Multinational Corporate Income Tax (MCIT) guidance (Pillar Two)

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​Pillar Two administrative guidance

The administrative guidance offers practical explanations of the administrative requirements and steps that an in scope Multinational Enterprise (MNE) group will follow to comply with Jersey's Pillar Two legislation.​

Pillar Two administrative guidance

Further information on Pillar one and Pillar Two​

​​MCIT scope and general design​

This information provides technical guidance on the MCIT to assist Jersey businesses comply with their MCIT obligations. While the Income Inclusion​ Rule (IIR) has also been enacted, this guidance does not cover the IIR in detail.

​​​Interpretation

Article 2 of the MCIT Law, on the application of definitions used in the Model Rules, states:

• 'Terms used in the MCIT Law follow the meaning given by the Model Rules, unless defined differently in the MCIT Law.'
  
• The Comptroller must interpret terms defined in the Model Rules with regard to the Organisation for Economic Co-operation and Development (OECD) Commentary, which includes the latest consolidated commentary published by the OECD. As of the date of this publication, the latest consolidated commentary published on 9 May 2025 is ‘Tax Challenges Arising from the Digitalisation of the Economy – Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2025)’​
• Jersey intends to follow a dynamic interpretation approach to OECD Pillar Two guidance, meaning that new or updated OECD guidance (for example administrative guidance, commentary, examples) can be incorporated into the domestic legislation. This does not apply to terms defined differently in the MCIT Law, and if applicable, technical guidance would follow

Revenue Jersey recognises that areas of uncertainty may arise while the OECD consensus continues to evolve. In such cases, we are committed to supporting taxpayers by providing clarity where possible.

Taxpayers and advisers are encouraged to engage with us and we'll consider queries on a case-by-case basis. To assist in navigating areas of ambiguity under the MCIT, we may issue:

• technical guidance
• interpretational viewpoints
• rulings

​Comparison of Jersey’s MCIT and a Qualified Domestic Minimum Top-up Tax (QDMTT) r​​egime

The table below highlights key differences between Jersey’s MCIT and a QDMTT regime, based on the Global Anti-Base Erosion (GloBE) Model Rules. This comparison may be useful if you're already familiar with QDMTT mechanics under the OECD Model Rules.

As described earlier, the MCIT functions as a corporate income tax and is treated as a covered tax under the Model Rules. In contrast, QDMTTs operate as a separate layer of top-up tax and interact differently with other Pillar Two rules.

​

​​Excluded entities​

Consistent with the Model R​​ules and policy objectives, Jersey’s MCIT excludes certain entities from scope. In particular, Model Rule 1.5.1. includes a list of excluded entities, including: 

• a Governmental Entity​
  
• an International Organisation
• a Non-profit Organisation
• a Pension Fund
• an Investment Fund that is an Ultimate Parent Entity (UPE)
• a Real Estate Investment Vehicle that is an UPE

Model Rule 1.5.2 expands the definition of an Excluded Entity to include certain holding or investment entities that are majority-owned (either 95% or 85%) by other Excluded Entities, provided they meet specific conditions, such as operating solely to hold assets, perform ancillary activities, or earning only excluded income like​ dividends or equity gains.

However, some exclusions under MCIT are broader than those permitted under a QDMTT. In particular, Article 7.1(b) allows certain holding or investment entities, such as investment entities, insurance investment entities, and securitisation vehicles, to be treated as Excluded Entities. 

The table below outlines the entities excluded under the MCIT Law and the conditions required to qualify as Excluded Entities under both the QDMTT and MCIT frameworks.

As stated above, an Excluded Entity or an Investment Fund or Real Estate Investment Vehicle under the Model Rules can still be an ‘Excluded Entity’ or ‘Investment Entity’ if it meets any of the following criteria:

​Safe harbours

​​For IIR purposes, Jersey fully aligns with the OECD's Pillar Two Safe Harbours framework. These Safe Harbours are available for MNE groups that meet the requirements set out in the Model Rules and prepare their GloBE Information Return (GIR) accordingly. 

