On November 26, 2024, Guernsey issued the Income Tax (Approved International Agreements) (Implementation) (OECD Pillar Two GloBE Model Rules) Regulations, 2024 (‘the Regulations’) to transpose the OECD Model Rules (and accompanying guidance) into domestic law.

The Regulations are issued under Section 75CC(1C) of the Income Tax (Guernsey) Law, 1975 and are very similar to the legislation introduced in the Isle of Man (eg See the Isle of Man’s Global Minimum Tax (Pillar Two) Order 2024).

Section 1 of the Regulations states that their purpose is to give legal effect in Guernsey to the GloBE Rules to implement:

• an income inclusion rule (IIR) (referred to in the Regulations as a Multinational Top-up Tax or ‘MTT’) that is intended to be a Qualified IIR;

• a minimum tax that is intended to be a Qualified Domestic Minimum Top-up Tax (QDMTT) (referred to in the Regulations as a Domestic Top-up Tax or DTT).

The Regulations do not give legal effect in Guernsey to the under-taxed profits rule (‘UTPR’).

The provisions of the Regulations apply to fiscal years that commence on or after January 1, 2025.

The approach taken in the Regulations is to incorporate by reference the OECD Model Rules and accompanying Commentary/Guidance to effectively transpose the OECD Rules into domestic law (subject to specified amendments).

Section 2 of the Regulations states that the provisions of the Regulations on the IIR and QDMTT must be read and construed in accordance with the GloBE Commentary, the Administrative Guidance, OECD Safe Harbour Rules and the OECD Examples.

This is reiterated in Section 69(4) which states that the provisions of the GloBE Rules must be applied consistently with the most recent:

• GloBE Commentary;

• GloBE Administrative Guidance;

• GloBE Safe Harbours; and

• GloBE Examples

that have been applied in Guernsey before the start of the Fiscal Year that is being considered.

The GloBE Administrative Guidance is defined in Section 2(2) to include:

February 2023 OECD Administrative Guidance (AG1)

July 2023 OECD Administrative Guidance (AG2)

December 2023 OECD Administrative Guidance (AG3)

June 2024 OECD Administrative Guidance (AG4)

Section 4 of the Regulations provides that the amount of top-up tax under the DMT is based on the calculation of excess profits for GloBE purposes. However, there are a number of adjustments which apply either as they are not relevant or the Regulations expressly provides rules that apply these provisions (eg the exclusion of Eligible Distribution Tax Systems).

There are also specific adjustments, as provided in the OECD Administrative Guidance, including for:

– Transitional Years

– Stateless Entities

– International Activity Exemption

– Taxes Pushed Down

In-scope entities are generally required to register 12 months from the start of the first Fiscal Year commencing on or after January 1, 2025 of the MNE Group of which the entity is a member.