Three different forms of relief in the original package
Approved on 15 December 2022, this thirty-page OECD package contains the original transitional CbCR safe harbour, a permanent simplified-calculations framework with a non-material-entity example, and transitional penalty relief. It responds to disproportionate compliance burdens in high-tax or low-risk jurisdictions while systems are being built. A safe harbour deems specified top-up tax zero; simplification reduces the calculations needed; penalty relief addresses reasonable filing mistakes. None automatically removes group-wide GIR duties. The original window is years beginning by 31 December 2026 and not ending after 30 June 2028. Later guidance can amend that window and conditions; this article preserves the 2022 package rather than claiming its timetable is the final current version.
The three transitional jurisdiction tests
A tested jurisdiction qualifies if any one test is met: qualified CbCR total revenue below EUR10 million and pre-tax profit below EUR1 million; simplified covered taxes/pre-tax profit at least the transition rate; or pre-tax profit no greater than GloBE SBIE. Rates are 15% for years beginning in 2023–2024, 16% for 2025 and 17% for 2026. The de minimis test uses the current qualified report, unlike ordinary GloBE’s three-year average. Losses can meet it if revenue also meets the limit. Zero profit or a loss automatically satisfies the routine-profit comparison without calculating SBIE. A positive-profit routine test requires the full Article 5.3 SBIE, including relevant Commentary and guidance, and its information in GIR. A failed simplified ETR, such as 10%, cannot be reused as the full GloBE ETR to compute tax.
Qualified reports and the tax numerator
Use a filed CbC report prepared from qualified financial statements: UPE consolidation accounts; reliable separate accounts under acceptable or authorised standards; or accounts used for CbCR for entities omitted from consolidation only for size/materiality. The CbCR is a risk proxy, not a tax-assessment base. Extract revenue/profit directly from it, but use financial-statement income tax expense, including deferred taxes and below-the-line covered levies, for taxes. Remove non-covered taxes and uncertain tax positions. Cash tax paid and current accrued CbCR tax alone are not the transitional numerator. The original 2022 package generally disregards other deferred adjustments and CFC/main-entity allocations; later Article 9.1 guidance adds specific restrictions and must be checked. Do not mix this simplified expense numerator with the different NMCE current-tax approach.
Held-for-sale entities and jurisdiction mismatches
Held-for-sale entities absent from CbCR can benefit when their GloBE jurisdiction qualifies, but de minimis is unavailable if their revenue plus the jurisdiction’s CbCR revenue reaches EUR10 million. They are not added to routine-test SBIE; neither are excluded entities. If a CE’s CbCR and GloBE locations differ, its payroll/assets are excluded from the routine-test SBIE in both jurisdictions. Ultimately eligibility follows GloBE location: CbCR residence in a qualifying jurisdiction does not rescue a CE located under GloBE in a non-qualifying one. Authorities can challenge materially unreliable facts under Article 8.2.2; the label qualified report alone is not immunity from review.
Once out, always out and deferred transition
If a jurisdiction has not used the safe harbour in a year when the group is subject to GloBE, it cannot enter in a later year. The exception is a jurisdiction where the group previously had no constituent entity, such as a new 2024 incorporation after none in 2023. An audit finding incorrect reliance brings full rules into that and later years. Correctly protected years do not generate current or additional top-up through later recalculation. Article 9.1.1 transition and the GloBE loss election move to the first unprotected year; Article 9.1.2 restrictions still operate during safe-harbour years. Asset-transfer transition has its stated disposing-jurisdiction/taxable-gain qualifications. Group-wide Articles 9.2–9.4 relief periods do not extend merely because one jurisdiction uses a safe harbour.
Joint ventures, minorities and multi-parented groups
Test a JV and its subsidiaries as a separate MNE group using qualified financial-statement revenue/profit rather than absent CbCR data. Do not blend it with normal CEs or another JV merely because they share a jurisdiction. Minority-owned CEs, unlike their separate full-GloBE ETR treatment, remain blended in the transitional CbCR test and can benefit with the jurisdiction. A multi-parented group needs one qualified report covering the combined groups; separate or incomplete reports disqualify it. Stateless CEs are excluded; a transparent entity with all income allocated to PEs or owners may have no remaining income to test, but that is different from giving a stateless entity the safe harbour.
