GloBE Rules Series

ITQ G-

009

March 18, 2022

Question

An MNE Group has 4 Constituent Entities which are located in a jurisdiction. For the current Fiscal Year:

ACo has GloBE Income of 9,400 and Adjusted Covered Taxes of 400
BCo has a GloBE Loss of 2,000 and Adjusted Covered Taxes of 40
CCo has GloBE Income of 2,200, Adjusted Covered Taxes of 200, and a Substance-based Income Exclusion of 3,000
DCo has a GloBE Loss of 1,100, Adjusted Covered Taxes of 160, and a Substance-based Income Exclusion of 1,300
The Group does not have any Additional Current Top-up Tax in regard to the jurisdiction
The jurisdiction has not introduced a domestic minimum top-up tax

Q1: What is the Group's ETR and Top-up Tax (if any) for the jurisdiction?

Q2: If the Group has Top-up Tax for the jurisdiction, what is the allocation of that Top-up Tax amongst the 4 Constituent Entities?

Answer

Q1:

Calculate ETR:

Sum of Adjusted Covered Taxes: 400 + 40 + 200 + 160 = 800 (Art. 5.1.1)
Net GloBE Income: 9,400 – 2,000 + 2,200 – 1,100 = 8,500 (Art. 5.1.2)
ETR = 800 / 8,500 = 9.4118% (rounded to fourth decimal place: Commentary on Art. 5.1.1)

Calculate Top-up Tax Percentage:

Top-up Tax Percentage = 15% - 9.4118% = 5.5882%

Calculate Excess Profit:

Substance-based Income Exclusion: 3,000 + 1,300 = 4,300
Excess Profit = 8,500 – 4,300 = 4,200 (Art. 5.2.2)

Calculate Jurisdictional Top-up Tax:

Jurisdictional Top-up Tax = (5.5882% x 4,200) – 0 – 0 = 234.7044 (Art. 5.2.3)

Q2:

Calculate Aggregate GloBE Income for all Constituent Entities which have GloBE Income:

Aggregate GloBE Income: 9,400 + 2,200 = 11,600 (Art. 5.2.4)

Allocation of Top-up Tax (Art. 5.2.4):

ACo: 9,400 / 11,600 x 234.7044 = 190.1915
BCo: nil (GloBE Loss)
CCo: 2,200 / 11,600 x 234.7044 = 44.5129
DCo: nil (GloBE Loss)

ITQ Disclaimer

This International Tax Quiz (ITQ) contains general information only, and none of International Insights Pte Ltd, its employees or directors is, by means of this ITQ, rendering professional advice or services. You use the content of this ITQ strictly at your own risk. You should not rely on all or any part of the content of this ITQ in making decisions to take action (including inaction) in regard to tax or other matters. Before making any decision or taking any action (including inaction) that may affect your tax position, your finances or your business, you should consult a qualified professional advisor. None of International Insights Pte Ltd, its employees or directors shall be responsible for any loss whatsoever sustained by any person who relies on the content of this ITQ.