The first administrative guidance package
Approved on 1 February 2023, this 111-page OECD package expands the original GloBE Commentary across scope, income and taxes, insurance, transition and qualified domestic minimum top-up taxes. It explains how the common approach should operate under domestic implementation, subject to domestic law. Its examples and historical GILTI rates belong to this edition. Later guidance on safe harbours, CFC allocation and transitional deferred tax restrictions must be considered separately; this article does not present the February 2023 package as the final consolidated rules.
Rebase local-currency thresholds annually
Domestic thresholds expressed outside euros are rebased using the preceding December average ECB reference rate, or the domestic central bank rate where the ECB does not quote the currency or legal/practical obstacles prevent its use. Apply the rebased amount to years beginning in the following calendar year. The covered thresholds include EUR 750 million group revenue, EUR 1 million permanent differences and tax adjustments, EUR 10 million/EUR 1 million de minimis revenue/profit, EUR 50 million tangible assets, EUR 75 million material competitive distortion and EUR 50,000 fines. Historical revenue years each use their own preceding December rate: testing 2026 revenue history uses December 2021, 2022, 2023 and 2024 for 2022–2025 respectively. This rebases statutory thresholds; it does not prescribe translation of financial-statement amounts.
Deemed consolidation follows the accounting standard
When a parent does not prepare authorised consolidated statements, ask what statements would have been required if an authorised standard were compulsory. The group can choose among authorised standards in the UPE jurisdiction, with required material-distortion adjustments. The test does not rewrite the standard: an investment entity permitted to report investments at fair value is not forced to consolidate them line by line merely because it owns a majority. Conversely, omission solely for immateriality or held-for-sale status does not remove an entity from the GloBE group. Central, state and local government and their administrations or agencies carrying out government functions are not Entities.
Four consolidation examples explain the boundary
A private non-investment parent with no reporting obligation must still deem-consolidate its headquarters, operating companies and two subsidiary chains; a lower headquarters’ published statements do not limit the upper group. An IFRS investment fund consolidates its service company but values the headquarters and operating investments at fair value, so it does not hold a GloBE controlling interest in those investments. The same result holds when that investment fund prepares no statements. A non-investment headquarters with no statements generally deem-consolidates its operating subsidiaries, but can rely on another authorised standard that does not require consolidation, after relevant adjustments. The diagrams therefore distinguish accounting control from simple percentage ownership.
Trace consolidated deferred tax to the entity
Current and deferred tax must use the same accounting basis as the entity’s GloBE income. Deferred tax recorded only in group consolidation is included where it can reliably and consistently be traced to the constituent entity, including Article 3.1.3 cases. Exclude amounts attributable to purchase accounting or excluded income and expenses. The purpose is to capture timing differences between the accounting standard supplying GloBE income and local taxable income, not to combine a separate-statement numerator with a consolidated-income denominator.
Sovereign wealth funds that qualify as Governmental Entities
A qualifying sovereign wealth fund is wholly government-owned, principally manages or invests government assets rather than conducting a trade or business, reports annually and is accountable to government, distributes earnings to government and returns assets to government on dissolution. Such a fund is not a UPE or part of an MNE group and is not deemed to hold controlling interests in its investments. Test the underlying businesses’ UPE and group status without that ownership link. This prevents otherwise separate sub-threshold government businesses from being aggregated merely because a qualifying fund consolidates them; it does not exempt every government-owned commercial company.
Excluded subsidiaries and combined activities
The 95% ownership route allows exclusive or almost exclusive asset-holding/investment activity, ancillary activity, or a combination of those permitted activities. Borrowing from third parties to acquire assets, including operating-company interests, is asset holding or investment for the excluded parent’s benefit; it is not automatically commercial operation. The separate 85% route requires substantially all income to be excluded dividends or equity gains/losses. Assess the entity together with all its PEs for activity and income tests. If the combined entity qualifies, its PE activities are excluded too. Ownership thresholds alone are insufficient without the activity or income conditions.
Non-profit organisations: the ancillary-activity bright line
For NPO subsidiaries, aggregate the revenue of all group entities after removing the NPO and entities independently excluded under the relevant asset-holding, ancillary or dividend/equity-income rules. If the remaining revenue is below the lower of EUR 750 million, adjusted for a non-12-month year, and 25% of group revenue, activities of 100%-owned NPO subsidiaries are deemed ancillary. The deeming does not depend on their actual trading activities. A subsidiary not wholly owned cannot use it. If the limit is reached, subsidiaries must qualify independently or remain in GloBE scope. Include PE revenue with its main entity. A government-funded organisation meeting the NPO definition can also use this rule.
