GloBE Rules Series

ITQ G-

141

August 8, 2025

Question

XCo is the UPE of an MNE Group and owns 70% of the Ownership Interests in YCo, a POPE located in Country Y. The remaining 30% of the Ownership Interests in YCo are owned by persons that are not Group Entities.

YCo owns 20% of the Ownership Interests in ZCo, a Constituent Entity located in Country Z. XCo directly owns 70% of the Ownership Interests in ZCo. A person that is not a Group Entity owns the remaining 10% of the Ownership Interests in ZCo.

XCo owns 100% of the Ownership Interests in ACo, a Constituent Entity located in Country A.

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

The Top-up Tax computed for Country Z and allocated to ZCo for the Fiscal Year is 1,000.

The Top-up Tax computed for Country A and allocated to ACo for the Fiscal Year is 500.

The Financial Accounting Net Income of ZCo and ACo reflected in the Consolidated Financial Statements of XCo is 18,000 and 0, respectively. ZCo’s GloBE Income is 20,000 and ACo’s GloBE Income is 35,000. The difference between ZCo’s GloBE Income and the income reflected in the Consolidated Financial Statements is attributable to 2,000 of expenses that are not taken into account in computing GloBE Income or Loss. The difference between ACo’s GloBE Income and its income reflected in the Consolidated Financial Statements is attributable to the fact that all of its transactions were conducted with Group Entities located outside of Country A.

What is: (1) YCo’s Allocable Share of the Top-Up Tax of ZCo?; (2) XCo’s Allocable Share of the Top-Up Tax of ZCo?; and (3) XCo’s Allocable Share of the Top-Up Tax of ACo?

Answer

1. YCo’s Allocable Share of ZCo’s Top-Up Tax (1,000):

Ownership Interests in ZCo held by persons other than Group Entities = 80% (which includes XCo’s 70%: Art. 2.2.3(d)).

ZCo’s GloBE Income, reduced by amount of GloBE Income attributable to Ownership Interests held by other owners = 20,000 minus 16,000 = 4,000.

Inclusion Ratio: 4,000 / 20,000 = 20%: Art. 2.2.2

Thus, YCo’s Allocable Share of ZCo’s TUT = 1,000 x 20% = 200.

2. XCo’s Allocable Share of ZCo’s TUT (1,000):

Ownership Interests in ZCo held by persons other than Group Entities: 10% + (30% x 20%) = 10% + 6% = 16%.

ZCo’s GloBE Income, reduced by amount of GloBE Income attributable to Ownership Interests held by other owners = 20,000 minus 3,200 = 16,800.

Inclusion Ratio: 16,800 / 20,000 = 84%: Art. 2.2.2.

XCo’s prima facie Allocable Share of ZCo’s TUT = 1,000 x 84% = 840.

Reduction to reflect portion of XCo’s Allocable Share that is brought into charge by YCo (a POPE) = 1,000 x 14% = 140.

Thus, XCo’s final Allocable Share of ZCo’s TUT = 840 minus 140 = 700.

3. XCo’s Allocable Share of ACo’s TUT (500):

Ownership Interests in ACo held by persons other than Group Entities: 0%.

ZCo’s GloBE Income, reduced by amount of GloBE Income attributable to Ownership Interests held by other owners = 35,000 minus 0 = 35,000.

Inclusion Ratio: 35,000 / 35,000 = 100%.

Thus, XCo’s Allocable Share of ACo’s TUT = 500 x 100% = 500.

Do you agree?

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