Guernsey, Channel Islands

Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two

BEPS Pillar Two focuses on ensuring a minimum level of taxation and is centred around the following two rules:

• The income inclusion rule (IIR) based around existing controlled foreign company (CFC) rule principles.
• The undertaxed payments rule (UTPR), which acts as a backup to the IIR by making a top-up tax adjustment in relation to profits of a constituent entity that is not in scope of the IIR.

Together, the IIR and UTPR are known as the global anti-base erosion (GloBE) rules. They would apply to certain multinational enterprise (MNE) groups with 750 million euros (EUR) or more in annual revenues and would by necessity rely on a common tax base. In essence, the GloBE rules would provide jurisdictions with the right to ‘tax back’ up to an agreed minimum rate of tax, where other jurisdictions have not fully exercised their primary taxing rights.

Guernsey has approved legislation to implement the OECD’s Pillar Two rules, effective 1 January 2025. Guernsey has implemented the Qualified Domestic Top-up Tax (DTT) and the Multinational Top-up Tax (MTT) for the Qualified Income Inclusion Rule, following the GloBE Model Rules with some modifications. Applying the rules and determining the impact are likely to be very complex and pose a number of practical challenges. 

Tax return due dates

The Guernsey Revenue Service has decided to initiate steps to reinstate the original annual filing deadline of 30 November as follows:

• Year of charge 2023: 31 January 2025
• Year of charge 2024: 30 November 2025
• Year of charge 2025 onwards: 30 November