Cost-based intragroup transactions still require arm’s length
Recording an intragroup asset transfer at the disposing entity’s carrying value does not switch off Article 3.2.3. Cross-border disposing-entity GloBE income still follows the arm’s-length principle even if the seller records no gain and the buyer records cost. This edition identifies further buyer-side guidance and simplification as future work to avoid double taxation; it does not supply an unrestricted cost-basis exemption.
Five-year election for effective net-investment hedges
A filing entity can elect for five years to exclude entity-level foreign-exchange gains or losses from a hedge of a non-portfolio ownership interest where the hedge is effective under the consolidated accounting standard and its result appears in consolidated OCI. Remove associated covered tax as well. If treasury issues the hedge and passes its effect to the investment holder through an intragroup loan, make the adjustment at the holder, not treasury. In the example, an external euro loan loses USD 100, offset at treasury by the intragroup loan; the holder records profit 900 instead of 1,000. Excluding its 100 hedge loss restores GloBE income 1,000. With tax 250, both treasury and the holder jurisdiction have 25% ETRs.
Debt and equity must be classified consistently
An instrument issued and held within the same group must use the issuer’s debt/equity classification for both parties if their accounting classifications differ. This prevents the issuer deducting a payment while the holder excludes it as a dividend, including within one jurisdiction where Article 3.2.7 may not apply. For a compound instrument, only amounts relating to the equity component can be excluded dividends; coupons on the liability component remain income to the holder. If the issuer treats the instrument as debt, separately consider the intragroup-financing integrity rule in Article 3.2.7.
Debt release: three limited rescue routes
A filing entity may elect to exclude released-debt income where statutory insolvency/bankruptcy proceedings are court-supervised or an independent administrator is appointed; where independent professional advice supports that the debtor would become unable to pay debts within 12 months without third-party release; or where liabilities already exceed asset fair value. The first two routes cover connected and third-party debts released under the same rescue arrangement. The third covers only third-party debt and only the lower of the net-asset shortfall and reduced domestic tax attributes. Related releases need not share one legal document but must objectively form one rescue plan. Only legally waived debts after an administrator’s appointment qualify under that route.
Align taxes with the elected debt-release exclusion
For the elected qualifying portion, exclude both released-debt accounting income and the associated current tax and deferred tax caused by reduced domestic tax attributes from GloBE income and adjusted covered taxes respectively. Non-qualifying portions retain ordinary treatment. A domestic exemption alone does not establish qualification, and a routine related-party cancellation is not automatically corporate rescue. The connected-person test refers to OECD Model Article 5(8); the 12-month test is cash-flow insolvency supported by independent advice, not solely a balance-sheet test. The guidance addresses the debtor and leaves creditor treatment for further work.
Pension funds and direct pension payments differ
For funded plans, GloBE pension expense equals net contributions to the pension fund. Remove accrued fund expenses or retained fund income and replace them with contributions; include a surplus when the fund distributes it to the company. Using positive accrued income, negative accrued expense and positive contributions, the adjustment is −(accrued income/expense + contributions). Direct pension payments to former employees without a pension fund are outside this adjustment and follow the timing and amount of the accrued accounting expense. Deferred tax must not preserve a timing difference eliminated by the GloBE pension adjustment.
Pension examples across three years
With operating income 100 and year-one accrued fund expense 20 but no contribution, taxable income is 100 and current tax 15; the accounting DTA of 3 is ignored for GloBE, which adds 20 back and reports income 100, tax 15 and ETR 15%. In year two, contribution 15 with no accrued expense reduces GloBE income to 85; current tax is 12.75 and the DTA reversal 2.25 is ignored, again giving 15%. In year three, fund earnings 40 and liabilities 10 create retained net pension income 30. Remove 30 from accounting profit 114.25, add back tax 15 and deferred expense 0.75, and obtain GloBE income 100 and covered tax 15. Retained pension surplus does not create artificial GloBE income.
Taxes on actual and deemed distributions
Article 4.3.2(e) allocates withholding and net-basis taxes incurred by a direct constituent-entity owner on ownership distributions to the distributing entity. This also covers distributions not called dividends in the recipient’s tax law. Deemed distributions, including taxes on undistributed earnings or capital such as consent dividends, qualify where the underlying interest is equity for both financial accounting and the taxing jurisdiction’s tax law. CFC taxes follow their separate rule, rather than being reclassified as deemed-distribution tax.