In respect of the MCIT, specific exclusions are addressed in Article 5 of the MCIT Law and are detailed in the sections below. These exclusions, including Jersey’s additional de minimis income threshold, are distinct from the OECD’s Pillar Two framework Safe Harbour provisions. 

​De minimis exemptions 

Under Article 5 of the MCIT Law, some MNE Groups will not be subject to MCIT, even if they are an in-scope MNE group (that is, a group that has annual global revenue of €750 million or more and at least one constituent entity located in Jersey and have at least one constituent entity in Jersey). This is because Jersey offers two types of de minimis exemptions, one based on the Model Rules, and one that is Jersey-specific.   

The exemption applies where the reporting entity elects for the exemption to apply (in the manner described below) and either Condition A or B below is met.

​​Condition A: Model Rules’ de minimis exclusion

Condition A follows the de minimis exclusion in Model Rule 5.5. The MNE group is excluded from MCIT in a fiscal year if the reporting entity elects for the exclusion to apply and both of the following conditions are met (based on the average for the jurisdiction over the relevant period):

• The MNE group’s average GloBE revenue  in Jersey is less than €10 million; and
• The MNE group’s average GloBE income or loss of Jersey is a loss or is less than €1 million.​
  

​Condition B: Jersey-specific de minimis income exclusion

Separately, the MCIT Law also provides an additional Jersey-specific de minimis income exclusion. The MNE group is excluded from MCIT in a fiscal year if the reporting entity elects for the exclusion to apply and the following sin​gle condition is met:  

• The MNE group’s Jersey GloBE income for the fiscal year is less than £100,000.
  

The £100,000 GloBE income threshold is calculated under Article 12.1 of the MCIT Law, which refers to Model Rules 3.1 to 3.5, and it should be determined following the Arm’s Length Principle (see below).

The Jersey-specific de minimis exclusion provides targeted relief from MCIT for groups with limited economic presence in Jersey. It is designed to exclude from charge:

• Smaller MNE groups with low levels of activity in Jersey,
• Jersey entities operating at or near break-even, and
• Certain quasi-securitisation structures.
  

Where a group does not meet the Model Rules de minimis exclusion but meets Jersey’s local income threshold (less than £100,000 in Jersey income), it is excluded from MCIT for that fiscal year, if it elects to do so. 

This effectively cedes taxing rights to other Pillar Two jurisdictions by carving out such Jersey entities from MCIT. In doing so, Jersey ensures these entities are not taxed locally in Jersey under MCIT, the Pillar Two taxes are instead applied at the parent or group level elsewhere, which often better aligns with financial reporting.

Election

As stated above, to apply either Condition A or B, an election needs to be made by the reporting entity (that is, the exemptions will not apply automatically). The election is made by giving written notice to the Comptroller on or before the return due date for a fiscal year. 

The process for making this election is set out​ in the administrative guidance.​

​​Revenue determination  

For the purposes of the de minimis exclusion under the Model Rules, the terms 'average GloBE income' and 'average GloBE income or loss' carry the meanings set out in the OECD Model Rules and OECD Commentary. The term 'revenue' is not specifically defined in either the Model Rules or the MCIT Law. However, paragraph 88 of the OECD Commentary clarifies that the starting point for determining revenue is the financial accounting revenue used in the preparation of the consolidated financial statements, unless an alternative eli​gible accounting standard is applied. 

The nature of revenue may vary depending on the sector and accounting treatment. For example, in the case of financial services entities, items such as interest income and dividends may form part of ordinary revenue. In contrast, for non-financial entities, similar items may be treated as investment income and excluded from revenue.

​Substance Based Income Exclusion (SBIE)

Jersey’s MCIT regime is aligned with the GloBE rules in its method for calculating a group’s net GloBE income or loss. However, the MCIT operates as a standalone corporate income tax rather than a top-up tax, and as such, it does not apply the SBIE.

