Article 7.5.2 of the OECD Model Rules provides that this is a five-year election and it treats the GloBE income of the investment entity as accruing to the constituent entity owner in proportion to its ownership entitlement.
It is only available where the constituent entity owner is subject to tax on a fair value accounting method on its interest in the investment entity (such as under a mark-to-market accounting policy) and the tax rate levied on the income for the owner is at least 15%.
The purpose behind the election is to align the GloBE rules with the domestic tax treatment for the owner of the investment entity. The election applies to both directly held and indirectly held investment entities.
Under domestic law, the constituent entity owner would be subject to tax on the income of the investment entity anyway (calculated on fair value changes). This election simply pushes up the income to the constituent entity owner for the GloBE income calculation to match the timing under domestic law.
One of the criticisms of this election is that in some countries, such as Germany, changes of the fair value of the ownership interest in the investment entities are not taxed. In others, such as France, some investors are taxed on changes of the fair value as required but others are not and are taxed on the historic
value of their ownership interests.
Therefore, this election is either not applicable in some jurisdictions or only on a few investment entities or insurance investment entities in others.
Note that once an election is made a constituent entity owner of an investment entity shouldn’t include any fair value adjustment even if when looked at separately it may use a fair value basis for accounting purposes. If there are any fair value adjustments included in the financial accounting income or loss they should be excluded from GloBE income.
To include such adjustments would result in the income being included in GloBE income twice given the tax transparency election already allocates the share of the investment entity income to the constituent entity.
In this case, if we assume P Co 1 and P Co 2 were subject to the mark-to-mark basis on their investment in the investment fund, they could file a tax transparency election.
The income of the fund, which is likely to be calculated on a fair value basis under accounting standards, would be included in P Co 1 and P Co 2’s GloBE income.
If the income was for instance 1,000,000 euros, P Co 1 would include 750,000 euros and P Co 2 would include 250,000 of income.
The substance-based income exclusion also applies to the constituent entity owners on a tax transparent basis. In other words, the constituent entity owner can take into account its share of the payroll costs and tangible assets in the jurisdiction when calculating excess profits.
The Tax Transparency Election treats the GloBE income of the investment entity as accruing to the constituent entity owner in proportion to its ownership entitlement.
The purpose behind the election is to align the GloBE rules with the domestic tax treatment for the owner of the investment entity.
On November 26, 2025, Montenegro issued a Draft Law to apply a domestic minimum top-up tax (DMTT) from January 1, 2026.
On December 1, 2025, Turkey announced an extension in the filing and payment date for the QDMTT return and the opening of a test environment for the submission of the QDMTT return.
On November 26, 2025, the Swiss Federal Council issued an amendment to the Minimum Tax Ordinance to provide for the OECD GIR provisions, as well as some other small amendments.
On November 19, 2025, Hungary enacted Pillar 2 amendments from the 2025 Autumn Tax Package. This includes some amendments to the operation of the Transitional CbCR Safe Harbour.
On November 18, 2025, Slovakia issued its QDMTT Return
On November 14, 2025, Hungary issued a Draft Regulation (for consultation) to provide for the detailed application of the Pillar 2 Safe Harbours.
Italy has issued 2 regulations relating to the Administration of the Pillar 2 top-up tax. A November 7, 2025 Decree provides for more information on the rules for the submission of the GloBE tax return. Resolution no. 63 of November 10, 2025 provides for the tax codes to be used for the payment of top-up tax on the F24 payment form.
On November 3, 2025, Finland issued a draft law for consultation to amend its Minimum Tax Act for the June 2024 and January 2025 OECD Administrative Guidance.
A Communique of October 29, 2025 issued by the MRA provides further information on QDMTT Notifications.
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