GloBE Rules Series

ITQ G-

144

September 19, 2025

Question

XCo is the UPE of an MNE Group.

XCo, a company located in Country X, owns Controlling Interests in three subsidiary companies: YCo, ZCo and ACo, respectively located in Countries Y, Z and A.

XCo, YCo, ZCo and ACo are the only Constituent Entities in the MNE Group. Only Countries Y and Z have implemented the GloBE rules.

XCo has a direct 100% Ownership Interest in YCo and a direct 60% Ownership Interest in ZCo. YCo has the remaining 40% Ownership Interest in ZCo (not a Controlling Interest).

ZCo has a direct 100% Ownership Interest in ACo.

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

ACo has Top-up Tax of 1,000.

Based on these facts, what is the IIR tax liability of: (1) XCo; (2) YCo; and (3) ZCo?

Answer

The IIR tax liability of XCo is obviously zero, as Country X has not implemented the GloBE rules.

ZCo is an Intermediate Parent Entity (Art. 10.1.1 definition). ZCo is therefore required to apply the IIR because it owns an Ownership Interest in ACo (Art. 2.1.2). ZCo’s Allocable Share of ACo’s Top-up Tax is, prima facie, 1,000 (Art. 2.2).

ZCo’s obligation to apply the IIR is not “switched off” by Art. 2.1.3, because (i) XCo (the UPE) is not required to apply an IIR; and (ii) YCo does not own a Controlling Interest in ZCo.

YCo is also required to apply the IIR because it is an Intermediate Parent Entity (Art. 10.1.1. definition) that owns indirectly an Ownership Interest in ACo (Art. 2.1.2). YCo’s Allocable Share of ACo’s Top-up Tax is, prima facie, 400 (Art. 2.2).

YCo’s obligation to apply the IIR is not “switched off” by Art. 2.1.3, because XCo (the UPE) is not required to apply an IIR.

Double counting is avoided by the IIR offset mechanism in Art. 2.3: YCo’s Allocable Share is reduced to zero.

Thus, final answer: (1) XCo: 0; (2) YCo: 0; and (3) ZCo: 1,000.

Do you agree?

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