Implementing rules around a new global tax regime will enable the Isle of Man to broaden its tax base and could raise a forecast £35m each year from 2027.
Measures are being introduced in response to the Organisation for Economic Co-operation and Development’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.
Legislation will soon appear on the Tynwald Register of Business ahead of the November sitting to implement:
- A Qualified Domestic Minimum Top-up Tax (QDMTT), to be known as Domestic Top-up Tax. This will mean 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. This will apply to the very small number of MNEs that have their ultimate parent entity in the Island or, in certain limited situations, their intermediate parent entity in the Island. It will ensure that profits arising outside the Isle of Man are subject to at least 15% taxation
The changes were revealed today (Tuesday 15 October) by Treasury Minister Dr Alex Allinson MHK during his financial statement to the October sitting of Tynwald.
The Treasury Minister told Members:
‘In March I stood again in this honourable Court to discuss our tax strategy and our commitment to both widen the tax base and continue to comply with international tax standards. Next month I shall be introducing new legislation relating to the OECD Pillar 2 Global Minimum Tax rules and a 15% Domestic Top-up tax for large multinational groups. This will come into effect from 1 January 2025 with further primary tax legislation being introduced next year.
‘Significant consultation has been carried out with the companies involved and we will continue to work with them to ensure that the Island remains a competitive and attractive base for business growth, innovation and entrepreneurship.’
He added:
‘We estimate that this policy will bring in approximately £35m each year from 2027, of which £25m will be additional revenue to the changes introduced in February in relation to banks and large retailers.
‘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.’
Pillar 2 global minimum tax measures only apply to MNE groups with annual combined revenues of €750m or more. The measures do not impact businesses whose annual revenues are below this threshold.
The Income Tax Division will be contacting all businesses that it understands may be in-scope of Domestic Top-up Tax and Multinational Top-up Tax. If you believe that your business may be in-scope and you have not heard from the Division by early November, please email Pillars-Tax@gov.im
