GloBE Rules Series

ITQ G-

157

March 27, 2026

Question

An MNE Group which is “within scope” of the GloBE rules, has 2 Constituent Entities located in jurisdiction B: BCo 1 and BCo 2. These 2 companies are members of a tax consolidation group in jurisdiction B.

In a Fiscal Year, BCo 1 has (i) Financial Accounting Net Income or Loss (FANIL) of $3 million; (ii) income tax expense of $1,000,000; and (iii) gains of $750,000 (included in the FANIL) from the sale of portfolio shareholdings.

In the same Fiscal Year, BCo 2 has (i) FANIL of $5 million; and (ii) income tax expense of $1.5 million.

Also, in the same Fiscal Year, there are trading transactions between BCo 1 and BCo 2: BCo 1 sells $2 million of goods to BCo 2. The MNE Group’s UPE makes an election under Art. 3.2.8 in respect of these trading transactions.

Based on this limited information, what is the MNE Group’s Simplified Income in jurisdiction B for the purposes of the Simplified ETR Safe Harbour?

Answer

See sections 3.1 and 3.2 in chapter 2 of the Side-by-Side Package.

What is the impact of the $2 million intragroup trading transactions and the Art. 3.2.8 election?

The impact will be to reduce BCo 1’s FANIL by $2 million. However, the impact will also be to increase BCo 2’s FANIL only if and to the extent that BCo 2 has sold the goods by year-end. If all the goods are in BCo 2’s inventory at year-end, their purchase has not yet been reflected in BCo 2’s FANIL. For convenience, I will assume that BCo 2 has sold all the goods by year-end – based on this assumption, BCo 2’s FANIL will be increased by $2 million.

The Jurisdictional Profit (or Loss) before Income Tax (JPBT) in jurisdiction B is: $3 million - $2 million + $1 million + $5 million + $2 million + $1.5 million = $10.5 million.

BCo 1’s gains of $750,000 from the sale of portfolio shareholdings are not removed, because they are not within the definition of “Excluded Equity Gain or Loss” (Art. 10.1).

Therefore, Simplified Income = $10.5 million.

Do you agree?

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