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October 2022

GLoBE Rules: Some Special Rules, Administrative and Compliance Aspects – Part 3

By Vinod Ramachandran | Mohit Singh Raisinghani
Chartered Accountants
Reading Time 43 mins
[This is the concluding part of a 3-part series on GloBE Rules. The first part was published in the August, 2022 issue of BCAJ (“Pillar 2: An Introduction to Global Minimum Taxation and the second part (“GloBE Rules – Determination of Effective Tax Rate (ETR) and Top-Up Tax (TUT”)) was published in September, 2022 BCAJ.]

TO REFRESH ON EARLIER PARTS

In the previous two articles, we discussed how GloBE Rules apply, when the effective tax rate (ETR) computed at a jurisdictional level is less than 15 per cent, and, how a top-up tax (TUT) is levied to achieve at least 15 per cent tax in each jurisdiction where the MNE Group has a presence in the form of a subsidiary or a permanent establishment (PE). For this purpose, each subsidiary or PE is referred to as a constituent entity (CE) of the MNE Group. We also discussed certain nuances around the computation of ETR – which, as aforesaid, is calculated on a country-by-country basis as a fraction of adjusted covered tax (numerator) upon GloBE income (denominator). While ETR is primarily linked to book results based on ‘fit for consolidation’’ accounts, specified adjustments, coupled with options/choices, make the exercise fairly complex and unique. Moreover, we also discussed hierarchical rules (i.e. top-down approach of income inclusion rule) for recovery of such TUT.

Having discussed
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