June 2026 Part A: scope
The second edition of Module Four Part A contains 39 pages on jurisdictional effective tax rate (ETR) and top-up amounts. The full module outline also lists substance-based income exclusion (SBIE), allocation, de minimis and DTT applicability, but those later topics are not fully taught in this Part A. ETR is calculated for each financial year and expressed as a percentage rounded to four decimal places, using adjusted covered taxes and GloBE income rather than the headline corporate rate.
The calculation sequence
Determine jurisdictional ETR, subtract it from the 15% minimum rate for the top-up percentage, and multiply by excess profits after SBIE. Add additional current top-up and subtract eligible QDMTT. The snapshot then allocates the resulting amount proportionately to entities with positive GloBE income; detailed allocation belongs to the later module part. This sequence separates ordinary current-year shortfall from historical recalculation amounts.
Multiple ETRs in one jurisdiction
Compute separately for ordinary CEs; investment or insurance-investment entities; each minority-owned CE outside a minority-owned subgroup or each such subgroup; each stateless entity; and each standalone JV or JV group. Special entities include investment entities, insurance-investment entities, minority-owned and stateless entities, as well as connected JV entities even where not group CEs. A country can therefore require several independent ETR computations, rather than one rate for every entity.
Ordinary and special-entity fractions
For ordinary CEs, ETR equals total adjusted covered taxes, including negative amounts, divided by total GloBE income or loss, multiplied by 100%. The same approach applies to each minority-owned entity or subgroup, standalone JV or JV group, and stateless entity using its own population. Investment and insurance-investment entity methods are reserved for Module Eight. Keep the numerator and denominator within the same tested population.
Positive, negative and nil cases
Positive taxes and positive income use the normal fraction; an ETR above 15% gives no top-up percentage and an ETR below it gives a shortfall. Negative covered taxes with positive income produce a deemed zero ETR and negative-tax carryforward adjustments. Where aggregate income is nil or negative, ETR is deemed 15% regardless of whether covered taxes are positive, negative or nil, but an additional current top-up may still arise. An apparent loss therefore does not automatically remove every top-up charge.
Top-up percentage and excess-profit floors
Top-up percentage is 15% minus the relevant ETR, floored at zero. Excess profits are aggregate GloBE income/loss minus SBIE, also floored at zero. The jurisdictional amount is percentage multiplied by excess profits, plus additional current top-up, minus QDMTT imposed for those entities and that financial year. A zero percentage or zero excess profit does not erase an independently added current top-up amount.
Loss-year permanent differences
Section 21(1) applies where aggregate GloBE income/loss A is negative, adjusted covered taxes B are negative, and B is lower than expected tax A multiplied by 15%. Additional current top-up equals A times 15% minus B. The rule addresses a permanent difference between local taxable income and GloBE income/loss in a loss year, rather than an ordinary 15%-ETR shortfall on positive excess profits.
The two-entity loss example
In a 15%-rate jurisdiction, CE1 has GloBE loss 500 and tax expense negative 150 due to enhanced deduction; CE2 has income 100 and tax 15. Combined income/loss is negative 400 and covered taxes negative 135. Expected tax is negative 60, so the additional current top-up is negative 60 minus negative 135, or 75. The table demonstrates why total GloBE loss need not imply zero additional tax.
Five historical recalculation triggers
Section 21(4) covers recalculations for the regulation 32 local-tangible-assets election, regulation 46 deferred-liability recapture, regulation 40(2) post-filing adjustments, regulation 40(8) unpaid current tax and regulation 48 recapture of deemed-distribution tax. Recalculate the relevant previous-year income and covered taxes where affected, then ETR and top-up. Additional current amount is recalculated prior-year top-up C minus original top-up D.
Tax refund in Year 4
The example originally has Year 1 income 100 and tax 15, giving ETR 15% and no top-up. A Year 4 reassessment reduces Year 1 taxable income to zero and refunds 15, leaving Year 1 GloBE income 100 but covered tax zero. Revised Year 1 top-up is 15. Year 4 itself has income 80 and tax 12, still ETR 15%; nevertheless its additional current top-up from the historical revision is 15.
Which domestic top-up amounts are deductible
Deduct QDMTT imposed by jurisdictional law for the relevant entities and year, including QDMTT/DTT on stateless entities. Exclude amounts contested in judicial or administrative proceedings, or found not assessable or collectible on constitutional or similar grounds or under a government agreement limiting liability. A previously excluded amount later determined payable for that year becomes includible. Domestic tax deductibility is therefore not established merely by the name of a levy.
The 5% jurisdiction example
A Singapore UPE has CEs in a 5%-corporate-tax jurisdiction A. Their GloBE income is 100, adjusted covered taxes 5 and ETR 5%. QDMTT imposed is 10. With no additional current top-up and the illustrated excess profits of 100, the MTT calculation is (15% minus 5%) times 100, or 10, minus QDMTT 10, leaving nil. This is a calculation example, separate from a safe-harbour election.
Why negative-tax carryforward exists
Permanent differences interacting with deferred-tax accounting can produce a negative ETR, a top-up percentage above 15%, or tax in a GloBE loss year. Negative tax carried forward (NTCF) defers tax in two situations: negative ETR with positive GloBE income, and a loss-year section 21(1) additional amount where an election is made. The mechanism moves the effect to subsequent profitable years; it is not a permanent exemption.
Automatic positive-income case and elected loss case
With negative aggregate covered taxes and positive aggregate GloBE income, the negative tax amount becomes NTCF and ETR is deemed nil. For the elected case, covered taxes B must be negative, GloBE income/loss A must be zero or negative, and B below A times 15%; the additional current amount becomes NTCF, excluding amounts attributable to loss carry-back. The source’s earlier section 21(1) trigger uses strictly negative income, while this election slide states zero or negative; those printed boundaries should be kept distinct.
Using the balance in a later profitable year
Deduct NTCF against a subsequent year’s positive aggregate covered taxes when aggregate GloBE income is positive. This lowers the subsequent jurisdictional ETR and can create top-up tax then. Keep an additions, utilisation and closing-balance schedule; neither a negative-income year nor a positive deferred-tax reversal alone is described as sufficient without the stated profitable-year conditions.
Example 1: positive income but tax loss
Year 1 has GloBE income 100, enhanced-deduction tax loss 300 and accounting deferred asset 45 at 15%. Without NTCF, ETR would be negative 45% and top-up percentage 60%. With NTCF, ETR is zero, top-up percentage 15%, top-up 15 and balance 45. Year 2 has GloBE income 300, taxable income zero after using the tax loss and covered taxes 45. Deducting NTCF 45 gives ETR zero and top-up 45; the balance is exhausted.
Example 2: GloBE loss and election
Year 1 has GloBE loss 100, tax loss 300 and deferred asset/negative covered tax 45. Expected covered tax is negative 15, creating additional current top-up 30. Election defers that 30 as NTCF, leaving Year 1 ETR deemed 15% and top-up nil. In Year 2, income 300 and covered taxes 45 normally give ETR 15%; deducting NTCF 30 leaves tax 15, ETR 5%, percentage 10% and top-up 30. The NTCF balance returns to zero.
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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