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 July 13, 2026, the UK government published draft Finance Bill 2026–27 legislation implementing the OECD’s January 2026 Side-by-Side package.
On July 1, 2026, Australia issued the Taxation (Multinational—Global and Domestic Minimum Tax) Amendment (2026 Measures No. 2) Rules 2026. This incorporates elements of the OECD Agreed Administrative Guidance issued in December 2023, June 2024 and January 2026.
On June 26, 2026, Cyprus issued Decree 272/2026 to confirm entry-into-force dates for the main January 2026 OECD safe harbour package
On June 22, 2026, the UAE issued Ministerial Decision No. 96 of 2026 to implement the OECD Side-by-Side Tax Package.
On June 26, 2026, Turkey announced an extension to the filing of its GloBE tax return and payment from June 30, 2026 to July 31, 2026.
On June 16, 2026, the Dutch Ministry of Finance opened an internet consultation on the Draft Safe-Harbour Bill. The consultation closes on 14 July 2026 and provides draft legislation to implement the OECD Side-by-Side package into the Dutch domestic regime.
On June 15, 2026, the Cyprus Tax Department issued two announcements on the domestic implementation of the Pillar Two framework. The first concerned the European Commission’s position on Cyprus’ Income Inclusion Rule (IIR). The second addressed filing deadlines and compliance obligations for Cypriot constituent entities and joint ventures under Law 151(I)/2024.
On June 10, 2026, the EU issued the ‘Manual for MNE Groups on Global Minimum Tax (Pillar Two) Compliance Obligations‘. This provides country level analysis of Pillar Two filings in Austria, Belgium, Croatia, Cyprus, Czech Republic, Finland, France, Germany, Greece, Ireland, Poland, Romania, Slovenia and Sweden.
A practical overview of the Dutch GloBE Information Return (GIR) filing process, including BIA terminology, deadlines, XML format, Digipoort submission, security, validation, notification obligations and governance controls.
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