Income determination and adjustments

This section outlines how income is determined under the MCIT regime, how Jersey applies accounting standards, and how it aligns with OECD guidance on intra-group transactions and transfer pricing.

​Acceptable financial accounting standards 

Jersey follows the Model Rules definition of 'acceptable financial accounting standards,' as set out in Model Rule 10.1. 

No additional Jersey-specific accounting framework is required or imposed.

​Intra-group financing arrangements

Under Model Rule 3.2.7., if a low-tax entity has an intragroup financing expense that increases its GloBE deductions without a matching increase in the high-tax group member’s income, that expense is excluded from the low-tax entity’s GloBE calculation. This prevents profit shifting through internal financing.

Broadly, an entity is a ‘Low-Tax Entity’ under the Model Rules where the entity is not subject to the 15% minimum ETR in its jurisdiction (a Low-Tax Jurisdiction).

Under the MCIT, all in-scope Jersey constituent entities are taxed at 15% on GloBE income. As a result, they are not considered Low-Tax Entities for the purposes of Jersey’s MCIT and Model Rule 3.2.7 will not be relevant in the computation of MCIT net GloBE income for in-scope Jersey entities. 

​Arm’s length principle

Under the MCIT, Arm’s Length Principle is applied as outlined in the Model Rules and the accompanying administrative guidance. Revenue Jersey adopts OECD's Arm’s Length Principle and does not intend to impose additional requirements beyond what is required under Pillar Two. 

As such, an in-scope MNE Group’s GloBE income is required to be determined following the Arm’s Length Principle set out in Model Rule 3.2.3.

Loss relief and carry-forwards

Jersey’s MCIT regime allows in-scope groups to reduce future taxable income by carrying forward losses, including losses incurred before the MCIT regime came into effect. These provisions align with Jersey’s existing Income Tax Law (ITL), while applying MCIT-specific rules. Losses incurred under the MCIT cannot be carried back to offset prior year profits. 

​Carry forward losses

Under the MCIT, losses from previous years, whether under the MCIT itself or under the earlier ITL regime, may be carried forward and used to offset future MCIT income, but not below zero.

​Bringing Income Tax Law losses into MCIT 

Losses incurred under the ITL, before the entity became subject to MCIT, can be offset against MCIT net GloBE Income, provided they are:

• reliably calculated and accurately presented as a part of the MCIT return process
• not already used to offset taxable income in a prior period
• determined consistently with ITL, and the associated principles and guidelines
  

Adequate documentation must be held to support ITL losses brought into MCIT. Revenue Jersey can request evidence and may review claims to ensure compliance requirements are met.

The treatment of losses and other tax attributes when an entity ceases to be subject to the MCIT and re-enters the standard ITL regime is a complex area. This includes the potential carry-forward or recognition of losses accrued under MCIT.

Cross-border relief and tax credits

​Cross-border tax credits

Under Pillar Two, the ETR for each jurisdiction is calculated based on the GloBE income and GloBE covered taxes of all constituent entities on a jurisdictional basis. Some taxes paid by or on behalf of these entities, such as those related to permanent establishments, transparent entities, or withholding taxes, may or may not count toward the income and covered tax total of the entity incurring in the tax expense in its financial accounts, depending on the rules applied to a specific case.

Jersey’s MCIT Law provides specific rules for recognising certain foreign taxes as credits against MCIT liability. The table below summarises how various cross-border taxes are treated under the Model Rules compared with the MCIT:

​MCIT blended CFC tax credit

Jersey’s MCIT law implements a credit mechanism for blended CFC tax regimes, ensuring that income already taxed under a blended foreign minimum tax regime, such as United States Global Intangible Low-Taxed Income (GILTI), is not taxed again under MCIT. A '​blended CFC tax regime' is defined by reference to the OECD Commentary, and Jersey’s Law adopts that definition directly.

