OECD/IF Releases Further Administrative Guidance On The GloBE Rules

On 17 June 2024, the OECD / Inclusive Framework (IF) released additional Administrative Guidance on the global minimum taxation rules (GloBE Rules, which form part of the OECD's Pillar Two solution).
Luxembourg Tax
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On 17 June 2024, the OECD / Inclusive Framework (IF) released additional Administrative Guidance on the global minimum taxation rules (GloBE Rules, which form part of the OECD's Pillar Two solution). The new Administrative Guidance (June 2024 AG) notably contains further guidance on: (i) the recapture rule applicable to deferred tax liabilities; (ii) divergences between GloBE and accounting carrying values; (iii) cross-border allocation of current and deferred taxes; (iv) allocation of profits and taxes in structures involving Flow-through Entities; and (v) the treatment of securitization vehicles. In addition, the IF released a Q&A document outlining the approach to determine whether the GloBE Rules introduced in a jurisdiction can be considered ‘qualified'. 

Below we outline the main items of this June 2024 AG which is the fourth set of guidance complementing the OECD commentary to the GloBE Rules after the guidance released in February 2023 (Feb 2023 AG), July 2023, and December 2023. 


DTL Recapture 

The determination of the DTL Recapture comes with challenges in tracking and allocating deferred tax liabilities (DTLs) in an appropriate manner to be compliant with the GloBE Rules. The June 2024 AG aims to simplify the tracking and allocation thereof, but despite the suggested simplifications this remains to be quite a challenge for the reporting systems of in-scope Groups.

Identified issues DTL Recapture and proposed solutions

The DTL Recapture Rule stipulates that a DTL booked in a Fiscal Year during which the GloBE Rules apply shall be subject to recapture if it does not reverse within the subsequent five Fiscal Years and it is not subject to certain exemptions (DTLs that qualify as Recapture Exception Accruals). DTL recapture means that the Adjusted Covered Taxes and the ETR for the Fiscal Year in which the DTL was accrued and claimed is re-computed without such DTL to the extent the DTL did not reverse within the five subsequent Fiscal Years. The re-computed ETR will decrease, and Additional Top-up Tax may be due. 

Because not all DTLs are in scope of the DTL Recapture Rule, each Constituent Entity is required to identify categories of DTLs that are in scope and to determine the year in which, and the extent to which, each identified DTL accrual reverses. This creates challenges and risks which the June 2024 AG seeks to address.

The June 2024 AG explains how to practically apply the DTL Recapture Rule. In particular, it provides: (i) criteria for determining the scope of a DTL category; (ii) methodologies for determining whether a category of identified DTL accruals have reversed within five years and whether reversals are attributable to recaptured DTLs or pre-GloBE DTLs; and (iii) a simplification via an extended application of the Unclaimed Accrual election rule. 

Tracking DTLs

In order to address the challenges created by the fact that in-scope Groups do not typically trace DTLs and deferred tax assets (DTAs) for each asset or liability, the June 2024 AG provides that, for purposes of the DTL Recapture Rule, a Constituent Entity may track its DTLs on either: (a) an item-by-item basis; (b) a General Ledger account (GL Account) basis; or (c) on an Aggregate DTL Category basis (see below). The guidance notes that, while the approaches under (a) and (b) can be used for each DTL that is in scope of the DTL Recapture Rule, approach (c) can only be used where the Aggregate DTL Category is consistent with the Aggregate Tracking Requirements set forth in the June 2024 AG. Furthermore, the guidance allows Constituent Entities to combine different tracking approaches for different DTLs in scope of the DTL Recapture Rule and provides guidance on certain DTLs that are specifically excluded from recapture.

The June 2024 AG clarifies that an "Aggregate DTL Category" means a category of DTLs determined in relation to two or more GL Accounts that, consistent with the chart of accounts, falls under the same balance sheet account or sub-balance sheet account. Such category may include both Short and Long-term DTLs and provides for specified exclusions from the Aggregate DTL categories (i.e. certain types of GL accounts involving, for example, intangibles and related party receivables). 

Mechanisms to recapture Long-term DTLs

Since in-scope Groups generally do not trace the balance of a DTL to particular assets or liabilities reflected in the corresponding Aggregate DTL Category or GL Account, the June 2024 AG provides for a methodology with certain assumptions to determine whether a reversal relates to amounts that accrued in the preceding five Fiscal Years or to amounts previously subject to recapture.

