approach to Pillar Two
Jersey has implemented a Qualified IIR and a new standalone domestic corporate income tax, MCIT for groups in-scope of Pillar Two, for accounting periods beginning on or after 1 January 2025. Jersey has not enacted an UTPR.
The MCIT Law is Jersey’s domestic minimum tax rule implemented to ensure in-scope Jersey businesses are subject to tax consistent with the liability under a 15% minimum GloBE ETR in Jersey. Because the MCIT is a covered tax under the GloBE Rules, jurisdictions applying the IIR or UTPR would include the MCIT amount in their calculation of the jurisdictional GloBE ETR, which may reduce or eliminate any top-up tax that would otherwise be due in those jurisdictions.
References to QDMTTs are included throughout this guidance to help readers familiar with the QDMTT framework to understand the key differences with the MCIT.
Key principles to Jersey's approach
The key principles on which we have consulted industry and which guide Jersey's approach to Pillar Two are:
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our commitment to maintaining an attractive business environment, based on certainty and simplicity is unchanged
- most companies in Jersey will be outside the scope of the OECD two-pillar solution and should therefore see no change in their corporate tax rate
- Jersey would be well placed to implement GloBE if it chooses to do so, since the Island has a trusted and well-resourced tax authority administering an existing corporate tax regime
- the decision on GloBE will not be based on short-term revenue-raising considerations
These principles are set out in our tax policy reflections paper and are still relevant.
Jersey's tax policy reflections paper on the OECD Pillars
Subject to Tax Rule
The Subject to Tax Rule (STTR) is part of Pillar Two. It is intended to ensure that double tax agreements entered into by developing countries do not prevent certain cross-border payments being taxed at rates of at least 9%.
All members of the Inclusive Framework are expected to amend their double tax agreements to reflect the STTR, if they are requested to do so by a treaty partner which is a developing country and a member of the BEPS Inclusive Framework.
This can be done either bilaterally, by agreeing a protocol to each relevant double tax agreement, or multilaterally, by signing the OECD's Multilateral Legal Instrument (MLI) implementing the STTR.
Jersey currently only has one double tax agreement with an Inclusive Framework member which is classed as a developing country for this purpose.
If asked to do so, Jersey therefore intends to implement the STTR by way of a bilateral protocol rather than the MLI.
Tax Challenges Arising from the Digitalisation of the Economy – Subject to Tax Rule (Pillar Two) on OECD
Jersey's latest Pillar Two developments
Following the election procedures of the Steering Group of the Inclusive Framework (SGIF), Jersey has also been elected to serve a two-year term as a Base Erosion and Profit Shifting (BEPS) Associate until September 2027.
Previous Pillar Two statements and updates
May 2024 statement on Jersey's Pillar Two implementation plan
Jersey announced on 21 May 2024 that it is following its May 2023 commitment regarding Pillar Two implementation by proceeding with plans to introduce an Income Inclusion Rule and a multinational corporate income tax for accounting periods, beginning on or after 1 January 2025.
Pillar Two implementation plan statement
May 2024 Joint Update on Pillar Two by the Crown Dependencies
On 17 May 2024, the three Crown Dependencies provided an update on their intentions to proceed with implementation of Pillar Two in their respective jurisdictions.
Joint three Crown Dependencies statement
July 2023 Inclusive Framework Outcome Statement
The OECD Inclusive Framework met in Paris from 10 to 12 July 2023 to discuss the programme of work on the Two-Pillar solution addressing the tax challenges of the digitalising economy.
Jersey joined 137 other jurisdictions in an Outcome Statement which provides an update on the status of the Pillar One and Pillar Two workstreams.
138 countries and jurisdictions agree historic milestone to implement global tax deal on OECD
Joint statement on Pillar Two by the Crown Dependencies
On 19 May 2023, the 3 Crown Dependencies made a statement on an intended approach to implementation of the Organisation for Economic Co-operation and Development (OECD) Pillar Two global minimum tax framework for large multinational groups.
The treasury ministers of Jersey, Guernsey and the Isle of Man have jointly announced their intentions in relation to Pillar Two implementation.
Each Island intends to implement an Income Inclusion Rule (IIR) and domestic minimum tax from 2025, while continuing to monitor global implementation.
This statement gives in-scope businesses certainty in relation to the 2024 tax year.
Crown Dependencies joint statement
Local press release on the Crown Dependencies announcing agreed approach to Pillar Two Framework
OECD's draft Pillar One Multilateral Convention, October 2023
On 11 October 2023, the OECD published a draft of the consolidated Multilateral Convention to Implement Amount A, alongside a draft explanatory statement and a draft statement of understanding on the way in which the tax certainty process for Amount A would operate.
Between them, these document set out the current understanding of the Amount A rules, and note the areas where agreement has not yet been reached.
Discussions on the final form of Amount A are continuing.
OECD summary of the Amount A rules
Draft Multilateral Convention to Implement Amount A of Pillar One on OECD
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