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 October 21, 2025, Vietnam released Decision 3563/QD-BTC 2025 on the Administrative Procedures for the Minimum Tax. This includes the final forms to be submitted for notification, registration and returns.
Guernsey has issued the Guernsey Pillar 2 Brief: Issue 1 which includes further detail on the registration process (the actual registration system is planned to be operational during the fourth quarter of 2025).
On October 14, 2025, France released the 2026 Finance Bill. This includes amendments to include the June 2024 OECD Administrative Guidance, as well as DAC 9 implementation.
On October 14, 2025, France released the 2026 Finance Bill. This includes amendments to include the June 2024 OECD Administrative Guidance, as well as DAC 9 implementation.
On October 2, 2025, Hungary released the 2025 Autumn Tax Package. This includes some amendments to the operation of the Transitional CbCR Safe Harbour.
On October 15, 2025, Hungary issued the draft Advance QDMTT Tax Declaration (Form 24GLBADO) as well as filing instructions and a draft XML guide.
On October 10, 2025, Belgium issued a Draft Law to amend its Minimum Tax Act. There are a number of technical amendments (which don’t effect the Minimum Tax calculation), the correction of an error in the original text as well as administrative amendments.
On October 3, 2025 Normative Instruction RFB No. 2282, of October 2, 2025 was published in the Official Gazette. This includes amendments to Brazil’s DMT Law for the OECD June 2024 OECD Administrative Guidance and other sundry amendments.
On October 5, 2025, Israel published a consultation on a draft law for a domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax or ‘QDMTT’) from January 1, 2026.
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