Where applicable, Jersey grants a creditable blended CFC amount, subject to a cap of 7.5% of the entity’s MCIT income. This approach helps prevent double taxation which would exceed the minimum rate of 15% and acknowledges situations where taxing rights have been exercised by another jurisdiction.

​Qualified refundable tax c​​redits

Jersey’s MCIT legislation does not currently provide for a Qualified Refundable Tax Credit (QRTC), but it does include enabling provisions that allow the States of Jersey to introduce such a credit by regulation in the future.

While no formal proposal has been brought forward at this time, the Government continues to monitor international developments and remains committed to maintaining a competitive and international compliant tax framework.

The potential for introducing a QRTC or other type of Pillar Two compliant incentives will be considered as part of that ongoing policy work.

​Foreign entities: treatment and location

The MCIT applies only to entities that are considered located in Jersey as per Article 4 of the MCIT Law. While Jersey entities are typically assessed under local incorporation and management rules, the classification of foreign entities involves a separate two-step process:

​Step 1: Classification under Jersey Law

The starting point is to classify the entity based on how it is treated under Jersey law.

​Step 2: Application of Model Rule criteria

Subsequently, this treatment then needs to be considered for the specific purposes of the MCIT applying the further conditions of the Model Rules (such as Article 10.3).

As an example, Jersey Limited Liability partnerships are treated as transparent under Jersey law. However other jurisdictions may see them as opaque, which might impact their status for the purposes of the MCIT.

Some foreign vehicles

To provide clarity on the treatment of some foreign vehicles under Jersey Law, the Comptroller has issued general tax ruling 3 (General tax rulings) to confirm certain foreign entities are seen as fiscally transparent. These entities are:

• Société de libre partenariat (SLP) under French Law
• Société en commandite simple (SCS) under Luxembourg Law
• Société en commandite spéciale (SCSp) under Luxembourg Law

This is not an exhaustive list and the Comptroller is keen to provide further certainty where there is clear need, either through additional general rulings or on a case-by-case basis. 

Retention of supporting documentation

Where the MNE group has obtained advice  or other documentation on the tax treatment of foreign entities for Jersey purposes, Revenue Jersey expects this to be retained and made available upon request.

This may include formal written tax advice or more standardised materials, such as onboarding packs or operational due diligence documents that confirm an entity’s tax status (for example transparent or opaque) for operational taxes or Pillar Two assessments. While formal advice will generally carry greater evidential weight, other forms of documentation may still be considered persuasive depending on their content, context, and reliability. 

Revenue Jersey will assess all available material on a case-by-case basis to determine the appropriate treatment.

​Jersey entities: treatment and location​

The MCIT applies to Jersey constituent entities that are part of in-scope MNE groups. Article 7 of the MCIT Law states that a Jersey constituent entity of an MNE Group is an entity that is located in Jersey and is not:

• ​an investment entity;
• an insurance investment entity; or
• a securitisation entity.
  

Whether an entity is subject to MCIT depends on its classification under Jersey law and whether it is considered 'located in Jersey' for Pillar Two purposes. Jersey adopts Model Rule 10.3 to determine location, subject to specific exceptions set out in Article 4 of the MCIT Law.

These exceptions clarify the treatment of certain entity types, including permanent establishments, flow-through entities, and reverse hybrid entities, for MCIT purposes. 

This section outlines the MCIT treatment of various entity types, including:

• corporate entities
• partnerships
• flow-throughs
• hybrids
• trusts
  
• permanent establishments

​Jersey corporate entities 

Jersey corporate entities are generally in scope of MCIT if they are part of an in-scope MNE group and are considered located in Jersey. The MCIT relies on Jersey Law and Model Rule 10.3 to determine an entity’s location (tax residence).

A Jersey-incorporated or centrally managed and controlled company would typically be 'located in Jersey' and thus a Jersey constituent entity subject to MCIT.

