The substance-based income exclusion is based on the amount of tangible fixed assets and payroll costs in a jurisdiction.
It therefore stands to reason that capital intensive industries will benefit most from the this, as will companies with high payroll costs.
However, such companies could also benefit from significant tax credits and other allowances in a jurisdiction given the level of tangible assets and payroll costs. This would operate to reduce the Pillar Two effective rate and potentially lead to top-up tax.
Therefore, there is to a certain extent an element of offset, with the higher substance-based income exclusion offsetting the lower effective tax rate.
In this article we look at this issue in detail, including a detailed example.