This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Welcome to the European Tax Blog.

Some of Europe's brightest legal minds look at the tax issues across Europe which could impact multinational businesses.

| 5 minutes read

GloBE Administrative Guidance

In order to achieve consistency, any jurisdiction adopting the global minimum tax or “GloBE” rules has to follow the Model Rules and the Commentary as amended from time to time by Administrative Guidance. This guidance is expected to be issued on a rolling basis, as and when agreed, and is intended to ensure the GloBE rules are implemented and applied in a consistent and co-ordinated manner. 

The first tranche of agreed guidance was published on 2 February and the 111 pages include confirmation on how US GILTI will be treated, the conditions a domestic minimum tax must satisfy in order to be a Qualified Domestic Minimum Top-up Tax (QDMTT), and the resolution of some of the discrepancies between domestic tax bases and the tax base for the GloBE.

Adjustments to the GloBE tax base

Although the concept of a global minimum tax is simple, the rules to achieve it are complex. One of the reasons for this complexity is that the participating jurisdictions all have different domestic tax bases whereas at the heart of the GloBE is an agreed common tax base (based on financial accounts) and consensus on which taxes are taken into account as “covered taxes” to calculate the jurisdictional effective tax rate (ETR). The GloBE tax base reflects a compromise on what items included in the financial statements should or should not be taken into account for the ETR. Some adjustments to the financial accounts are already baked into the Model Rules as they were identified early on as sufficiently material and widely accepted in Inclusive Framework (IF) jurisdictions. But there were still some instances where the GloBE rules did not permit adjustments (and the response to the consultation on implementing the Model Rules in the UK highlighted some of those relevant to the UK).

This means you can have the situation where, under the domestic tax rules, the ETR is well above the 15% minimum rate but because the GloBE tax base and covered taxes are different from those used in computations under the domestic tax law, the GloBE ETR may be below 15% resulting in a top-up tax.

Fair enough, you may say, because how else can you get a common tax base if you allow for all the domestic rules diverging from the financial statements? But what if the policy objective of those tax rules would be undermined if certain allowances were not made?  And where will the OECD/IF draw the line on acceptable tweaks bearing in mind this is adding further complexity to the rules?

The first tranche of administrative guidance identifies a number of areas where the GloBE tax base needs to be adjusted which include dealing with the UK’s corporate rescue debt release rules and the UK’s rules on net investment hedges, although the guidance does not single out the UK by name and equivalent rules in other jurisdictions will similarly benefit.

Debt releases 

Under the GloBE Rules significant top-up tax liabilities could arise where a debtor has a debt released and the resulting accounting income is not taxed under the domestic legislation. In the corporate rescue context, imposing a top-up tax on the release of debt in this way would defeat the purpose of the domestic tax rule and impose a tax burden on companies already in financial distress and so the guidance provides that, in certain circumstances (including those which mirror the conditions for the UK’s corporate rescue rules), an election can be made to exclude the debt release from the GloBE tax base. There is no provision for the creditor in the first tranche of guidance, however, but the IF will consider whether further guidance in relation to the creditor is necessary. Debt releases outside of the corporate rescue context will not be excluded from the GloBE tax base so in-scope groups should look to tidy up any intra-group loans before the rules commence.

Hedges of investments in foreign operations

The UK’s Disregard Rules exempt forex gains and losses from transactions that hedge the currency risk associated with certain net investments in foreign operations and it is welcome to see that the guidance provides that an MNE Group may elect to treat gains or losses on a net investment hedge as excluded from the GloBE calculation. This will prevent such hedges from distorting the ETR and will align the treatment of the hedge with the treatment of the equity investment it is hedging.


The guidance sets out what a domestic minimum tax must look like to be treated as a QDMTT. It must be consistent with the design of the GloBE rules and must provide for outcomes that are consistent with the GloBE rules. The IF will develop a multilateral review process this year to assess whether a domestic minimum tax is to be treated as a QDMTT.

There are two significant advantages of having a QDMTT and so the take-up is expected to be large. First, the QDMTT will prevent another jurisdiction from applying a top-up tax in respect of low-taxed profits in the QDMTT jurisdiction – so enabling the QDMTT jurisdiction to get tax revenues that would otherwise be picked up elsewhere. The QDMTT will not credit CFC taxes either so that keeps a larger share of revenue for the QDMTT jurisdiction.

Second, there will be a QDMTT safe harbour (in later guidance) which will provide compliance simplifications for MNE groups operating in a jurisdiction that has adopted a QDMTT that meets certain conditions. One such simplification is exempting the MNE group from the requirements to perform additional GloBE calculations in respect of constituent entities located in a safe harbour jurisdiction. This will be a game changer (assuming enough QDMTTs meet the conditions which are to be developed in future work) as it would let the QDMTTs do all the heavy lifting rather than the GloBE rules themselves in order to achieve the 15% global minimum tax.

The US corporate alternative minimum tax (CAMT) is too different from the GloBE rules to be treated as a QDMTT so the CAMT will be another layer of complexity to grapple with for groups with US entities.

Treatment of US GILTI

The guidance helpfully clarifies the treatment of US GILTI. It is clear that there is no possibility of the US GILTI rules being brought into line with the GloBE rules in the near future and so the guidance provides that GILTI in its current form will be treated as a CFC tax regime (rather than equivalent to the income inclusion rule) and will be taken into account as a “covered tax” for the purpose of the ETR calculation. The issue then is how you allocate GILTI taxes to the level of the jurisdiction of the constituent entity that earned the income that triggered the tax because GILTI itself blends the income/losses and/or creditable taxes of multiple CFCs. The answer is that GILTI will be treated as a “Blended CFC Tax Regime” and the guidance provides a special, time limited, allocation method. The IF will consider whether the special allocation methodology should continue beyond 30 June 2027.

Next steps for implementation in the UK

We await the publication of the Spring Finance Bill to see the draft legislation on the QDMTT and the revised Multinational Top-up Tax (MTT) which will include elements of the administrative guidance. It was confirmed in the Autumn Statement that the UK will adopt a QDMTT from the start of the MTT and that the threshold for the QDMTT will be the same as for the MTT but that it will apply to wholly domestic groups as well as those which are multinational even though purely domestic groups would not be within the scope of the GloBE Rules.  

The UK rules will also build into the MTT and the QDMTT the agreed safe harbours. But further changes are likely in future guidance and so the legislation will inevitably go through further iterations before we get to the “final” version – if these rules can ever be final!


slaughterandmay, zandrews, pillartwo, oecd, globerules, internationaltaxreform