As Jersey implements its multinational corporate income tax regime from 1 January 2025, our tax experts Mimi Chan and Anthony Chandlen explore the practical implications for in-scope groups.
Drawing on our work on joint projects, latest guidance and legislative developments, we aim to help you navigate the new compliance landscape and highlight key considerations for Jersey-based entities.
Among other considerations, multinationals need to focus on registration requirements, reporting obligations, and the interaction with OECD Pillar Two rules.
Pillar Two represents a landmark shift in international taxation. Its purpose is to curb base erosion and profit shifting (BEPS) by ensuring that large multinational enterprises (MNEs) pay a minimum level of tax – 15% – in every jurisdiction where they operate. This initiative, part of the broader OECD/G20 Inclusive Framework, has been embraced by over 140 jurisdictions. It’s designed to address the tax challenges caused by the digitalisation and globalisation of the economy.
Multinational corporate income tax: what it means
Jersey, a leading international financial centre, has responded to Pillar Two by introducing a multinational corporate income tax (MCIT) regime. Effective for accounting periods beginning on or after 1 January 2025, MCIT applies a 15% effective tax rate (ETR) to in-scope MNE groups with consolidated revenues of at least €750 million.
This regime operates alongside Jersey’s existing 0/10/20 corporate tax introduced in 2009. That means Jersey can maintain its traditional tax model for the majority of companies ultimately owned by non-Jersey residents while ensuring that large MNEs are taxed in line with global standards.
|
Traditional Jersey regime |
MCIT regime |
|---|---|---|
In-scope entities |
All Jersey companies that are not part of a Pillar Two group |
Only MNE groups within Pillar Two |
Tax rate |
0%, 10% or 20% depending on activities |
15% ETR |
Tax basis |
Domestic tax law |
OECD Pillar Two-aligned model |
Compliance |
Annual tax return |
Additional MCIT registration and reporting |
Impact |
Most companies pay 0% tax |
Up to 5% of Jersey companies affected |
Although MCIT allows Jersey to collect taxes domestically, it is not a qualified domestic minimum top-up tax (QDMTT) under the Pillar Two framework. Instead, it’s treated as a ‘covered tax’ for Pillar Two purposes. This means:
- Jersey’s MCIT contributes to the calculation of an MNE’s ETR in Jersey under the GloBE (global anti-base erosion model) rules.
- It does not, however, prevent other jurisdictions from applying top-up taxes under the income inclusion rule (IIR) or undertaxed profits rule (UTPR) if the ETR in Jersey is below the 15% minimum.
In terms of Jersey’s own adoption of these broader Pillar Two rules:
- It has implemented the IIR, allowing it to apply top-up taxes to the low-taxed profits of foreign subsidiaries of in-scope MNE groups.
- It has not adopted the UTPR, which would allow it to collect top-up taxes on other low-taxed profits within the group (that are not otherwise captured by a QDMTT or IIR).
What are the implications for administration and compliance?
Jersey has launched a registration portal for in-scope MNE groups, requiring them to register before the end of their first fiscal period under the MCIT regime. This must be done by the group’s designated reporting entity or an appointed tax agent. The reporting entity could be:
- The Jersey-based ultimate parent entity (UPE)
- A Jersey-based intermediate parent entity (IPE)
- A nominated Jersey entity, subject to approval by Revenue Jersey.
Entities must also submit an MCIT return by the due date. The return includes detailed financial data aligned with GloBE standards.
|
For in scope Jersey companies with a year-end 31 Dec 2025 |
MCIT registration deadline |
31 Dec 2025 |
MCIT return filing deadline |
31 Dec 2026 |
MCIT liability payment deadline for: Instalment (50% of estimated MCIT due) Balance |
31 May 2026 31 December 2026 |
MCIT: what to focus on
- Consider the exemptions available:
- Certain entities are excluded from the scope of MCIT. These include investment funds and pension funds.
- There is also an exemption from MCIT where the average GloBE revenue for Jersey is less than €10m and the average GloBE income for Jersey is either a loss or a profit of less than €1m.
- With the introduction of MCIT, Jersey companies’ financial statements, which may have previously received limited tax scrutiny, are now central to compliance and the calculation of MCIT.
- There are various elections available that can affect the amount of MCIT payable. But these should be considered carefully, particularly the interaction of these with Pillar Two.
What is our advice?
Jersey’s adoption of the MCIT regime is a significant change in the tax regime for in-scope Jersey entities.
While there is ongoing global debate about the future of Pillar Two — particularly in light of proposed special arrangements exempting US parented groups from certain Pillar Two rules and the non-participation of major economies like India and China — Jersey’s MCIT regime has already been legislated and Jersey remains committed to Pillar Two.
As the first MCIT filing deadlines approach, in-scope companies should proactively assess their readiness and consider key compliance requirements well in advance.
If you would like further information or advice relating to the issues covered by this article, please contact Corporate Tax Partner Mimi Chan or Jersey-based Tax Partner Anthony Chandlen.
