What the December 2023 guidance changes
Approved on 15 December 2023 and published on 18 December, this 43-page OECD guidance addresses six implementation issues: purchase price accounting, the transitional CbCR safe harbour, consolidated revenue and mismatched fiscal years, blended CFC tax allocation, early filing deadlines and simplified calculations for non-material constituent entities. It modifies Commentary rather than creating a stand-alone domestic tax. The article describes this edition; later guidance, elections and domestic implementation must be distinguished from its original rules.
Purchase price accounting and goodwill impairment
Consolidation reporting packages qualify as financial accounts even without separate financial statements. Ordinary GloBE calculations remove purchase price accounting adjustments, subject to the pre-1 December 2021 transaction exception where records are insufficient. For the transitional safe harbour, purchase price adjustments can remain only under the consistency condition: no CbC report for a fiscal year beginning after 31 December 2022 used data without those adjustments, apart from a legally required change. Goodwill impairment from transactions after 30 November 2021 is added back to pre-tax profit for the routine-profit test. For the simplified ETR test it is added back only if the financial accounts do not reflect a corresponding deferred tax liability reversal or deferred tax asset increase. This is a specific rule, not permission to make every ordinary GloBE adjustment to CbCR data.
Define each tested jurisdiction before choosing data
A jurisdiction containing ordinary constituent entities and two separate JV groups has three tested jurisdictions, rather than one pooled safe-harbour calculation. Within each tested jurisdiction, revenue, profit, taxes, payroll and assets must use the same type of qualified financial statements for all relevant entities, subject to the express NMCE and permanent-establishment exceptions. Different tested jurisdictions can use different permitted sources. Mixing consolidated reporting packages for one ordinary entity with separate statements for another in the same tested jurisdiction disqualifies that jurisdiction. A CbC report can therefore be qualified for one jurisdiction but not another. Reliable separate statements need not have been prepared specifically for a statutory or regulatory purpose.
Deferred tax, consolidation entries and unpermitted adjustments
When consolidated reporting packages supply pre-tax profit, associated deferred tax recorded only at parent consolidation level must also be included. The guidance illustrates both package-level and parent-level deferred tax; a separate-statement approach without purchase price adjustments cannot import the parent’s related deferred tax. Fields not used by the safe harbour may use other permitted CbCR sources. Do not retrofit transfer pricing adjustments into qualified data merely to align with local taxable income: a 5,000 adjustment reported in the 2025 consolidation package cannot be inserted into the 2024 package-based CbC figures. Financial-accounting income on a hybrid instrument remains income for safe-harbour purposes even if CbCR rules would ordinarily omit a tax dividend.
Groups without a CbCR filing duty and permanent establishments
A group within GloBE scope but without a CbCR filing obligation can still qualify using information that would have appeared in a qualified report, reported in the relevant GIR field under UPE-jurisdiction rules or OECD rules where appropriate. A permanent establishment uses its own qualified statements if available; otherwise permitted separate accounts may be prepared for regulatory, tax or internal reporting by the main entity. Allocate profit correctly between the main entity and PE so a loss is not duplicated. Tax imposed locally on PE income belongs exclusively to the PE. The substance-based income exclusion uses the applicable transitional percentages, not automatically the eventual 5% rates; for a 2024 year the guidance identifies 9.8% payroll and 7.8% assets.
Prior-year tax adjustments and cross-border taxes
Simplified covered taxes can include ordinary prior-year return-to-provision adjustments; uncertain-tax-position provisions are excluded. The transitional safe harbour does not generally require main-entity or parent taxes on foreign branch, CFC or hybrid income to be removed from that parent’s simplified tax expense merely because full GloBE rules would allocate them abroad. This can differ from a foreign jurisdiction’s full calculation. The later anti-arbitrage rules still apply: an ordinary allocation simplification must not be used to justify a deliberately duplicated tax or expense arrangement.
