Interim guidance on Pillar Two
The guidance below is published on an interim basis, pending parliamentary debate of the Pillar Two legislation by the Jersey States Assembly on 22 October 2024.
Further information and confirmation of the position following that debate will be published on gov.je.
To provide taxpayers certainty, Revenue Jersey are keen to set out its interpretation of certain provisions in appropriate circumstances. The interim guidance covers most frequently raised questions over the last weeks.
Guidance will be reviewed and issued regularly. Check this page for updates. We’re also preparing the publication of a more comprehensive guidance document.
Jersey’s Pillar Two legislation is based on the OECD GloBE Model Rules and Commentary. Certain areas can only be clarified by the OECD.
Find more information on OECD Pillar One and Pillar Two.
When is a Jersey Limited Partnership a ‘resident in Jersey for the purposes of Jersey law’?
Both Multinational Corporate Income Tax (MCIT) Article 4 paragraph 4 and Income Inclusion Rule (IIR) Article 11 paragraph 4 use the phrase ‘regarded as resident in Jersey for the purposes of Jersey law’. Notably, the phrase refers to ‘Jersey law’, which is broader than ‘Jersey tax law’.
In the context of a Jersey Limited Partnership (LP) governed by the Limited Partnerships (Jersey) Law 1994, this determination includes the residence test contained in the Taxation (Partnerships – Economic Substance (Jersey) Law 2021 – meaning of ‘resident partnership’.
Are synthetic securitisation arrangements considered to fall within the definition of ‘securitisation entity’?
MCIT Article 7(1)(b)(iii) confirms securitisation entities are excluded from the definition of a Jersey constituent entity.
MCIT Article 7(2) confirms that the term ‘securitisation entity’ has the meaning given by paragraph 24 of Chapter 6 (treatment of securitisation vehicles) of the OECD’s June 2024 Guidance. Notably, the OECD June 2024 Guidance gives an example of a synthetic securitisation, where in practice the underlying asset pool is not transferred to the SPV, but the creditors of the SPV are put in the same economic position as if the SPV had itself owned the underlying asset pool.
Where an SPV is a party of a derivative contract or guarantee and the securitisation arrangement synthetically transfers exposure to a (targeted) underlying asset pool, such synthetic securitisation arrangements meet the condition of ‘holding the legally segregated assets’ for the purposes of defining a securitisation entity for MCIT.
Does the MCIT provide taxpayers with the benefit of the GloBE Substance Based Income Exemption (SBIE)?
While the MCIT follows the GloBE computation in determining the amount of the GloBE net income or loss (GNI/L), the MCIT applies a 15% tax rate to the GNI/L (while also taking into account specified losses and certain credits).
The GloBE top-up tax calculation is made on excess profits, which subtracts a specified portion of costs related to tangible assets and payroll (see Model Rule Article 5.3).
Jersey’s MCIT does not provide the same outcome as the SBIE, as doing so would lead to a jurisdictional ETR below 15% (because the MCIT is a domestic covered tax and not a GloBE top-up tax regime).
Does Jersey intend to offer a Qualified Refundable Tax Credit (QRTC)?
MCIT Article 38 provides the States with power to make provision for a qualified refundable tax credit by regulation.
The Government remains committed to ensuring that Jersey maintains a competitive business environment.
Which funds in Jersey are considered to be ‘subject to a regulatory regime’ under the Model Rules that would allow them to be an ‘investment fund’ for GloBE purposes?
The definition of ‘investment fund’ in OECD Model Rule 10.1 contains a list of qualifying requirements, including in paragraph (f) that the entity (or its management) is ‘subject to a regulatory regime’ in the jurisdiction where the entity is established or managed. The OECD Commentary recognises that jurisdictions may take different approaches to the prudential regulation of funds. In Jersey, the JFSC regulates funds either directly or indirectly, but in either case the fund is subject to regulatory control.
Therefore, whether a fund is itself regulated or holds a certificate or permit under the CIF Law, or is indirectly regulated such as through its regulated service provider, it will be regarded as meeting the regulatory regime requirement.
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