Tax Credits & Substitute Loss Carry Forwards

Tax Credits and Deferred Tax

Under Article 4.4.1(e) of the OECD Model Rules, deferred tax expenses arising from the generation and use of tax credits are ignored for the purposes of calculating covered tax. Therefore, any deferred tax assets or liabilities and the impact of them unwinding are removed from covered taxes.

This is necessary as the deferred tax attributes arising from tax credits could distort the Pillar Two GloBE ETR.

Example: Deferred Tax and Tax Credits

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