GloBE Rules Series

ITQ G-

155

March 13, 2026

Question

An MNE Group has Net GloBE Income of 22,000 in Jurisdiction X. This includes 2,000 of Qualified Refundable Tax Credits (QRTCs) which are expenditure-based and meet the definition of a Qualified Tax Incentive (QTI). The MNE Group’s pre-credit tax liability is 3,000 but this is reduced by the 2,000 of QRTCs and 1,000 of non-refundable expenditure-based credits which also meet the QTI definition.

The Filing Constituent Entity elects to apply the Substance-based Tax Incentive Safe Harbour. The Substance Cap for the Fiscal Year is 2,200.

Based on this limited information, what is the MNE Group’s ETR in Jurisdiction X?

Answer

If the election were not made, the Group’s Adjusted Covered Taxes would be 2,000 (i.e., 3,000 less 1,000 of non-refundable credits). This would give the Group an ETR of 9.1% (2,000 / 22,000).

If the election for the Substance-based Tax Incentive is made, then:

1. If the Group adjusts only the 1,000 non-refundable expenditure-based credit, its Adjusted Covered Taxes would be increased to 3,000 (i.e., 2,000 + 1,000). The Group’s Substance Cap would become 1,200 (i.e., 2,200 less 1,000). Its revised ETR would be 13.6% (3,000 / 22,000).

2. As there is 1,200 of Substance Cap remaining, the Group elects to treat 1,200 of the QRTC as a QTI. Consequently, the GloBE Income becomes 20,800 (i.e., 22,000 less 1,200). There is no net movement in the Group’s Adjusted Covered Taxes, because the QRTC credit offsets the additional deemed Covered Tax. The Group’s revised ETR would be 14.4% (3,000 / 20,800).

Final answer: ETR = 14.4%.

Do you agree?

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