A Constituent Entity may use the FIFO methodology to determine reversals whenever: (a) the DTL is determined in relation to a single GL Account; (b) the DTL is determined in relation to an Aggregate DTL Category that consists solely of DTLs determined in relation to GL Accounts with a similar "reversal trend (i.e. whose DTLs fully reverse within a two-year period of each other); or (c) the DTLs are aggregated within an Aggregate DTL Category without a similar reversal trend, but the Group can demonstrate that the FIFO methodology nevertheless results in appropriate recapture of DTLs to the extent their reversal trend extends beyond five years. For any Aggregate DTL Category for which the Constituent Entity does not choose (or is not entitled) to use the methodology above, the LIFO methodology must be used. 

Simplification for Short-term DTLs

A Constituent Entity will be allowed to demonstrate, on the basis of objective facts, that all DTLs related to the assets or liabilities in a GL Account or all DTLs included in an Aggregate DTL Category are Short-term (i.e. reverse within five fiscal years of the accrual year). In such cases, which are illustrated with examples, the Entity is not obligated to put in place a tracking system and recapture methodology. 

Other aspects

In addition to the above, the June 2024 AG provides technical guidance regarding: (i) the application of the recapture methodologies in relation to DTLs that accrued before the Transition Year; (ii) changes made to the scope of an Aggregated DTL category; (iii) the scope of the Recapture Exception Accrual in the context of lease contracts of tangible assets; (iv) the consistent application of the Unclaimed Accrual Election to exclude DTLs that are not expected to reverse; and (v) the implications of the Aggregate DTL categories for the definition of the QDMTT.

Divergences between GloBE and accounting carrying values 

Where the GloBE Income or Loss is determined based on a carrying value that deviates from the carrying value based on the relevant accounting standard, the DTAs and DTLs should generally be determined in line with such GloBE carrying value. A very welcome clarification included in the June 2024 AG is that a transfer of assets subject to a GloBE arm's length adjustment will also be recognized against such GloBE carrying value at the level of the acquiring Constituent Entity.

Divergences between GloBE and accounting carrying values

The amounts reflected in the financial accounts used for the preparation of the Consolidated Financial Statements of the UPE (or where applicable the local financial accounts) are the starting point for determining the GloBE Income or Loss and the Adjusted Covered Taxes (also including the Deferred Tax Adjustment Amount) of a Constituent Entity. However, for certain GloBE Rules, the GloBE Income or Loss is determined based on a different carrying value of the assets and liabilities than as reflected in those financial accounts.

Such differences to the carrying value may arise based on the (i) the accrued pension expense adjustments, (ii) the stock-based compensation election, (iii) arm's length principle adjustments, (iv) the realization principle election, (v) push-down accounting adjustments, (vi) adjusted treatment of certain acquisitions and dispositions of Controlling Interests as acquisitions and dispositions of assets and liabilities, and (vii) adjustments upon transfers of assets and liabilities under Chapter 6 of the GloBE Rules.

In such cases the deferred tax expense and benefit accrued in the financial accounts in relation to these assets and liabilities may no longer be appropriate. Instead, the Total Deferred Tax Adjustment Amount under the GloBE Rules must be determined by computing the DTAs and DTLs based on the GloBE carrying value and adjusted in accordance with the relevant accounting standard, unless otherwise specified under the GloBE Rules. 

GloBE and accounting carrying values and the Transition Rules

Chapters 1 through 8 of the GloBE Rules are generally designed to apply to financial years in which the Constituent Entity is subject to the GloBE Rules and not to the pre-GloBE period. Accordingly, the June 2024 AG stipulates that the GloBE articles on the arm's length principle (Article 3.2.3), Constituent Entities joining and leaving an MNE Group (Article 6.2.2), and transfers of assets and liabilities (Article 6.3) only apply in the Transition Year and subsequent financial years. Chapter 9 provides how GloBE Rules apply to pre-GloBE transactions and tax attributes during the transition period (after 30 November 2021 and the Transition Year).

An exception applies in determining the pre-GloBE tax attributes in relation to Constituent Entities acquired by the in-scope Group preceding the application of the GloBE Rules that are subject to push-down accounting (Article 6.2.1(c)).

In such case, the pre-GloBE tax attributes that can be recognized are in principle limited by the GloBE carrying value of the assets and liabilities disregarding push-down accounting and based on the historic carrying value instead.

