Election to use the Realization Basis
This applies where a constituent entity uses the fair value accounting method to account for assets and liabilities it holds. Generally speaking, the fair value accounting method revalues assets and liabilities for certain financial instruments to market value for accounting purposes. Where a domestic tax system adopts a similar approach there would be no issue. […]
Debt Release Election
The GloBE Rules and Commentary do not include an exemption for debt releases. For financial accounting purposes the release of debt is likely to be treated as income (ie Dr Creditors, Cr P&L). However, in many jurisdictions, a domestic tax exemption. This could therefore push the GloBE ETR down leading to top-up tax. Article 2.4 […]
Foreign Exchange Hedge Election
Gains and losses from the sale of an ownership interest (except a shareholding with ownership of less than 10%) are excluded from GloBE Income under Article 3.2.1(e) of the OECD Model Rules. Similar to the treatment of excluded dividends, many jurisdictions have a participation exemption for gains on group shareholdings. The Pillar Two GloBE rules […]
Portfolio Shareholding Election
As the financial accounting income or loss figure is a below-the-line figure, dividends are generally included in this amount. However, for tax purposes, many countries have some form of participation exemption for intra-group dividends (with differing requirements in terms of shareholdings and length of ownership). Article 3.2.1(b) of the OECD Model Rules applies a standard exemption for […]
Excess Negative Tax Carry-Forward Election
As an alternative to incurring additional top-up tax when a domestic tax loss exceeds the GloBE loss, Article 2.7 of the OECD Administrative Guidance provides that an MNE can elect for the Excess Negative Tax Expense administrative procedure. Where this applies the Excess Negative Tax Expense is removed from Adjusted Covered Taxes for the Fiscal Year and an Excess Negative […]
Equity Investment Inclusion Election
Article 2.9 of the OECD Administrative Guidance provides for an Equity Investment Inclusion Election. This relates, in part, to the interaction of Articles 3.2.1(c) and 4.1.3(a) of the OECD Model Rules. Article 3.2.1(c) of the Model Rules excludes the following from the GloBE Income or Loss: Gains and losses from changes in fair value of […]
Distribution Tax Regime Election
Distribution Tax Regime Election Contents What is a Distribution Tax Regime? Article 7.3.1 of the OECD Model Rules permits a constituent entity to to make a Distribution Tax Regime Election. A distribution tax regime is a tax regime that doesn’t levy a tax charge on taxable income when it is generated, but when it is distributed. […]
Deemed Disposal of Assets Election
Deemed Disposal of Assets In some jurisdictions there can be a deemed disposal of assets. This occurs in the UK for instance where a company migrates by changing its treaty residence. In other jurisdictions it can apply on an ‘immigration’ (ie where a company becomes tax resident in a jurisdiction). In general, the company is […]
Excluded Entity Election
Excluded Entity Election Excluded entities are not taken into account for the purposes of calculating the jurisdictional effective tax rate, any top-up tax payment and the imposition of top-up tax (the IIR and UTPR etc). However, they are taken into account for the purposes of determining whether an MNE group is within the scope of […]
Taxable Distribution Method Election
Taxable Distribution Method Election Contents Taxable Distribution Method Election, Generally The taxable distribution method election is an election available for investment entities and is an alternative to making a tax transparency election. This is available where the constituent entity owner can be reasonably expected to be subject to tax on distributions at a rate of […]
