GloBE Rules Series

ITQ G-

014

April 29, 2022

Question

An MNE Group has 4 Constituent Entities located in jurisdiction X: ACo, BCo, CCo and DCo.

The UPE's Ownership Interest in each Constituent Entity is this:

ACo: 100%
BCo: 40%
CCo: 30%
DCo: 25%

The other Ownership Interests in BCo, CCo and DCo are owned by shareholders who are unrelated to the UPE.

The UPE holds a Controlling Interest in all 4 Entities. None of the Entities owns shares in the other Entities.

In the current Fiscal Year

ACo has:
- Adjusted Covered Taxes: 100
- GloBE Income: 250
BCo has:
- Adjusted Covered Taxes: 25
- GloBE Income: 100
CCo has:
- Adjusted Covered Taxes: 20
- GloBE Loss: 200
DCo has:
- Adjusted Covered Taxes: 50
- GloBE Income: 500
For jurisdiction X, there is:
- No Additional Current Top-up Tax
- No Domestic Top-up Tax
- No Substance-based Income Exclusion
- No de minimis exclusion

What is the Top-up Tax, if any, for jurisdiction X for the current Fiscal Year?

Answer

CCo and DCo are each Minority-Owned Constituent Entities. BCo is not, as the UPE's Ownership Interest in BCo is 40%. See the definition of "Minority-Owned Constituent Entity" in Art. 10.1.1.

Thus, Art. 5.6.2 requires separate calculations of ETR and Top-up Tax for (1) ACo and BCo; (2) CCo; and (3) DCo.

ACo and BCo:

Adjusted Covered Taxes: 100 + 25 = 125
Net GloBE Income: 250 + 100 = 350
Thus, ETR = 125 / 350 = 35.7%
Top-up Tax Percentage = nil • Therefore, Top-up Tax = nil

CCo:

Adjusted Covered Taxes: 20
Net GloBE Loss: 20 • Thus, Top-up Tax = nil

DCo:

Adjusted Covered Taxes: 50
Net GloBE Income: 500 • Thus, ETR = 10%
Top-up Tax Percentage = 15% – 10% = 5%
Therefore, Top-up Tax = 500 x 5% = 25

Do you agree?

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