The determination of the GloBE carrying value of assets and related DTAs and DTLs with respect to assets transferred within the scope of the Transition Rules (Article 9.1.3) are governed by the OECD Commentary as complemented through the Feb 2023 AG and further updated in the June 2024 AG. This guidance stipulates that the GloBE carrying value and recognition of the GloBE DTA upon acquisition is determined considering the tax paid and the DTA that would have been recognized under the Transition Rules at the level of the disposing Constituent Entity. The June 2024 AG repeats that the DTA recognition shall not reduce the Adjusted Covered Taxes of the acquiring Constituent Entity. The June 2024 AG furthermore clarifies that the DTA recognized for GloBE purposes pursuant to an asset transfer in scope of Article 9.1.3 can arise regardless of whether a DTA would be recognized by the acquiring Constituent Entity under the relevant accounting standard. 

Intragroup transactions accounted at cost

Pursuant to the GloBE Rules and as already confirmed in the Feb 2023 AG, the arm's length price of intragroup transactions at cost is in principle relevant for determining the disposing Constituent Entity's GloBE Income or Loss. The June 2024 AG furthermore confirms that also the acquiring Constituent Entity should consider this arm's length price.

Accordingly, the GloBE carrying value at the level of the acquiring Constituent Entity will be based on the fair market value of the acquired assets. No DTA hence needs to be recognized for GloBE purposes upon acquisition (which DTA could adversely affect the GloBE ETR of the acquiring Constituent Entity). After recognition, the asset would be amortized based on the relevant accounting standard based on this GloBE carrying value. DTAs and DTLs will be recognized based on the GloBE carrying value. Any DTL recognized will remain to be subject to the GloBE Rules on recapture.

It is noted in the June 2024 AG that impairments of assets accounted for at their GloBE carrying value will only occur if the accounting value is subject to an impairment based on the relevant accounting standard. In such case, the GloBE carrying value will be reduced to match the accounting value to the extent the accounting carrying value is lower.

Carrying value SBIE tangible asset carve-out

The adjustment of the carrying value of an asset would be for the sole purpose of determining GloBE Income or Loss and Covered Taxes. It would not affect the asset's carrying value for purposes of the SBIE tangible asset carve-out.

Allocation of cross-border current taxes 

Further guidance is provided on the allocation of cross-border taxes between a Main Entity and its Permanent Establishments (PEs) subject to cross-crediting systems and the allocation of taxes with respect to Controlled Foreign Companies, Hybrid Entities, and Reverse Hybrid Entities. The June 2024 AG aims to introduce a consistent mechanism for such allocation, but the resulting four-step allocation mechanism seems to be very complicated.

Principles for allocating cross-border, current taxes under a cross-crediting corporate tax system

The June 2024 AG provides for further guidance on the allocation of taxes from a Main Entity to the various PEs under a cross-crediting system, including cross-crediting systems which only allow cross-crediting between specific categories. In addition, guidance is provided on the allocation of taxes under a Controlled Foreign Company (CFC) Tax or taxes on Hybrid Entities or Reverse Hybrid Entities.

The June 2024 AG outlines a new four-step allocation mechanism to determine the allocation of current taxes in case of cross-crediting of taxes. These taxes have accrued under a tax system that combines income from various sources and allows cross-crediting of tax credits within specific income categories, meaning that foreign tax credits arising of income can be used against another source of income arising. The primary goal of this allocation mechanism is to allocate taxes between Constituent Entities under Article 4.3.2. Additionally, it determines the treatment of any current Covered Taxes related to income from non-Constituent Entities. This four-step mechanism aims to accommodate different treatments of foreign source income across corporate tax systems. 

For example, the allocation mechanism between a Main Entity and a PE/PEs can largely be described as follows. The first step of the allocation mechanism calculates the foreign source income of each PE. The second step calculates the total Allocable Covered Taxes which have been accrued with respect to foreign source income and are available for allocation. The third step assigns a ‘Cross-Crediting Allocation Key' to each PE as well as the Main Entity itself. The fourth step allocates the Allocable Covered Taxes between the PEs and the Main Entity.

The IF will consider further guidance with respect to the impact of post-filing adjustments on the cross-crediting allocation mechanism.

Clarification of Article 3.4.5 on PE GloBE Loss treatment

The rules of the Main Entity's jurisdiction for determining PE income, including foreign tax credit rules, must be considered in order to determine whether a PE GloBE Loss shall be treated as an expense in the computation of domestic taxable income. 

