New 15% tax on global enterprises to raise £35m

Treasury Minister Alex Allinson announced the rate's implementation to Tynwald

A new 15% tax rate on profits earned by large multinational enterprises in the Isle of Man is expected to raise about £35m annually from 2027, the treasury minister has said.

The "domestic top-up tax" will come into effect in January 2025 in response to a global tax initiative by the Organisation for Economic Co-operation and Development (OECD).

Alex Allinson said it was part of the government’s commitment “to both widen the tax base and continue to comply with international tax standards”.

The move is part of a commitment by the Crown Dependencies to take a "joint approach" to meet reforms to international taxation rules approved by the G20 in 2021.

Dr Allison told the island’s parliament that despite inflation dropping from 7.2% to 2.2%, “financial pressures persist”, with several government departments forecasting overspends, including Manx Care being £16.8m over budget.

The new rules are in response to the OECD 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”.

The OECD’s minimum tax measures only apply to large multinational enterprises (MNEs) with annual combined revenues of £627m (€750m) or more.

'Significant consultation'

While the new tax ensures that MNEs will pay at least 15% on profits earned in the island, the government is also introducing a Multinational Top-up Tax rule.

It states 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".

This "Income Inclusion" multinational tax rule will ensure that profits generated outside the island are subject to at least 15% tax.

Dr Allison commented: “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."

As part of the commitment, the corporate rate was increased from 10% to 15% for banking business and large retailers in February this year, a move expected to generate £10m of the overall £35m.