GloBE Rules Series

ITQ G-

093

March 22, 2024

Question

X MNE Group, which manufactures and sells consumer goods, includes the following items in its consolidated profit and loss statement for a Fiscal Year (all in EUR millions):

Sales (net of discounts, returns and allowances of 40): 600
Cost of Goods Sold: (400)
Selling, General and Administrative Expenses: (160)
Gains from investments – realised: 20
Gains from investments – unrealised: 30
Losses from investments – realised: (25)
Losses from investments – unrealised: (40)
Extraordinary or non-recurring items – income / gains: 35
Extraordinary or non-recurring items – expenses / losses: (30)
Interest income (on surplus cash): 5
Interest expense: (20)

Based on this limited information, what is X MNE Group's annual revenue for the purposes of Art. 1.1.1 of the GloBE rules?

Answer

Section 3.1 of December 2023 AG provides guidance on the computation of annual revenue for the purposes of Art. 1.1.1.

Treatment of each item:

Item (1) Sales (net of discounts, returns and allowances of 40): 600 added.

Item (2) COGS: no impact.

Item (3) SGA Expenses: no impact.

Items (4) to (7) Gains and losses from investments – realised and unrealised: gains are added, but losses are deducted "to the extent of gross gains from investments" (para. 10.4 in Comm to Art. 1.1). As there is an overall loss of (15), items (4) to (7) have no net impact on computation.

Item (8) Extraordinary or non-recurring items – income / gains: 35 added (para. 10.4 in Comm to Art. 1.1).

Item (9) Extraordinary or non-recurring items - expenses / losses: para. 10.4 in Comm to Art. 1.1 does not state that such expenses or losses should be deducted. Thus, no impact.

Item (10) Interest income (on surplus cash): no impact (see Example 1 in para. 10.6 in Comm to Art. 1.1).

Item (11) Interest expense: no impact. Thus, annual revenue = 600 + 35 = 635.

Do you agree?

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.