If the Main Entity's jurisdiction offsets PE losses against PE income to determine the foreign source income eligible for a foreign tax credit, the PE loss must first be allocated to other PE income. Only the excess above other PE income should be considered an expense in computing the Main Entity's GloBE Income or Loss. 

In cases where multiple PEs have losses and those losses are offset by income from other PEs, the amount of loss taken into account by the Main Entity under Article 3.4.5 should be apportioned between the loss PEs. The apportionment is based on their separate losses as determined under the applicable regime. 

For example, if PE1 has 100 of income and PE2 and PE3 each have losses of 150, the Main Entity will consider a net loss of 200. This loss is allocated as 100 from PE2 and 100 from PE3 under Article 3.4.5. 

Allocation of cross-border deferred taxes 

The June 2024 AG also provides for guidance on the allocation of deferred taxes between Constituent Entities. In particular, the guidance discusses the application of the Substitute Loss Carry-Forward DTA to foreign PEs and Hybrid Entities as well as the methodology to allocate deferred tax expenses and benefits under a CFC Tax Regime, and to allocate deferred taxes to Hybrid Entities, Reverse Hybrid Entities and PEs.

Extension of Substitute Loss Carry-Forward DTA

The Feb 2023 AG introduced the Substitute Loss Carry-forward DTA where a Parent Entity has a domestic tax loss which is used to offset foreign CFC income. The June 2024 AG extends this to cases where a domestic loss is used to offset income from foreign PEs, Hybrid Entities, and Reverse Hybrid Entities and cases where a loss carry forward is used to offset the income of such entities in a subsequent year. It is important to highlight that June 2024 AG only addresses cases where the relevant loss arises from the Main Entity or Parent Entity jurisdiction (i.e. a domestic source loss) and does not address cases where a loss arising from one PE, CFC, Hybrid Entity or Reverse Hybrid Entity is used to offset income from similar entities. 

The guidance also notes that the IF will consider whether the current mechanism is fully effective and sufficient in all cases; and if additional guidance would be necessary.

Methodology to allocate deferred taxes

In order to match Covered Taxes with the relevant GloBE Income, the GloBE Rules provide for the cross-border allocation of Covered Taxes between entities. The original OECD Commentary on the GloBE Rules clarified that this allocation mechanism also applies to deferred taxes. The June 2024 AG now introduces a five-step mechanism to appropriately allocate deferred tax expenses or benefits. In a nutshell, these steps mainly require to: 

  1. Separate the DTAs and DTLs reflected in the Parent Entity's financial accounts with respect to the assets and liabilities of each CFC Constituent Entity and determine the deferred tax expense or benefit as a consequence of the movement of such assets and liabilities in the particular year split between three categories (being (i) income which is not GloBE Income, (ii) GloBE Income which is not Passive Income and (iii) GloBE Income which is Passive Income).
  2. Calculate the pre-foreign tax credit deferred tax expense or benefit arising under the CFC Tax Regime for the Parent Entity (Step 2A); as well any creditable foreign taxes expected to be paid by the CFC Constituent Entity which would give rise to foreign tax credits which would be available (absent a foreign tax credit limitation) to offset the expected pre-foreign tax credit expense (Relevant Creditable Foreign Taxes) (Step 2B).
  3. Allocate the deferred tax expense or benefit for the first category (deferred tax expense or benefit with respect to income which is not GloBE Income).
  4. Allocate the deferred tax expense or benefit for the second category (deferred tax expense or benefit with respect to GloBE Income which is not Passive Income) to the CFC Constituent Entity.
  5. Allocate the third category (deferred tax expenses or benefits with respect to GloBE Income which is Passive Income).

The June 2024 AG also mentions that no allocation of deferred taxes arising from Blended CFC Tax regimes will take place and that only the current tax expense associated with the latter is allocated to the relevant Constituent Entity. Deferred tax expenses or benefits arising from a Blended CFC Tax Regime should therefore be disregarded for GloBE purposes.

Allocation of profits and taxes in structures including Flow-through Entities 

Various issues have been identified for GloBE purposes in relation to the allocation of profits to Flow-through Entities. The issues discussed in the June 2024 AG in this respect are: (1) the location and identification of the direct owner of a Flow-through Entity, (2) application of Article 3.5.3 in view of Ownership Interests in Flow-through Entities held by entities other than Group Entities, (3) the allocation of cross border taxes to Flow-through Entities in case of CFC taxes, (4) allocation of taxes to Hybrid Entities, and (5) allocation of taxes to Reverse Hybrid Entities.

