GloBE – February 2023 significant changes and further detail

The OECD issues amendments to the operation of the Global Anti-Avoidance Base Erosion (“GloBE”) Model Rules (Pillar 2) and additional clarification of some areas.


The global 15% minimum tax measures proposed by the OECD continue to take form and on 2 February 2023, a further 111 pages of guidance and amendments were released.

The guidance was not well received by a section of the US political base with an immediate attack being launched by Jason Smith, the Chairman of the House Ways and Means Committee followed up by an open letter to OECD.

With still some miles left in this battle Republicans threaten trade measures if the mechanism which would allow non-US jurisdictions to take US tax (undertaxed payments rule (“UTPR”) becomes effective.

What is the new guidance?

The document is mostly clarifications of the detail with the new text to be incorporated into the Model Guidance later in the year. However, there are some significant changes which may be of interest.

The volume of additional guidance (and pointers to further guidance to come) required serves to highlight how very complex the full Model Rules are to apply and further strengthen the need for appropriate and wide ranging simplified permanent safe harbours.

Key points covered

Quite a few of the points covered are of wide applicability to anyone doing a full Model Rules calculation. Highlighted below are the main points:

  • Clarification that the deferred tax amounts used in the full Model Rules are those in the Consolidated Accounts that relate to an entity, whether included in that entity’s solo accounts or not (section 1.3)
  • If intra-group transactions cross border are accounted for at cost, they need to be restated to market value in line with the arm’s length principle. Further guidance and simplifications to come to avoid double taxation (section 2.1)
  • Non-taxable debt releases are adjusted for but only in limited circumstances (section 2.4)
  • A new adjustment to GloBE income in respect of defined benefit pension schemes (contribution less expense or plus income as an income reducing adjustment (section 2.5)
  • A significant amendment (“Excess Negative Tax Expense”) is introduced which can be applied to prevent the top-up tax percentage being in excess of the Minimum Rate (section 2.7). The adjustment is mandatory if this is caused by negative Covered Taxes and there is a GloBE profit; and elective if caused by negative Covered Taxes and there is a GloBE loss.
  • For equity investments, a new jurisdictional election (“Equity Investment Inclusion Election”) has been created that allows tax credits and losses to flow through to the owner rather than being excluded. Further guidance is expected on this complex but useful addition to the Rules (section 2.9)
  • For a limited time period, up to periods beginning on or before 31 December 2025, a ‘simplified’ method of allocating GILTI taxes and taxes for other CFC regimes, groups taxes from jurisdictions together rather than treating each jurisdiction separately (“Blended CFC regimes”). GILTI, and similar taxes are therefore brought into the GloBE regime and reduce any top-up tax required in respect of the jurisdictions already charged to tax by the US or any jurisdiction with a similar regime (section 2.10). Hopefully a welcome addition for the US and alleviates some of the concerns raised by Mr Smith (see above links).
  • The whole of section 3 covers insurance groups - we have covered this section at the end of this summary.
  • Where existing deferred tax assets exist in relation to tax credits on transition, a simplified method of recasting these to the Minimum Rate (15%) is brought in for use only where the domestic rate is higher than this Minimum Rate (section 4.1)
  • Where groups increase the carrying value of assets via transactions within a group or within an entity after 30 November 2021 and before a Transition Year, adjustments will be made to ignore this uplift (section 4.2 and 4.3)
  • Qualified Domestic Minimum To-up Taxes (“QMDTT”) are expected to be a key feature of GloBE and further guidance is expected on these. It is re-emphasised that in order to be counted as QMDTT, a tax must:
    • Follow the architecture of the GloBE rules
    • Use mechanisms that are substantially similar to the GloBE rules to calculate income and tax
    • Use the same data points for the QMDTT as for GloBE
    • Produce an outcome consistent with GloBE objectives (and therefore apply to GloBE definitions of entities and thresholds as a minimum) with most of the complexities of GloBE being embedded in the QMDTT.

However where a QMDTT does apply, it seems likely that the calculations will replace those required under GloBE rather than being duplicative via a permanent QDMTT safe-harbour. There is no further guidance the procedure or body that will assess and grant Qualified status. Hopefully this will be forthcoming shortly.

In addition to the relatively mainstream topics above, there are further measures which are of specific interest which we have outlined below.

Detailed areas of guidance

It is worth reading the new guidance if you have an interest in the following areas:

  • An explanation of how to convert local currency into Euros for the threshold tests (section 1.1)
  • If your top company (ultimate parent entity – “UPE”) prepares accounts where ownership interests are not consolidated, the circumstances under which deemed consolidation applies (section 1.2)
  • Sovereign wealth funds are to be treated as if they were governmental entities which removes the need to consider all its subsidiaries as part of one group for the threshold tests (section 1.4)
  • Excluded entities to include where holding and investment (including debt) and ancillary matters are both undertaken (section 1.5)
  • Adaptation of the threshold test to cover the trading activities of Non-Profit Organisations and their subsidiaries (section 1.6)
  • Gains or losses on currency derivatives accounted for as net investment hedges will follow the treatment of the asset which they hedge (i.e. if an election to make a gain or loss on the asset an Excluded Equity Gain is made, it will also cover the net investment hedge) (section 2.2)
  • Where a distribution contains equity and liability components only the equity part can be an Excluded Dividend (section 2.3) and Covered Taxes relate only to that part (section 2.6)
  • A measure to make sure the GloBE rules work appropriately where a jurisdiction does not adjust for foreign tax credits in a loss situation through losses and a DTA on losses (section 2.8)

For insurance groups only

The Model Rules are especially complex for insurance groups and in some cases, amendments were required to allow them to work in the way intended. It is good to see the OECD Inclusive Framework being adjusted for feedback and we hope this continues through implementation and beyond.

We have commented on these new sections, and where further simplifications or clarifications could be made in our response to the Public Consultation on the GloBE Information Return. 


The insurance section contains further guidance on:

  • Broadening out the election for taxable distribution method consolidated Investment Entities (Article 7.6 of the Model Rules), and the exclusion from Intermediate and Partially Owned to those which are part owned by insurance companies (“Insurance Investment Entities”) (sections 3.1 and 3.2)
  • A recognition the Rules in Article 7.6 are complex and further simplification and guidance is being considered (section 3.1)
  • A very welcome recognition that Tier 1 capital for insurers should be treated the same as for banks with interest on capital instruments being adjusted (Section 3.3)
  • An adjustment to ensure that where there is a deduction for dividends received through an increase in reserves, those dividends are not also excluded (section 3.4.1) and similar for excluded equity gains or losses (section 3.4.2)
  • An election to allow entities to include all dividends in the calculation of GloBE income and Covered Taxes to avoid having to segregate dividends and tax on those dividends relating to assets held for less than one year for the purposes of the Excluded Dividend calculations (section 3.5)
  • A very welcome extension of the Tax Transparency Election at Article 7.5 of the Model Rules to mutual insurance groups (section 3.6)