Guernsey has enacted legislation to implement the Organisation for Economic Cooperation and Development’s (OECD) global minimum tax rate of 15 per cent, known as Pillar 2, starting from 1 January 2025.
Pillar 2 aims to ensure that multinational enterprises (MNEs) with annual revenues exceeding €750 million pay a minimum effective tax rate of 15 per cent on their global profits.
This minimum rate is achieved through the OECD's Global Anti-Base Erosion (GloBE) rules, which allocate taxing rights among relevant jurisdictions in an MNE group.
While jurisdictions can choose whether to adopt Pillar 2 measures, Guernsey has implemented two key features: the multinational top-up tax (MTT) and the qualified domestic minimum top-up tax (QDMTT).
The MTT applies to Guernsey resident entities that are the ultimate parent entity (UPE) or intermediate parent entity (IPE) of an MNE group.
This tax is triggered when a constituent entity in another jurisdiction has an effective tax rate below 15 per cent, with Guernsey collecting the top-up tax required to meet this threshold.
The QDMTT, or domestic top-up tax (DTT), applies to constituent entities of in-scope MNEs that are tax residents in Guernsey or have a permanent establishment there.
Both MTT and DTT also apply to certain joint ventures involving entities based in Guernsey, with anti-tax avoidance measures in place.
In addition, Guernsey has decided not to adopt the Undertaxed Profits Rule.
Exemptions from MTT and DTT include real estate investment trusts (REITs), regulated investment funds (in each case, they must be the UPE), and insurance investment entities. Securitisation vehicles are also exempt from DTT.
Guernsey is exempt from DTT and can exclude jurisdictional profits from the MTT calculation if the average GloBE revenue is under €10 million, the average GloBE income is below €1 million, or there is a reported loss.