Location of direct owner of a Flow-through Entity

The classification of a Flow-through Entity (Tested Entity) as a Tax Transparent Entity and/or Reverse Hybrid Entity, depends on the treatment at the level of the direct owner. It was unclear how this should be interpreted in case the direct owner of the Tested Entity is a Flow-through Entity itself (Flow-through Entity owner).

The June 2024 AG states that the status of Tested Entity as a Tax Transparent Entity or Reverse Hybrid Entity should generally be determined by reference to the tax law of the first owner in the ownership chain that is not a Flow-through Entity (Reference Entity) itself. 

This general rule applies regardless of the question whether such Flow-through Entity owner is a stateless entity or if it is located in the jurisdiction where it was created because it is required to apply the IIR. However, the rule does not apply if such Flow-through Entity owner is the UPE because there is no entity above the UPE that is part of the same in-scope Group.

A Flow-through Entity is a Tax Transparent Entity with respect to the Ownership Interest held by the Reference Entity, if the tax law of the Reference Entity's jurisdiction considers the Tested Entity as well as each Entity through which the Reference Entity owns its Ownership Interest in the Tested Entity as fiscally transparent. In other cases, the Flow-through Entity qualifies as a Reverse Hybrid Entity. Note that a Flow-through Entity can qualify as both a Tax Transparent Entity and a Reverse Hybrid Entity in case there are multiple owners of the Flow-through Entity.

It is also made clear that a jurisdiction that does not have a corporate income tax system or similar Covered Tax cannot consider another entity as tax transparent. However, the Reference Entity can still be located in such jurisdiction. This would result in the Tested Entity qualifying as a Reverse Hybrid Entity with respect to the Ownership Interest held by an Entity in such jurisdiction. 

Application of Article 3.5.3 and Article 3.5.4 on allocation to Minority Owners

Article 3.5.3 of the GloBE Rules reduces the Financial Accounting Net Income or Loss of a Flow-through Entity by the amount allocated to owners that are not part of the same Group (Minority Owners) holding their ownership in such Flow-through Entity directly via a Tax Transparent Structure. Based on Article 3.5.4 this main rule does not apply to (a) a Flow-through Entity that is the UPE or (b) any Flow-through Entity owned by such a Flow-through Entity UPE (directly or through a Tax Transparent Structure).

The June 2024 AG provides clarification regarding the application of Article 3.5.4 in situations whereby Flow-through Entities are not wholly owned by the Flow-through UPE. It states that Article 3.5.4 only applies to the extent the Ownership Interest in the Flow-through Entity is (in)directly held by the Flow-through UPE. The main rule of Article 3.5.3 therefore continues to apply to Ownership Interests held by Minority Owners.

Furthermore, the June 2024 AG states that the determination of an Ownership Interest that is held through a Tax Transparent Structure is based solely by considering the status of such entity/entities from the perspective of direct Group owners. This means that the classification of those entities at the level of the Minority Owners is not of relevance for purposes of Article 3.5.4.

Allocation of cross-border taxes to Flow-through Entities

The allocation of taxes to Flow-through Entities generally follows the same principle as the allocation of profit to such entities. In view of Tax Transparent Entities, however, the GloBE Rules only refer to the allocation of tax accrued in the financial accounts of the Tax Transparent Entity. The June 2024 AG states that this also includes taxes allocated to the Tax Transparent Entity itself under Article 4.3.2. This includes CFC tax allocated to the Tax Transparent Entity under the GloBE Rules. The June 2024 AG in this respect provides for specific rules in case: (a) a Tax Transparent Entity is owned by multiple Reference Entities, (b) a Flow-through Entity qualifies as both a Tax Transparent Entity and a Reverse Hybrid Entity, or (c) it concerns the allocation of Blended CFC Taxes.

Taxes paid by Constituent Entity-owners with respect to Hybrid Entities

A Hybrid Entity for GloBE purposes is a separate taxable person for income tax purposes in the jurisdiction where it is located but fiscally transparent in the jurisdiction where its owner is located. Covered Taxes included in the financial accounts of a Constituent Entity-owner in relation to a Hybrid Entity are allocated to the Hybrid Entity under the IIR and UTPR. 

The June 2024 AG confirms that the definition of an owner for purposes of the classification of an Entity as a Hybrid Entity includes both a direct and an indirect owner. As such, if an indirect owner of a Hybrid Entity is subject to tax on the income of such Hybrid Entity, the allocation rules for Covered Taxes are also to be followed by such indirect owner.

