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Section 2 of the Fourth Set of OECD Administrative Guidance (issued on June 17, 2024) provides details on the use of GloBE carrying values and the impact that these will have on the GloBE ETR calculation.
 
In particular, when calculating the deferred tax expense for GloBE purposes (which is included in adjusted covered taxes to determine the GloBE ETR), the deferred tax expense in the accounts will be excluded and a separate GloBE deferred tax calculation is required. This will be based on the substituted GloBE carrying value and determined using the financial accounting standard used for GloBE purposes.
 
Constituent Entities will therefore be required to maintain accounting records to support the computation of GloBE Income or Loss and Total Deferred Tax Adjustment Amount by reference to the GloBE carrying values.
 
General
 
The GloBE Rules generally rely on the amounts reflected in the financial accounts of a Constituent Entity used in the preparation of Consolidated Financial Statements of the UPE.
 
As such, when calculating the adjusted covered taxes of an entity the deferred tax is based on deferred tax expense accrued in the financial accounts.
 
However, there are cases where the GloBE Rules require/permit a Constituent Entity to:
 
-determine its GloBE Income or Loss and Adjusted Covered Taxes using a GloBE carrying value that is different from the carrying value reflected in the financial accounts; or
 
-determine its GloBE income or loss by substituting an amount contained in the financial accounts for another amount (eg under the Stock-based compensation election where the tax deductible amount is included for GloBE purposes rather than the amount expensed in the financial accounts).
 
In both of these circumstances there will be a requirement to consider a recalculation of the deferred tax expense based on the values used for GloBE purposes.  

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Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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