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.  Sign into your account to access this analysis Login/Register Please login or register to view this analysis. Register

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 […]

Tax Transparency Election

Tax Transparency Election An entity can make a tax transparency election in respect of its ownership interest in an investment entity. This then changes the default tax treatment under the Pillar Two rules. For more information on the treatment of investment entities/funds under Pillar Two, see Investment Funds and Pillar Two The election is a […]