Excess negative tax expense is carried forward
Permanent differences can create negative adjusted covered taxes exceeding 15% of a GloBE loss, or a negative ETR on positive income. The administrative procedure is an annual election in Article 4.1.5 loss/no-income cases and mandatory where Article 5.2.1 would produce a top-up percentage above 15%. Remove excess negative tax from current taxes and establish a group-level carry-forward. In later years with positive income and positive taxes, reduce taxes by the balance, never below zero, and reduce the balance accordingly. Loss carryback amounts must be dealt with currently and cannot enter the carry-forward. Keep the attribute even after selling every entity in the jurisdiction; use it if the group returns later.
Two negative-tax examples show the timing
A GloBE loss 100 with domestic loss 300 gives expected tax−15 and actual tax−45. Elect to carry forward 30 without year-one additional tax. Year-two income 300 and reversal 45, less the 30 carry-forward, gives covered tax 15, ETR 5% and top-up 30 in the example. Separately, year-one income 200 and domestic loss 100 create negative tax 15. Mandatory removal sets covered tax 0, so top-up 30 is paid and 15 carried forward. Year-two income 100 reverses the DTA 15, but the carry-forward removes it, leaving zero tax and top-up 15. Deferral therefore changes timing; it does not permanently forgive the permanent difference.
Substitute loss DTA for certain CFC systems
A substitute loss carry-forward DTA can apply where foreign income must offset domestic losses before foreign credits, a domestic loss is consequently reduced, and credits can later offset tax on income included in GloBE. It equals the lower of permitted carried credits and the original domestic loss times the domestic rate, recast at 15%. Include deferred expense when created and reversed only to the extent credits offset tax on GloBE income. An equivalent loss-recapture/resourcing mechanism can qualify but cannot be more generous than a 15% loss DTA. This edition does not automatically extend the mechanism to PE losses.
CFC substitute-loss examples
At a domestic rate 17.5%, domestic loss 100 offset by CFC income 100 taxed abroad 20 leaves no domestic loss and credits 20 carried. The substitute DTA is 15. In year two, domestic income 100 uses credits 17.5, leaving 2.5; the DTA reversal adds covered tax 15 and no top-up arises. Under a recapture system without credit carry-forward, year one foreign tax 30 and domestic loss 100 similarly create DTA 15. Year two foreign income 200 and domestic 100 create gross tax 52.5; ordinary foreign credit 35 and additional recapture credit 17.5 eliminate cash tax, and the DTA reversal adds 15. If recapture creates no additional credit, there is no corresponding addition to covered taxes.
Equity investment inclusion election
The five-year jurisdictional election covers all non-portfolio ownership interests and cannot be revoked for an interest whose loss has been included while the election applies. It includes relevant taxable fair-value movements or impairments, equity-method transparent-entity profit/loss, and taxable disposition gain/loss, with corresponding current and deferred taxes. A disposition gain relieved by participation exemption is excluded to the extent relieved. The election restores numerator/denominator symmetry rather than granting a hypothetical tax credit for an excluded loss. Qualified ownership interests follow the separate flow-through rules, not this ordinary inclusion treatment.
Qualified flow-through tax benefits and the investment cap
Credits flowing through a transparent entity retain their character: QRTC is income, other credits generally reduce taxes. The special qualified-interest rule requires a non-consolidated transparent investment whose expected return at inception, excluding non-QRTC credits, is below the investment cost. Qualifying non-refundable credits and tax-loss benefits returning capital can be added back to taxes to offset an accounting tax reduction, but only while reducing investment to zero. Reduce the cap for credits, deductible loss times the owner’s statutory rate, distributions and sale proceeds. Later receipts after the cap is exhausted reduce covered taxes; distributions, sale proceeds and QRTCs do so only up to prior positive flow-through benefits. Record the expected-return assessment and annual cap use.
