If the investment entity is treated as tax transparent in the owner’s jurisdiction anyway, then for tax purposes the income of transparent entities is taxed on the underlying owners. However, for accounting purposes, these entities would generally have their own financial accounts.
Given the GloBE rules rely on financial accounting information, specific additional rules are required to correctly allocate the income of transparent entities in a way that reflects most domestic tax treatment.
If special rules weren’t in place and the tax transparent entity was treated as having GloBE income and covered taxes under the standard GloBE rules, its ETR would often be zero and top-up tax would be due.
The purpose of this is again to try and align the GloBE rules with typical domestic tax treatment.
Investment funds are frequently tax-neutral entities under domestic law, with jurisdictions essentially looking to put investors into the fund in the same position for tax purposes as if they had made a direct investment.
Key amendments to the general GloBE rules are:
• Firstly, the financial accounting net income or loss of a transparent entity or reverse hybrid is reduced by any amounts due to owners that aren’t members of the MNE group.
This is necessary as the GloBE ETR of the group members won’t include income or taxes paid by non-group members.
• Secondly, if the transparent entity or reverse hybrid carries our business through a PE, this needs to be deducted from the accounting income of the transparent entity or reverse hybrid, given that permanent establishments (PEs) are treated as separate constituent entities for GloBE purposes.
• Finally, any remaining amount of the financial accounting income or loss is allocated to the owners if the entity is a transparent entity (based on their ownership interest).
This can flow up the chain if there are a number of transparent owners.
On December 23, 2024, Australia issued the Taxation (Multinational—Global and Domestic Minimum Tax) Rules 2024 (the ‘Rules’) to provide for the detailed application of the Pillar 2 GloBE rules in Australia.
On January 15, 2025, the OECD issued Administrative Guidance that includes a list of jurisdictions that have transitional qualified status for the purposes of the income inclusion rule and domestic minimum tax (including the QDMTT Safe Harbour).
On January 15, 2025, the OECD issued an updated GloBE Information Return (GIR) and GIR XML Schema. In this article we look at the changes to the previous GIR.
On January 3, 2025 the Law on Global Minimum Corporate Income Tax was published in the Official Gazette to implement the EU Global Minimum Tax Directive.
On January 15, 2025, the OECD issued a list of jurisdictions that have transitional qualified status, further Administrative Guidance on the application of the Article 9.1 transitional rules, and an updated GloBE Information Return and GIR XML Schema, as well as the GIR MCAA.
On December 31, 2024, Law No. 20612, was published to amend the International Tax Adjustment Act for the 2025 Tax Reform provisions. This includes some amendments to the Global Minimum Tax provisions.
On December 31, 2024, Ministerial Decree of December 27, 2024 was published in the Official Gazette. This implements Article 4.1-4.3 of the February 2023 OECD Administrative Guidance and some aspects of the June 2024 OECD Administrative Guidance on deferred taxation.
The Ministerial Decree of December 27, 2024 published in the Official Gazette on December 31, 2024 provides for a number of miscellaneous, but important aspects of the OECD Administrative Guidance that were not included in the original Minimum Tax Law.
The Dutch Minimum Tax Executive Decree 2024 was published in the Government Gazette on December 23, 2024 to implement various aspects of the OECD Administrative Guidance.
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