GloBE Rules Series

ITQ G-

148

October 31, 2025

Question

XCo is a Constituent Entity in an “in scope” MNE Group. XCo is tax resident, and owns land, in Country X. In Year 3, XCo sold part of its Country X land, incurring a loss of 25. In Year 5, XCo sold its remaining land in Country X, deriving a gain of 200. XCo made an Annual Election under Article 3.2.6 with respect to its gain in Year 5.

What impact does the election have on XCo’s GloBE Income in each of Years 1 to 5?

Answer

Relevant definitions are in Art. 10.1.1.

XCo’s land in Country X qualifies as “Local Tangible Assets”.

Thus, XCo’s gain of 200 in Year 5 is an “Aggregate Asset Gain”, and XCo’s loss of 25 in Year 3 is a “Net Asset Loss”.

XCo’s election under Art. 3.2.6 will have these effects: (1) the 200 Aggregate Asset Gain is carried back to Year 3 and set off against the Net Asset Loss of 25 (Art. 3.2.6(b)); and (2) the remaining amount of Aggregate Asset Gain (175) (which is called the “Adjusted Asset Gain”) is allocated evenly to each Fiscal Year in the “Look-back Period” (Years 1 to 5) – thus, 35 is allocated to each of Years 1 to 5.

Therefore, the impact on XCo’s GloBE Income in each of Years 1 to 5 is:

Year 1: 35 increase

Year 2: 35 increase

Year 3: 60 increase (i.e., 25 + 35)

Year 4: 35 increase

Year 5: 165 decrease (i.e., 35 – 200)

Do you agree?

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