GloBE Rules Series

ITQ G-

140

August 1, 2025

Question

XCo is located in jurisdiction X and is the UPE of an MNE Group.

XCo owns the Controlling Interests in 3 Constituent Entities: YCo, ZCo, and ACo, respectively located in jurisdictions Y, Z, and A.

XCo owns 60% of the Ownership Interests in YCo, while the remaining 40% are held by third parties.

YCo owns 90% of the Ownership Interests in ZCo, while the remaining 10% are held by third parties.

ZCo wholly owns ACo.

The Ownership Interests of YCo, ZCo, and ACo are common shares that carry an equal right to profit distributions and capital.

Jurisdictions X, Y and Z have implemented the GloBE rules, but jurisdiction A has not.

ACo is the only Constituent Entity located in jurisdiction A. 100 of top-up tax exists in regard to jurisdiction A.

How much top-up tax will each of XCo, YCo, and ZCo be required to pay?

Answer

YCo is a Partially-Owned Parent Entity (POPE) (Art. 10.1.1 definition), because: (i) it owns an Ownership Interest in ZCo; and (ii) 40% of its Ownership Interests are owned by persons that are not Constituent Entities of the MNE Group. It is therefore not an Intermediate Parent Entity (Art. 10.1.1 definition).

ZCo is also a POPE, because: (i) it owns an Ownership Interest in ACo; and (ii) 36% (40% x 90% = 36%) of its Ownership Interests are owned indirectly by persons that are not Constituent Entities of the MNE Group, and 10% of its Ownership Interests are owned directly by persons that are not Constituent Entities of the MNE Group; thus, in total, 46% of its Ownership Interests are owned by persons that are not Constituent Entities of the MNE Group. It is therefore not an Intermediate Parent Entity.

ACo is not a POPE, because it does not own an Ownership Interest in any Constituent Entity of the MNE Group.

Prima facie: (1) XCo applies the IIR (Art. 2.1.1); (ii) YCo applies the IIR (Art. 2.1.4); and (iii) ZCo applies the IIR (Art. 2.1.4). For XCo, the Allocable Share of the jurisdiction A top-up tax is 54: Art. 2.2. For YCo the Allocable Share is 90: Art. 2.2. And for ZCo, the Allocable Share is 100: Art. 2.2.

Art. 2.1.5 does not apply because ZCo is not wholly-owned by YCo.

Triple tax is avoided by: (a) Art. 2.3 reduces XCo’s Allocable Share to zero; and (b) Art. 2.3 also reduces YCo’s Allocable Share to zero.

Thus, final answer: ZCo is required to pay 100 of top-up tax.

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.