​​Similar arrangements to cell companies 

As covered above, under the Companies (Jersey) Law, a Jersey Incorporated Cell Company and its cells are separate legal persons. Moreover, cells of a Jersey Protected Cell Company must prepare financial accounts, separately from the cell company itself. Therefore, both the cells and cell companies formed under these Jersey laws are entities for the purposes of the Model Rules, and therefore are constituent entities under MCIT.

Because the OECD definition of a 'constituent entity' includes any arrangement that prepares separate financial accounts, both the cell company and its cells are treated as separate entities for MCIT purposes.

The same principles will be applied to other cases, such as segregated portfolio structures, regardless of their legal form. Where such arrangements prepare separate financial accounts and meet the relevant criteria under the Model Rules, they may be treated as separate constituent entities for MCIT purposes.

Jersey permanent establishments 

Jersey uses Pillar Two’s approach of treating permanent establishments as separate entities to ensure income earned through a local branch is taxed under MCIT.

Permanent establishments, like branches, are treated as separate constituent entities under the MCIT if they meet the definition of a permanent establishment under Jersey’s Income Tax Law (ITL 1961).

For example, a Jersey branch of a foreign partnership is treated as a standalone entity for MCIT purposes, even if the partnership is transparent.

Jersey flow-through entities

For flow-through entities, such as partnerships or other tax-transparent structures, the MCIT law explicitly states that an entity established in Jersey is not treated as located in Jersey if it is fiscally transparent.

In other words, if a Jersey partnership is not itself subject to tax, it will not be subject to MCIT as a separate taxpayer.

The only exception is where the entity qualifies as a Reverse Hybrid, treated as flow-through in Jersey but as opaque in the jurisdiction of owner. In that case, it may be treated as located in Jersey and brought within the scope of MCIT.

​Jersey reverse hybrids

A Jersey reverse hybrid is a resident entity that is fiscally transparent in Jersey, while (one of) its owner(s) jurisdictions (defined in accordance with the principles of the Model Rules and the accompanying administrative guidance) treats it as opaque.

Jersey’s MCIT Law has a specific rule to capture such cases. If the entity is a Jersey reverse hybrid and is 'regarded as resident in Jersey for the purposes of Jersey law,' then Jersey will treat it as located in Jersey, rather than stateless. The phrase 'resident in Jersey for purposes of Jersey law' extends beyond tax law and includes other legal frameworks, such as economic substance rules for partnerships.

Therefore, a flow-through entity established in Jersey is deemed to be located in Jersey if it fulfils the following 2 conditions:

1. ​the entity is a reverse hybrid entity
2. it is considered a resident of Jersey under Jersey law
   

Importantly, only 1 owner treating the entity as opaque is sufficient to classify the entire entity as a Jersey reverse hybrid. This is because a split treatment would create a distorted allocation of covered taxes among owners for Pillar Two purposes. 

Once classified as a Jersey reverse hybrid located in Jersey, the entity becomes a Jersey constituent entity subject to MCIT, provided other conditions are met, such as not being an excluded entity. For example, an investment entity or other exempt vehicle. Once in scope, it is no longer treated as a flow-through entity for MCIT purposes.

Jersey Limited Liability partnerships are treated as transparent under Jersey law. However other jurisdictions may see them as opaque, which might impact their status for the purposes of the MCIT Law. 

For example, for a Jersey LP, residence includes the test under the Economic Substance Law for a 'resident partnership, meeting condition 2 above.'

​Jersey partnerships

Partnerships in Jersey can be structured in different legal forms.

Their treatment under the MCIT depends factors such as residency, whether they:

• are a legal person
• prepare separate financial accounts
• qualify as Jersey reverse hybrids

In general, partnerships that are not reverse hybrids are treated as flow-through entities and are therefore not subject to the MCIT.

