GloBE Rules Series

ITQ G-

111

August 23, 2024

Question

ACo, a company located in jurisdiction A, is a Constituent Entity in an MNE Group which is "within scope" of the GloBE rules. ACo is the only Constituent Entity located in jurisdiction A.

ACo owns and operates in jurisdiction A a large item of plant & equipment ("asset").

For a fiscal year, ACo has these numbers in respect of the asset:

Accounting carrying value (before impairment): 200
GloBE carrying value (before impairment): 150

During the fiscal year, ACo undertakes impairment testing in respect of the asset, which results in the post-impairment accounting carrying value of the asset being 170.

Q1: Based on this limited information, what is the asset's (i) GloBE carrying value; and (ii) carrying value for the purposes of computing the tangible asset carve-out under the Substance-based Income Exclusion? Please ignore current year depreciation.

Q2: What would be your answer to Q1 if the post-impairment carrying value of the asset was 120?

Answer

Q1 (post-impairment accounting carrying value = 170):

GloBE carrying value = 150: para. 68.5 of Comm to Art. 4.4.
Carrying value for tangible asset carve-out under Substance-based Income Exclusion (SBIE) = 170: paras. 49 & 50.1 of Comm to Art. 5.3.5.

Q2 (post-impairment accounting carrying value = 120):

GloBE carrying value = 120: para. 68.5 of Comm to Art. 4.4.
Carrying value for tangible asset carve-out under SBIE = 120: para. 50.1 of Comm to Art. 5.3.5.

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.