Yesterday the Government of Jersey published a “reflective paper” that sets out its current approach to the OECD BEPS 2.0 reforms, and invites stakeholder input on open policy questions, including whether and how Jersey should implement the GloBE minimum tax rules.
Jersey is the first of the Crown Dependencies to set out its policy thinking on this issue in detail and the paper provides valuable insight into the considerations that the governments of other offshore jurisdictions will be grappling with. It sets out a series of principles that will govern Jersey’s approach, including:
- Jersey remains committed to maintaining an attractive business environment, based on simplicity and certainty;
- as expected, Jersey will, implement the minimum standards that it signed up to in the October 2021 OECD Inclusive Framework agreement; that is, Pillar One and the Pillar Two Subject to Tax Rule (STTR);
- the Government has not decided whether and how to implement the GloBE rules and wishes to understand stakeholders’ views. However, its current analysis suggests that the best approach may be to implement GloBE together with a 15% Domestic Minimum Tax (DMT) that will apply to GloBE groups only;
- if Jersey does implement GloBE, it is unlikely to do so before 1 January 2024 given the legislative process that would need to be followed; and
- most businesses operating in Jersey would be outside the scope of the GloBE rules, and Jersey does not intend to change the domestic corporate system that applies to those businesses.
The OECD will be encouraged by Jersey’s preliminary conclusion that the GloBE rules will be effective and that there may therefore be little downside to implementing. The paper notes that Jersey is co-ordinating its work on BEPS with Guernsey and the Isle of Man, and while those territories are yet to set out their positions comprehensively it is likely they will be closely aligned with Jersey’s.
Other offshore territories may see things differently or face different constraints. As the paper acknowledges, Jersey will be well-placed to implement the GloBE rules if it chooses to, given it has an existing corporate income tax system administered by an experienced tax authority. However, this is not the case for all offshore jurisdictions and those without corporate income taxes may struggle to build the legal and administrative infrastructure needed to implement GloBE and DMTs, at least in the short term.