Pillar One Amount A: Scope

General Scope Provision

Under Article 3 of the Multilateral Convention to Implement Amount A of Pillar One (MLC)., multinational groups subject to the Amount A reallocation are defined as ‘Covered Groups’. 

A group is a covered group where in a fiscal year:

– the revenue of the group for the period is more than 20 billion euros (this is adjusted if the accounting period is not 12 months); and 

– the pre-tax profit margin of the group is more than 10 percent. 

Where the group was not a Covered Group in the two previous periods, it is a covered group if its pre-tax profit margin exceeds 10% in at least two of the four preceding periods or on average over the current period and the four preceding periods. 

What is a Group for Amount A?

As for the Pillar Two GloBE Rules, the Pillar One Amount A calculation relies on the financial accounts heavily. 

A group is:

– a collection of entities that would be consolidated on a line-by-line basis in the consolidated financial statements of an Ultimate Parent Entity (UPE), or would be if the UPE had prepared consolidated accounts, or

– an entity that meets the above revenue and profit margin test, providing it is not an excluded entity, an investment fund or real estate investment entity that is a UPE and is not part of another group.

Excluded Entities and UPE’s for Amount A Purposes

Just as for Pillar Two, excluded entities are excluded from the scope of Amount A. The definition is the same as for the Pillar Two GloBE Rules with one exception.

For the purposes of the Pillar Two GloBE Rules, an entity owned by an excluded entity can also be treated as an excluded entity for Pillar Two where at least 85% of the value of an entity is owned (directly or indirectly) by one or more excluded entities (excluding pension services entities), and where substantially all of the entity’s income is dividends or equity gains or losses excluded from the Pillar Two GloBE income or loss calculation. This does not apply for the definition of an excluded entity under the Pillar One Amount A Rules.

A UPE is an entity except for a government entity or pension fund that directly or indirectly owns a controlling interest in another entity providing it is not itself owned by another entity (aside from a government entity or pension fund). Therefore, the MLC restricts Amount A to the largest MNE groups. 

Segmentation