The application of the GloBE rules is dependent on jurisdictions implementing Qualifying Income Inclusion Rules (QIIRs), Qualifying Domestic Minimum Taxes (QDMTTs) and  Qualifying Under-taxed Payments Rules (QUTPRs). If jurisdictions implement rules that aren’t classed as ‘qualifying’ this would impact on how the GloBE rules apply to the MNE group.

For instance, if an MNE had a low-taxed constituent entity (CE) in a jurisdiction that implemented a QDMTT, the CE would be subject to the QDMTT in that jurisdiction. The tax levied on the QDMTT would be available as a credit (assuming the QDMTT safe harbour did not apply) against any top-up tax levied under an IIR in a foreign parent jurisdiction.

However, if the domestic minimum tax that was levied was not ‘qualifying’ the GloBE rules would apply top-up tax under the IIR to the foreign parent (generally, unless the UTPR applied) . The tax levied under the domestic minimum tax would just be another covered tax for the purpose of calculating the ETR of the constituent entity.

Therefore, determining which IIRs, UTPRs and DMTs are qualifying is essential.