Since jurisdictions without a corporate income tax or another Covered Tax cannot qualify an entity for tax purposes, Entities located in such jurisdictions can in principle not be considered Hybrid Entities. This is even the case if the owners would qualify these entities as tax transparent entities. The June 2024 AG states, however, that the Hybrid Entity definition also applies to such entities if they are treated as fiscally transparent in the jurisdiction where their owners are located. This only holds if these entities are not Tax Transparent Entities under the deeming provision of Article 10.2.4. 

Taxes paid by Constituent Entity-owners with respect to Reverse Hybrid Entities

The GloBE Rules did not yet provide for allocation of Covered Taxes to a Reverse Hybrid Entity by the Constituent Entity-owner. Amongst others considering the guidance released in view of classification of Flow-through Entities, the June 2024 AG states that Covered Taxes paid by a direct or indirect Constituent Entity-owner with respect to profits of a Reverse Hybrid Entity are allocated to the Reverse Hybrid Entity. The rule applies in the same way as the allocation of taxes to a Hybrid Entity. This – inter alia – means that although tax is allocated to the Reverse Hybrid Entity for purposes of the IIR and UTPR, the tax cannot be allocated to the Reverse Hybrid Entity for QDMTT purposes. Such taxes can, however, be considered at the level of the owner of the Reverse Hybrid Entity for its own QDMTT purposes since such taxes arise as a result of the owner jurisdiction exercising its primary taxing rights. 

Treatment of securitization entities

Securitization entities, often consolidated with the originator or operating as orphan vehicles, are designed to repackage risks without taking on risks themselves. However, their financial operations, particularly those involving hedging arrangements and deferred tax accounting, can lead to significant profits or losses. The OECD has recognized these complexities and has issued new guidance to accommodate the unique nature of securitization entities. This guidance aims to prevent adverse GloBE impacts on these entities, allowing countries to exclude them from the scope of the QDMTT without jeopardizing their eligibility for the QDMTT Safe Harbour.

Treatment of profits or losses arising in a securitization vehicle and QDMTT impact

The OECD has acknowledged the need to accommodate the nature of securitization entities, which in specific circumstances might be consolidated with the originator notwithstanding the fact that in many cases a securitization entity is an orphan vehicle.

Whereas securitization entities are supposed to realize a minimal income only, in view of their role to repackage risks but not take risks themselves, they may still recognize significant profits or losses through hedging arrangements that are not accounted for under hedge accounting. The OECD notes that in such case, the hedging arrangements would be subject to fair value accounting and that the changes would be reflected in the income statement, whereas at the same time the hedged asset or liability might not be subject to such fair value accounting. 

Deferred tax accounting does not resolve the issue, as securitization entities often do not recognize DTAs, either because for local tax purposes the entity is exempt or because the tax base determination ensures only the minimal profit is recognized for tax purposes. 

To prevent adverse GloBE impact on securitization entities, the new guidance allows countries to exclude securitization entities from the scope of QDMTT (and thus from the ETR computation in that country) without jeopardizing the eligibility for the QDMTT Safe Harbour. Also, if QDMTT is to be levied on the income of a securitization entity, such Top-up Tax should preferably be paid by other Constituent Entities in the same jurisdiction. The OECD does not expect that the securitization entity would be a UPE, so that it should not be liable to IIR Top-up Taxation, and countries will be free to choose not to levy UTPR at the level of a securitization entities. The guidance includes a detailed definition of securitization entity and securitization arrangements. 

The OECD announced further guidance in the future to “ensure that the use of securitization transactions (and arrangements of the kind entered into by [securitization entities] that give rise to fair value movements) do not result in in-scope Groups paying Top-up Taxes that are not commensurate with the economic profit that the SPV has made from the activities.” 

How can we support you?

The GloBE Rules have been introduced in the EU and other jurisdictions around the world for years starting on or after 31 December 2023 at the earliest. The newly released June 2024 AG contains various technical details that will impact the calculation of the GloBE ETR in various scenarios. 

Our Pillar Two team is available to support you in analysing and modelling the impact of this new guidance and the GloBE Rules in general on your group, assisting you in setting up compliance processes and exploring ways to mitigate increased administration, taxation and complexity. 

Should you have any questions, please contact a member of our Pillar Two team or your regular trusted contact at Loyens & Loeff. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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