Tax-neutral UPEs and distribution elections
A flow-through UPE jurisdiction cannot use the safe harbour unless all UPE ownership interests are held by qualified Article 7.1 persons, subject to the specified complete-PE allocation treatment. Reduce UPE pre-tax profit and related taxes for qualifying attributed income; otherwise the mismatch between stateless CbCR and GloBE creation-location income prevents relief. A deductible-dividend UPE similarly reduces eligible distributed profit and taxes under Article 7.2 and supplies the same evidence as outside the safe harbour. An Article 7.3 eligible-distribution-tax-system election affects all local CEs and excludes that jurisdiction from the transitional CbCR regime for the remaining transition. Without that election, it can qualify normally. Decide between regimes; do not combine both benefits indiscriminately.
Investment entities and unrealised ownership losses
Non-transparent investment and insurance-investment entities generally retain separate Articles 7.4–7.6 GloBE calculations while their owner and investment jurisdictions can still qualify. For safe-harbour tests, put their revenue, profit and taxes only in direct CE-owner jurisdictions in ownership proportions, excluding outside owners’ shares and avoiding double counting. A separate calculation is unnecessary where all CE owners share the investment entity’s jurisdiction and no 7.5/7.6 election applies. Five-year elections and four-year undistributed-income accounts continue; later distributions can be taxable even if underlying income appeared in a protected year. Remove a jurisdiction’s net unrealised non-portfolio ownership fair-value loss if it exceeds EUR50 million, including impairment net of gains/reversals. A loss ≤EUR50 million or net gain is not adjusted, and taxes are not adjusted. The example’s impairment 80 and reversal 80 leave zero net loss.
Permanent simplified-calculation framework
The permanent framework permits agreed alternative income, revenue or tax calculations, not any shortcut a group designs itself. Pass routine profit ≤full SBIE, ordinary Article 5.5 average revenue below EUR10 million/income below EUR1 million or loss, or ETR ≥15%. It deems ordinary current top-up zero but does not remove additional current top-up, including Article 4.1.5 consequences. Simplifications must reproduce full-rule outcomes or otherwise preserve integrity with justified compliance savings. The original examples describe omitting an unnecessary portfolio-dividend adjustment where de minimis already passes, and accepting limited proxy differences without systemic risk. Domestic law under Article 8.3 and required GIR information still apply. The 2022 text describes ongoing development, including a future QDMTT safe harbour, rather than an already complete menu.
NMCE eligibility relies on external audit and reliable accounts
An NMCE is omitted from audited consolidated statements only for size/materiality and includes its PEs. Management’s quantitative and qualitative materiality assessment must be supported by the external auditor; unaudited consolidation or statements prepared solely for GloBE do not suffice. The accounts supplying the simplified data must be those the auditor relied on to establish immateriality. For NMCE revenue exceeding EUR50 million, acceptable or authorised accounting standards are required. Small size does not exempt a CE entirely from GloBE. The conservative NMCE method is intended to avoid expensive alignment of separate local/management systems while protecting integrity.
NMCE income is revenue, while taxes exclude deferred expense
For an NMCE, simplified GloBE income and revenue both equal total revenue under the relevant UPE or surrogate-parent CbCR regulations, or OECD Action 13 guidance if neither has domestic regulations. Revenue includes sales, services, royalties, interest, premiums, extraordinary and investment gains, but excludes intragroup CE dividends and other comprehensive-income/equity revaluations. Do not deduct current expenses. Simplified taxes are current income tax accrued under those regulations, excluding deferred expense, non-current adjustments such as historical transfer pricing and uncertain-tax provisions. Combine eligible NMCE proxies with other CEs’ full or authorised simplified data to test the jurisdiction. Broad income and narrower tax should conservatively lower ETR. The original package proposes methodology review by 2028 and monitoring of CbCR changes.
Penalty relief is a good-faith standard, not tax forgiveness
The original transitional penalty understanding says no GIR filing penalties should apply where the administration considers reasonable measures taken to apply GloBE correctly. Domestic rules and circumstances define reasonableness. Good-faith systems, full disclosure, a reasonable factual mistake, isolated mathematics/transposition errors, uncertainty resolved by a reasonable interpretation or no reduction of current/future tax may support relief. It is not automatic for every initial-year mistake and does not cover avoidance, fraud or abuse. Errors must still be corrected and unpaid top-up tax and applicable interest paid under domestic law. Preserve evidence of systems, interpretation and disclosure; penalty protection is separate from whether a safe harbour reduces the tax.
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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