Isle of Man to introduce Pillar Two Global Minimum Tax rules from 2025
Isle of Man Treasury Minister Dr Alex Allinson announced on 15 October that draft legislation to implement the OECD Two Pillar Global Minimum Tax rules and introduce a 15% ‘domestic top-up tax’ for large multinational groups would be tabled in November.
The measures are being introduced in response to the OECD’s Pillar Two initiative, which aims to ensure that businesses that operate across international boundaries pay a fair share of tax wherever they are based and generate profits.
A Qualified Domestic Minimum Top-up Tax (QDMTT), to be known as Domestic Top-up Tax, will ensure that multinational enterprises (MNEs) will pay a minimum of 15% taxation on the profits that they generate in the Isle of Man.
An Income Inclusion Rule, to be known as Multinational Top-up Tax, will apply to the very small number of MNEs that have their ultimate parent entity in the Isle of Man or, in certain limited situations, their intermediate parent entity. It will ensure that profits arising outside the Isle of Man are subject to at least 15% taxation.
The Pillar 2 global minimum tax measures only apply to MNE groups with annual combined revenues of €750 million or more. They will come into effect from 1 January 2025 with further primary tax legislation being introduced next year.
“We estimate that this policy will bring in approximately £35 million each year from 2027, of which £25 million will be additional revenue to the changes introduced in February in relation to banks and large retailers,” said Dr Allinson.
“This revenue is a welcome contribution and will assist us in continuing to invest in our economy, support all businesses based here both large and small, and maintain key frontline services.”