Three hybrid-arbitrage arrangements
For arrangements entered into after 15 December 2022, the guidance targets deduction/non-inclusion, duplicate loss or expense, and duplicate tax recognition. The remedy adds back the relevant expense to safe-harbour pre-tax profit or removes duplicated tax from the numerator to the extent the arrangement supports qualification. Deduction/non-inclusion arises where an investment or credit produces a financial expense without commensurate financial income or expected taxable income over its life; additional Tier 1 capital has a specific exception. Duplicate expenses can arise across financial statements or through a second jurisdiction’s tax deduction. Duplicate tax arises when the same tax expense supports covered-tax or simplified-tax calculations more than once without the corresponding income appearing in both financial accounts.
When the anti-arbitrage rules apply and their limits
The rules can involve JVs and other entities whose accounts supply the calculation, not merely entities in one tested jurisdiction. Entry after the cut-off includes amendments, transfers, changed performance such as reduced or ceased payments with growing liabilities, and changed accounting treatment. Taxable income offset by attributes with a valuation or recognition adjustment, or by a tax deduction without a corresponding financial expense, may not be commensurate income. The guidance prevents duplication without treating transparent-entity consolidation as inherently abusive: no duplicate adjustment is needed to the extent the same income is also included twice; within one tested jurisdiction one of two duplicate expenses may remain. Where constitutional or superior-law constraints prevent the original cut-off, a jurisdiction may instead use 18 December 2023.
Consolidated revenue for the EUR750 million threshold
Revenue follows ordinary economic inflows under the applicable accounting standard, before cost of goods sold and operating expenses, while discounts, returns and allowances can reduce revenue. Aggregate different revenue lines; include net realised and unrealised investment gains and extraordinary or non-recurring income. Investment losses offset gains only to the extent of those gains. Financial businesses can use net banking income or net revenue, including permitted net swap treatment. The nature of the business matters: a manufacturer’s ancillary interest outside ordinary revenue below operating expenses is not automatically added, whereas ordinary customer-financing interest and leasing revenue for a sales or leasing business are included.
Different financial and tax years
The GloBE fiscal year is the UPE’s fiscal year. For consolidated entities, follow the actual consolidation method: the group may include the CE year ending during the UPE year, or split straddling periods to match the UPE period. For unconsolidated NMCEs under Article 3.1.3 and JVs, use the entity financial year ending within the UPE year. Thus a UPE calendar year 2024 can use a CE year December 2023–November 2024. When the local tax year differs, use the method reflected in the financial accounts supplying financial accounting net income to determine covered taxes, rather than automatically forcing a calendar-year tax computation. The JV rule follows the same principle.
Blended CFC tax allocation and separate blending groups
For the limited period described in this guidance—years beginning by 31 December 2025 and not ending after 30 June 2027—an entity’s allocation key is attributable income multiplied by the positive difference between the blended CFC applicable rate and its relevant jurisdictional ETR. Allocated tax equals that key divided by the sum of all keys, multiplied by allocable blended CFC tax. Exclude CFC taxes when calculating the underlying ETR. Where a jurisdiction contains ordinary entities, JVs, minority-owned entities or investment entities with separate blending calculations, use each entity’s own blending-group ETR. Include all their allocation keys in the denominator even when their ETRs differ.
CFC allocation when a safe harbour avoids a full ETR
Under any of the three transitional CbCR tests, use the tested jurisdiction’s simplified ETR for the allocation key; a group electing de minimis or routine profits must still collect the extra tax data needed for this ratio. Under a QDMTT safe harbour, use QDMTT income and taxes and add QDMTT payable only where the blended CFC regime credits it on the same terms as other creditable covered tax. For other jurisdictions without a full Article 5.1 ETR, use the simplified tax method but take pre-tax profit from qualified financial statements rather than a qualified CbC report. Entities not eligible for a jurisdiction’s safe harbour still use their full GloBE ETR. Allocated CFC tax never raises the QDMTT ETR because QDMTT excludes it.
