The purpose of the January 2025 restriction
Approved on 13 January 2025, this fifteen-page OECD guidance explains Article 9.1 transition rules for pre-GloBE deferred tax attributes. Genuine historical attributes, including losses, can prevent distortions on entry, but the transition was not intended to shelter future low-taxed income through newly created government benefits. The guidance addresses arrangements after 30 November 2021, retrospective choices and asset-basis differences on introducing a new corporate income tax. It revises Commentary, transitional CbCR and QDMTT safe-harbour provisions and includes two full examples. Its specified dates and grace periods should be retained when applying the rule, rather than replaced with a general claim that every old DTA is acceptable.
Accounting recognition is necessary but not sufficient
The revised Article 9.1.1 language includes a DTA unrecognised because insufficient future taxable income was expected, including a short utilisation window imposed by accounting policy. It does not include an attribute that cannot be reflected or disclosed under the authorised accounting standard because other recognition criteria are unmet, subject to the stated Article 6.2.1 and 9.1.3 exceptions. Article 9.1.2 also excludes specified assets even when shown in the transition-year accounts. Deferred-tax accounting therefore supplies the starting point, not a guarantee of GloBE recognition.
Excluded items and the broad meaning of transaction
Article 9.1.2 requires an asset associated with an item excluded from GloBE income and a transaction after 30 November 2021. Excluded items include non-economic tax expenses or losses, such as depreciation above actual asset cost, amounts not representing prepaid tax on GloBE income and similar future-activity credits. The transaction concept is not limited to commercial dealings: government agreements, rulings, decrees, grants and amendments can qualify. It can capture a transaction after the transition year if the DTA was reflected or disclosed for that year. This governs use of attributes in GloBE years, not retroactive imposition of tax on the old transaction.
A statutory entitlement is different from negotiated relief
A government arrangement is covered where it creates a specific credit, relief or basis step-up not independently available. Relief arises independently if no critical feature, such as eligibility or amount, depends on government discretion. A statutory expenditure credit is not caught merely because an authority must decide or acknowledge that statutory conditions are met. Nor does this rule automatically exclude the specified pre-transition Article 6.2.1(c)/Commentary 51.2 attributes. Analyse the legal origin and discretion over the entitlement; the involvement of a government official alone is not decisive.
Three excluded benefit categories and old losses
Category (a) is a discretionary government arrangement concluded or amended after 30 November 2021 creating a non-independent credit or relief. Category (b) is a choice made or changed after that date retrospectively changing a transaction’s taxable treatment for a year already assessed or filed. Category (c) is a tax/accounting basis difference created by a new corporate tax enacted after that date but before transition in a jurisdiction without an earlier corporate income tax; this includes relevant DTAs and DTLs. Reversal expenses are excluded from both full GloBE deferred-tax adjustments and simplified covered taxes, subject to limited DTA grace. Under a newly enacted tax, losses more than five fiscal years before its effective date are excluded; losses within five years are not automatically excluded but remain subject to ordinary Article 9.1.2 testing.
Grace periods and the single cumulative 20% cap
For categories (a) and (b), eligible grace years begin from 1 January 2024 and before 1 January 2026, excluding a year ending after 30 June 2027. For category (c), they begin from 1 January 2025 and before 1 January 2027, excluding a year ending after 30 June 2028. The maximum is the aggregate 20% of each originally recorded qualifying DTA, measured at the lower of 15% and the domestic rate. This is one cumulative ceiling across full Article 4.4 and transitional CbCR computations, not a fresh cap for each year or mechanism. The grace exception concerns DTA reversals, not a general allowance for every excluded DTL. Arrangements, retrospective choices or new tax enactments after 18 November 2024 do not qualify or contribute to the cap.
Acceleration is blocked and transfer relief cannot recycle excluded assets
Each year’s grace allowance is additionally limited to what would have reversed under the law, choices, accounting method and arrangement terms in force on 18 November 2024. Later acceleration cannot enlarge the permitted expense. Article 9.1.3’s other-tax-effects relief for asset transfers cannot include the excluded category 8.5 attributes that reversed or were not created. This stops recreating an excluded DTA through a transfer. Track the original amount, allowable rate, opening balances, actual and baseline reversals and cumulative amounts used across both tax calculations.
QDMTT qualification, switch-off and information
Related benefits can undermine qualified IIR/UTPR/QDMTT status. The package allows exceptional transitional self-certification for government-arrangement jurisdictions on the understanding that this guidance neutralises the relevant expense, or that QDMTT safe-harbour switch-off lets other taxing jurisdictions do so. A jurisdiction allowing excluded expenses without the authorised grace can trigger switch-off for its constituent entities, with QDMTT treated through the Article 5.2.3(d) credit method. Do not elect that QDMTT safe harbour when switch-off applies. Fill GIR section 3 under the Model Rules/Commentary, or the sole other taxing jurisdiction’s law where applicable, and provide the data needed to test switch-off, tax and CbCR eligibility, original assets, balances and grace cap. The source also describes further related-benefit/refund guidance and monitoring as work in progress at publication, including subnational and investment-promotion authorities.
Example 1: the grace period expires after two annual reversals
A 2023 DTA of 1,000 reverses by 100 annually from 2024 to 2033, with balances declining 1,000 to zero. The rate is already at or below the minimum, so no recast is needed. Profit before tax is 2,000 in 2024–2026; current taxes are 200/220/240 and deferred expense 100 each, giving pre-adjustment covered taxes 300/320/340 and ETRs 15%/16%/17%. Grace is 2024–2025 and its cap is 200. Both 100 reversals are permitted, so those two years pass the stated transitional ETR tests. In 2026 grace has ended: remove 100, leaving 240/2,000 = 12%, and the jurisdiction does not qualify for that safe harbour. Its transition year is 2026 and the same 100 is excluded from Article 4.4. The accounting DTA remains, but its reversal no longer supplies GloBE covered tax.
Example 2: using the full cap leaves nothing for the next year
The second example starts with the same 1,000 DTA but reverses 200 in 2024 and 100 annually from 2025 to 2032, closing at zero. In 2024, 2,000 profit, 100 current tax and 200 deferred expense give 300 covered taxes and 15% ETR: the entire 200 cap is used. In 2025, before adjustment, 100 current and 100 deferred tax give 200 and 10%. The remaining 100 reversal is disallowed because the cumulative cap has already been reached, despite 2025 still being inside the grace period. Covered taxes become 100 and ETR 5%; safe harbour fails and transition occurs in 2025. No extra 100 can be moved into the full GloBE calculation because both mechanisms share the ceiling. This example assumes the reversal facts stated; the separate anti-acceleration condition still governs real changes after the cutoff.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
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