Original blended CFC allocation and two examples
This edition’s special method covers regimes blending all CFC income/loss/credits at an applicable rate below 15%, excluding systems also blending domestic income. For years beginning by 31 December 2025 and ending by 30 June 2027, allocate total CFC tax by attributable income × (applicable rate−GloBE ETR), with a zero key if ETR reaches the applicable or minimum rate. Compute ETR without CFC taxes and include QDMTT only if creditable on the same terms as other covered tax. At 13.125%, incomes 100/50/25 and ETRs 10%/20%/5% give keys 3.125/0/2.031, dividing tax 20 as 12.12/0/7.88. If A is split between a non-CE with attributable 25 and CE with 75, the non-CE’s 3.03 is excluded, the CE receives 9.09 and C 7.88. Later guidance refines alternative ETRs and blending groups.
Insurance investment entities: distribution method and parent status
Insurance investment entities can elect the Article 7.6 taxable-distribution method, under which timely distributions within the four-year period reduce top-up exposure. Reasonably expected minimum taxation counts both tax on the owner’s distribution and tax paid by the investment entity on the distributed income. Income taxed as realised at owner level in the same year can be a deemed distribution. An intermediate investment-entity owner does not include a distribution, preserving neutrality. Insurance investment entities are also excluded from intermediate-parent and partially-owned-parent definitions, like ordinary investment entities; they do not become IIR parents merely through the ownership chain.
Restricted Tier One capital and policyholder liabilities
Restricted Tier One insurance capital receives the Article 3.2.10 treatment of bank Additional Tier One capital where prudential instruments convert to equity or are written down on specified triggers and absorb crisis losses. Distributions are issuer expenses and holder income. For unit-linked securities, if dividends or equity gains/losses are excluded, the economically matching policyholder reserve movement, net of management fees, is also excluded as an expense. Otherwise the group would remove investment income yet keep the offsetting liability expense, artificially increasing its ETR. Ordinary related expenses remain subject to the usual simplified rules.
Portfolio-dividend election and mutual insurers
Any constituent entity, not only an insurer, can elect for five years to include all portfolio-shareholding dividends, avoiding the short/long holding-period distinction and matching insurance reserve adjustments. Regulated wholly policyholder-owned mutual insurers are deemed to meet the mark-to-market and minimum-rate condition for Article 7.5 transparency of controlled investment or insurance investment entities. The election covers all that owner’s interests in the selected entity. In the example, fund income 100 and a matching policyholder liability 100 would otherwise sit in different GloBE entities. Transparency allocates the fund’s 100 to the insurer, offsets the liability and leaves both entities’ GloBE income zero.
Pre-existing credit DTAs at transition
Article 9.1.1 imports reflected or disclosed tax-credit carry-forward DTAs despite the normal Article 4.4.1(e) exclusion, subject to Article 9.1 restrictions. Where the domestic rate is at least 15%, recast DTA as accounting DTA ÷ domestic rate ×15%; below 15%, do not uplift it. Use the rate before transition and reapply the formula to remaining credits if the rate later changes; the remeasurement itself is not covered deferred expense. Earlier refundable credits recorded as income generally do not reduce covered taxes when settled, whether or not QRTC. Imported attributes are not subject to the specified ordinary deferred-tax adjustments or recapture, and can include unrecognised DTAs. Later restrictions on specified pre-transition arrangements remain separate.
Credit-DTA examples and their limits
A pre-transition credit 10 at a 20% domestic rate becomes a GloBE DTA 7.5, whether generated from foreign withholding tax or qualifying investment expenditure. If a pre-transition non-QRTC credit 10 was recognised as income rather than a DTA, settling it against cash tax in 2027 does not reduce covered taxes under this guidance. These are transition protections for existing attributes, not a rule that newly generated non-QRTCs never reduce tax. The source contains a self-referential numbering typo in the second example; the substantive contrast is with the preceding DTA example.
Pre-transition asset transfers are interpreted broadly
Article 9.1.3 addresses non-inventory transfers after 30 November 2021 and before transition between entities that were already in the same group. It does not target acquisitions through which an entity first joins the group. Asset transfer includes sales, capital leases, sale-like licences, controlling-interest sales, front-loaded royalty/rent prepayments, total-return swaps transferring accounting assets, migrations and fair-value accounting changes, including deemed transfers within one entity. The disposing entity’s pre-transition accounting recognition controls even if legal transfer or buyer recognition occurs later. A lease, licence or swap with matching income and expense in the same years is outside this rule.
