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.

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...