GloBE Rules Series

ITQ G-

161

June 2, 2026

Question

XCo 1 and XCo 2 are companies located in jurisdiction X, and they are also Constituent Entities in an MNE Group.

XCo 1 incurs administrative expenses of 250, of which 100 is re-charged to XCo 2. XCo 1 records an expense of 250 and offsets it with 100 of income received from XCo 2. XCo 2 records an expense of 100. Please assume that the 100 satisfies the arm’s length principle.

Based on this limited information, is the MNE Group permitted to apply the Simplified ETR Safe Harbour in jurisdiction X?

Answer

The issue in this question is whether the “single expense and loss principle”, which is within the integrity rules for the Simplified ETR Safe Harbour, is satisfied. The “single expense and loss principle” is that “expenses and losses are only deducted once and in a single Tested Jurisdiction” (section 7.3 in chapter 2 of the Side-by-Side Package).

Based on the facts, it could be argued that this principle is breached, because 100 of administrative expenses are deducted twice: once by XCo 1 (as part of the 250), and once by XCo 2.

However, the Package expressly rejects this view in a situation (such as in the present question) of intra-group recharging agreements: see para. 193.

Therefore, final answer: the MNE Group is permitted to apply the Simplified ETR Safe Harbour in jurisdiction X.

Do you agree?

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