Carry historical value forward and prove taxed gains
Start with the seller’s carrying value, then adjust for subsequent capital expenditure, depreciation and amortisation before transition; do not freeze the value at the transfer date. Ordinarily carry pre-existing DTAs/DTLs forward, appropriately recast, and disregard those created by the transfer. A buyer can recognise a DTA for proven tax paid or relevant other tax effects, including a loss DTA reversed or not created because of the gain, and attributable allocated covered taxes. The cap is 15% of the tax-basis/GloBE-value difference. Creation does not reduce current covered taxes; reverse the DTA proportionately as asset value declines. If a full 15% DTA would otherwise be available, fair-value book carrying value can be used instead for later GloBE calculations.
Seven asset-transfer examples preserve the tax history
The examples transfer an intangible with book value EUR 10 million and price/tax basis EUR 110 million. With no seller tax, no new DTA survives. Tax 20 million on gain 100 supports DTA 15 million. Where old tax basis is zero and old DTL 2 million, carry DTL 1.5 million and recognise new DTA 16.5 million, net 15 million; without tax, only the old DTL survives. Gain taxed at 10% supports DTA 10 million. Tax 8 million plus a forgone loss DTA 2 million likewise supports 10 million; later sale 110 creates GloBE gain 100 and tax 10, ETR 10%. An existing loss 100 million recast from DTA 20 million to 15 million can support DTA 15 million despite no cash tax. In the fair-value case, ten-year amortisation 11 million is adjusted to 1 million, with DTA reversal 1.5 million per year. After two years, sale 100 gives GloBE value 8, gain 92, accounting gain 12 and residual DTA 12 million; the 80 million gain difference is covered at 15%.
QDMTT qualification requires functional equivalence
A domestic minimum tax must follow GloBE architecture and reliably produce consistent outcomes without systematically lowering incremental tax; stricter rules can qualify. Qualification is assessed against the domestic tax system and multilateral review, and benefits related to GloBE/QDMTT cannot refund the charge directly or indirectly. Qualified imputation-tax credits are distinguished. The regime must cover domestic GloBE entities of in-scope groups, including domestically exempt entities in its calculations, but may extend to smaller or purely domestic groups. The legal charge can fall on one domestic taxable entity or use joint liability, provided it is enforceable. This February edition envisaged further review and QDMTT-safe-harbour work rather than establishing the later safe harbour.
QDMTT scope, ownership and separate calculations
QDMTT generally imposes the whole jurisdictional top-up amount, not merely a foreign parent’s ownership share; this edition also permits a regime limited to groups whose domestic entities are wholly UPE/POPE-owned throughout the year. Minority-owned constituent entities, JVs/JV subsidiaries and investment entities need separate ETR/top-up computations. A jurisdiction can choose not to impose its QDMTT on a JV, leaving that tax for GloBE, or charge a domestic CE for the JV amount. Deduct QDMTT at jurisdiction level before allocating remaining GloBE tax, rather than matching entity-by-entity liabilities. Foreign PE income is excluded and transparent-entity income follows GloBE allocation, including to foreign owners.
QDMTT accounting, currencies and covered taxes
A permitted local accounting standard can differ from the group standard but must prevent material distortion; the group-wide EUR 75 million distortion threshold is not automatically appropriate to one domestic jurisdiction. Use the GIR currency-translation paradigm for underlying calculations, although final GIR numbers may be translated to local filing currency at one rate. Income and tax adjustments generally mirror GloBE, with stricter disallowances or omission of domestically irrelevant provisions permitted. Exclude domestic parent/main-entity taxes allocated abroad and foreign-owner CFC or foreign-main-entity PE taxes allocated inward, preserving domestic priority. A regime can exclude all domestic tax on foreign passive income instead of retaining the excess allowed under Article 4.3.3. IIR and UTPR taxes cannot increase QDMTT covered taxes.
QDMTT tax formula, exclusions and transitional administration
QDMTT must coordinate negative-tax treatment with GloBE and must not subtract itself in its formula. Its rate must be at least 15%. A substance carve-out or de minimis exclusion is optional, but cannot be more generous than GloBE; narrower payroll/assets, lower percentages and no transitional uplift are possible. A de minimis election uses average revenue/profit and equal or lower limits. Reorganisation provisions are needed where locally relevant, including historical target values and intragroup gains. Import the same Article 9.1 deferred starting point and anti-abuse rules. The initial-international-activity UTPR exclusion and extended first-year GIR deadline need not apply to QDMTT. Elections generally align, subject to permitted stricter exceptions such as omitting a loss election. Domestic filing should coordinate with GIR and the then-agreed safe harbours to avoid unnecessary duplicate calculations.
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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