Qualified Refundable Tax Credits are a key aspect of the Pillar Two GloBE rules and provide favourable treatment for certain tax credits.

Whilst still reducing the GloBE effective tax rate (ETR), they have less of an impact than other tax credits. For more information on why this is generally the case, see Qualified Refundable Tax Credits.

It should also be noted that Qualified Refundable Tax Credits are not always more beneficial under the GloBE rules than other tax credits (eg see When is a Qualifying Refundable Tax Credit Not Beneficial?). However, in general they will usually provide the most effective outcome. 

Without global consensus on which tax credits qualify as Qualified Refundable Tax Credits, there is the potential for these to drive a wedge through the whole Pillar Two system. 

In this article we look at why the correct determination of which tax credits are classed as Qualified Refundable Tax Credits is so important and the significant risks to the application of the Pillar Two rules they potentially pose.