QDMTT allocation example and entities outside GloBE
With income 100, covered taxes 10 and substance exclusion 60, the ordinary ETR is 10%. Creditable QDMTT is (15%−10%) × (100−60) = 2. The ETR for the CFC allocation key is therefore (10+2)/100 = 12%, not 15%; no additional current top-up tax is assumed. A non-GloBE entity included in the CFC charge uses the ETR of the blending group in the same jurisdiction with the largest aggregate attributable income. Its key must remain in the denominator so its CFC tax is not wrongly assigned to GloBE entities. If no full or alternative group ETR exists there, calculate an aggregate ETR from the accounts of all relevant non-GloBE entities in that jurisdiction.
No filing or notification deadline before 30 June 2026
The ordinary GIR and notification deadline is 15 months after year-end, extended to 18 months for the transition year. The amendment adds an overriding floor: obligations for any fiscal year are not due before 30 June 2026. A six-month first year ending 30 June 2024 would otherwise be due 31 December 2025; a short later year January–February 2025 would otherwise be due 31 May 2026, ahead of the initial calendar-year return. The floor avoids both results. It is a filing and notification rule, not a universal change to domestic payment deadlines or a rolling extension for every later year.
Which entities qualify for NMCE simplification
An NMCE remains a GloBE constituent entity but is omitted from line-by-line consolidation solely for size or materiality. Actual consolidated statements must follow an acceptable standard, or an authorised standard adjusted for material competitive distortions, and be externally audited without a qualification concerning that exclusion. Deemed consolidation and a group consisting only of a main entity and PEs do not qualify. A PE is an NMCE only if its main entity is an NMCE. If the entity’s total revenue exceeds EUR50 million, its accounts used for CbCR must themselves follow an acceptable or authorised standard. Small size alone does not remove the entity from GloBE.
NMCE income and revenue equal total revenue
The filing entity makes an annual election for each NMCE separately. Both simplified GloBE income and GloBE revenue equal CbCR total revenue: no operating expenses are deducted. Revenue includes sales, services, royalties, interest, premiums, extraordinary income and investment gains, but excludes dividends from other constituent entities and other comprehensive income or equity revaluations. Taxes equal current-year accrued income tax, excluding deferred tax, non-current adjustments and uncertain-tax provisions. Apply UPE CbCR regulations, or surrogate-parent regulations where relevant; if no CbCR filing is required anywhere, use OECD Action 13 and implementation guidance. For a main entity reporting revenue 100, with 60 assigned to its jurisdiction and 40 to its PE, use 60 and 40 separately rather than counting 100 twice.
Combine elected NMCEs with ordinary entities and test the jurisdiction
Combine elected NMCE proxies with full GloBE figures for other constituent entities and non-elected NMCEs. Apply the simplified-calculations routine-profit, de minimis or ETR test, based on Articles 5.3, 5.5 and 5.1 respectively; these are not automatically the transitional CbCR tests. If any test succeeds, jurisdictional top-up tax is deemed zero. Otherwise perform ordinary GloBE calculations; the NMCE proxies cannot replace those ordinary calculations. In jurisdiction A, two NMCEs with total revenue EUR250,000 and accrued tax EUR50,000 produce a 20% ETR. In B, 52 ordinarily calculated entities have income EUR10 million and taxes EUR1.6 million; one elected NMCE adds income EUR100,000 and tax EUR10,000, giving EUR1,610,000/EUR10,100,000 = 15.94%. Both jurisdictions pass.
Monitoring and the conservative nature of the NMCE method
Using revenue as income while recognising only current accrued income tax generally enlarges the denominator and narrows the numerator, making the method conservative. It can omit some upward GloBE adjustments, but the guidance regards the risk as limited by entity size and the narrow use of these proxies. The Inclusive Framework plans to monitor changes to CbCR definitions and review the methodology no later than 2028. Keep the external-audit exclusion evidence, entity elections, source accounts and jurisdictional test calculation; an NMCE safe-harbour election is an annual computational choice, not a permanent exemption.
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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