GloBE Rules Series

ITQ G-

154

March 2, 2026

Question

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

Under the jurisdiction A corporate income tax law, ACo qualifies for a tax credit if its cumulative R&D expenditure over the previous 3 years exceeds $1 million. If it does, then it is entitled to a tax credit which is calculated as 20% of its cumulative R&D expenditure over the previous 3 years plus its current year R&D expenditure. The credit is payable in cash during the next year, to the extent that ACo does not have a sufficient corporate income tax liability and/or property tax liability in the current year to fully utilise the credit.

Is the tax credit a “Qualified Tax Incentive” (QTI) for the purposes of the Substance-based Tax Incentive Safe Harbour?

Answer

Paragraph references are to chapter 4 of the Side-by-Side Package …

The tax credit is a “Qualified Refundable Tax Credit” (QRTC) (defined in Art. 10.1.1).

ACo can make an Annual Election to treat certain QRTCs as a “Qualified Tax Incentive” (QTI): para. 21.

Does the QRTC in this question qualify for that election? Para. 22: the election can only be made for a QRTC that meets the definition of a QTI.

Condition #1: generally available (paras. 15 & 16) – satisfied.

Condition #2: expenditure-based or production-based – satisfied (the tax credit in this question is expenditure-based: paras. 4 to 8, and para. 13).

Condition #3: reduces liability for a Covered Tax (para. 3) – see below.

The tax credit in this question can be used against a corporate income tax liability (Covered Tax) and / or a property tax liability (non-Covered Tax). Para. 3: “The definition generally applies to tax incentives that reduce the liability for a Covered Tax of the taxpayer. It therefore does not apply to an incentive that reduces the liability for a non-Covered Tax …”.

The guidance is not clear on whether the ability of the tax credit to be used against a non-Covered Tax disqualifies it from being a QTI, even though it can be used against a Covered Tax.

What do you think?

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