Tax incentives are a key determining factor for the Pillar Two GloBE effective tax rate (ETR).
Not all tax incentives have the same impact on the GloBE ETR/top-up tax, as is shown in this table.
| Tax Incentive | Type | Impact of the GloBE Rules | Effect on GloBE covered tax | Effect on GloBE income |
|---|---|---|---|---|
| Income-based incentive | Full exemption | Very likely | Decrease | |
| Income-based incentive | Partial exemption | More likely | Decrease | |
| Income-based incentive | Reduced rate | More likely | Decrease | |
| Expenditure-based incentive | Tax allowance | More likely | Decrease | |
| Expenditure-based incentive | Bonus depreciation/accelerated depreciation: tangible assets | Unaffected | No recapturing | |
| Expenditure-based incentive | Bonus depreciation/accelerated depreciation: short lived intangibles | Less likely | Recapturing may apply | |
| Expenditure-based incentive | Bonus depreciation/accelerated depreciation: other assets | More likely | Recapturing may apply | |
| Expenditure-based incentive | Qualifying refundable tax credit | Less likely | Increase | |
| Expenditure-based incentive | Other tax credit | More likely | Decrease |
Global tax incentives for intellectual property (IP) have grown significantly in recent years. The impact on any top-up tax will depend (amongst others) on the type of tax incentive, jurisdictional blending and the substance-based income exclusion.
Our Global IP Tax Incentives Tool provides high level analysis of IP tax incentives globally, including the tax rate reduction.
Choose up to 4 jurisdictions to compare the respective regimes.
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