Treatment of CFC Taxes: QDMTTs vs GloBE Rules


  1. Income Inclusion Rule/Under-Taxed Payments Rule
  2. Qualified Domestic Minimum Top-Up Tax
  3. Feedback Loop – Example 

Under Article 4.3.2(c) of the OECD Model Rules, tax paid under a CFC regime is generally allocated for GloBE purposes to the CFC entity. However, Article 5.1.3 of the OECD Administrative Guidance confirms that this is not the case for Qualified Domestic Minimum Top-Up Taxes (QDMTTs) given this could create a ‘feedback loop’ if the QDMTT was itself creditable.

As such top-up tax payable under a QDMTT could be greater than under a normal application of the GloBE rules (eg under the Inclusion Inclusion Rule). 

Given many jurisdictions are likely to implement a QDMTT, it may be that the complex allocations of CFC taxes (including for Blended CFC Regimes such as GILTI)  may in fact only be relevant where a QDMTT did not fully cover any top-up tax liability under the GloBE Rules. If a specific QDMTT safe harbour was established (which is currently being looked at by the OECD) the GILTI or other CFC allocation may not even be relevant at all for GloBE purposes if there was a QDMTT in place.

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Income Inclusion Rule

Under-Taxed Payments Rule