​​Jersey trusts

​Trusts as entities for MCIT Purposes

For the purposes of the MCIT, trusts may be in scope of Pillar Two if they are considered ‘entities’. Jersey’s legislation follows the Model Rules Entity definition on entities, which includes ‘an arrangement that prepares separate financial accounts, such as a partnership or trust’.

If a trust has prepared financial accounts for any purpose, including to comply with regulatory requirements, it is considered to be an entity for the purposes of Jersey’s IIR and MCIT. Generally, we expect that the majority of Trustees of Trusts in Jersey will have prepared accounts and so the Trust will be considered an entity.

​Accounting considerations 

For Pillar Two purposes the tax and reporting obligations of an entity are based on financial accounting standards as defined in the Model Rules. Trustees should be aware that STEP Accounting Guidelines are not included amongst the acceptable or authorised financial accounting standards for this purpose.

Trustees should seek advice on what is the appropriate action to take for a trust that is or may be in scope of Pillar Two, adopting an acceptable financial accounting standard or restating the accounts for Pillar Two purposes may be necessary. 

Trusts as UPEs

A trust could be a UPE of a Pillar Two group when it has produced consolidated accounts or is required to produce consolidated accounts under the deemed consolidated test.

The outcome of the deemed consolidation test depends on the applicable financial accounting standards.

In cases where it is determined that a trust is not the UPE of a Pillar Two group, it is important to then evaluate whether any entities owned by the trust could be the UPE of their own Pillar Two group.

​MCIT flow-through treatment of a trust

Whether trusts are subject to MCIT will depend on whether these are treated as flow-through entities or opaque entities under Jersey Law. 

Revenue Jersey view is that trusts are generally not fiscally transparent under the Model Rules as the trustees have discretion to allocate funds to beneficiaries, and there is no discernible direct ownership of a trust. The major exception to this are Unit Trusts as the units are a discernible ownership interest, and the terms of such trusts generally ensure that income etc. is allocable to the unit holders. 

​​Jersey Property Unit Trusts

Jersey Property Unit Trusts (JPUTs) are commonly used vehicle for holding real estate and it is likely that some JPUTs will be held in in-scope MNE groups under Pillar Two. The paragraphs below set out technical guidance on how the MCIT applies to JPUTs. Whilst the analysis below examines JPUTs specifically, much of it would apply to Jersey Unit Trusts in general.

JPUTs are a type of Jersey administered unit trust. They are governed by the Trust Law and commonly regulated by the Jersey Financial Services Commission) JFSC either via specific fund regimes or under the Control of Borrowing (Jersey) Order 1958 (COBO). 

Where a JPUT is structured as a ‘Baker Trust’ (based on UK case Archer-Shee vs Baker), such JPUT will be treated as a flow-through entity under the Model Rules.

Commonly, a JPUT can also be an Excluded Entity under the Model Rules.

It may be an Investment Fund or Real Estate Investment Vehicle. 

Or the JPUT may be owned by an Investment Fund or Real Estate Investment Fund (or another Excluded Entity) where either: 

• it is 95%, or more, owned directly by the Investment Fund or Real Estate Investment Vehicle, or indirectly through a chain of such entities, and operates exclusively or almost exclusively to hold assets for the benefit of these entities
  
• at least 85% of its value is owned by an Investment Fund or Real Estate Investment Vehicle (again directly or indirectly as above), and substantially all of the entity’s income is Excluded Dividends or Excluded Equity Gain or Loss

​Jersey: other entities

Some entities do not fall neatly into the categories of corporations, partnerships or trusts but are still relevant for MCIT purposes, particularly if they are legal persons, prepare financial accounts and are located in Jersey.

Any other Entity not mentioned in this guidance should be considered on a case by case basis and follow general principles. 

​Jersey investment entities

​Investment funds 

Jersey entities are assessed against the OECD’s criteria to qualify as investment funds under the Model Rules. Once qualified, they are excluded from MCIT under Article 7.

​Investment fund requirements and Jersey application