An essential element of the Pillar Two GloBE rules is the substance-based income exclusion.

It provides a degree of tax relief for MNE groups in the form of carve-outs based on the amount of qualifying payroll and tangible fixed asset costs in a jurisdiction.

Relief is to be given at 5% of the amount of qualifying costs (subject to transitional rules). This is deducted from Pillar Two net GloBE income, before calculating top-up tax. Therefore, it directly feeds into the amount of top-up tax payable. 

Our Modelling Tool allows you to adjust jurisdictional payroll and fixed asset costs to instantly see the impact this has on your top-up tax liability.