Pillar Two: GloBE Information Return

Many corporate income tax returns require lodgement of the foundational information only with detailed information provided in the supporting workpapers.  This is not how the GIR operates. While there is a summary of the GloBE obligations for the MNE group contained in each GIR lodged discussed below, the GIR is based on the inclusion of detailed information being provided for each Constituent Entity or Jurisdiction for a transitional period. MNEs will also be required to retain supporting workpapers, which revenue authorities may request. 

The operation of a tax return filing and payment obligation is left to the determination of a local jurisdiction.  This is expected to be in line with existing tax filing and payment procedures.  This will also enable local jurisdictions to require additional data points.

For a transitional period there is an election to adopt simplified jurisdictional reporting framework. The Fiscal Years covered by this are those beginning on or before 31 December 2028, but not including a Fiscal Year that ends after 30 June 2030.

This election is limited and only applies where for a jurisdiction where there is either no Top-up Tax liability or if there is a Top-up Tax Liability it does not need to be allocated on a Constituent Entity by Constituent Entity basis.

Where the election applies information can be provided at an aggregated level, although in some cases the GloBE rules still may require a calculation at the Constituent Entity level although it can be reported at the jurisdictional level. 

The GIR is based on the full provision of information subject to the simplification mechanisms involved in the safe harbours, de minimis and other elections.  This is the case even where it is clear that the 15% ETR threshold is reached.  That is, there is no mechanism whereby MNEs can rely on a ‘reasonable to assume’ position even though it is clear that no top-up tax would apply in the circumstance. 

There is sensitivity surrounding the dissemination of the GIR to all jurisdictions in which an MNE is located. 

The approach adopted by the Inclusive Framework is broadly as follows:

• All implementing jurisdictions are provided with:
  • General information relating to the identification of the MNE Group including the Filing Constituent Entity, the Reporting Fiscal Year and details of the Consolidated Financial Statements of the UPE
  • The corporate structure including any changes specifying the status of each Constituent Entity under the GloBE rules (eg. as an Excluded Entity or a JV etc)
  • High level information summary including information on the ETR disclosed by ranges in increments of 2.5% from 0% to 30% (shown below) and whether a Qualifying Domestic Minimum Top-up Tax (QDMTT) applies or an Income Inclusion Rule (IIR) or UTPR applies;
  • Details of where the Substance-based Income Exclusion (SBIE) exceeds Net GloBE Income
• A jurisdiction with taxing rights in addition obtains:
  • Sections of the GIR that relate to ETR and Top-up Tax including allocation and attribution to those jurisdictions
  • Applicable safe harbours and exceptions
• The jurisdiction of the UPE is provided with the whole GIR (described below);

The document states that there is further work to be done in relation to the potential information to be provided to non-implementing jurisdictions.

In most cases a Designated Filing Entity will be appointed by the MNE Group who will lodge the GIR. In this circumstance the jurisdiction of the Designated Filing Entity will distribute the relevant sections to all implementing jurisdictions, jurisdictions with taxing rights and the jurisdiction of the UPE (if different) as above.  This however is subject to an important proviso. The Designated Filing Entity must be located in a jurisdiction which has a Qualifying Competent Authority Filing Agreement with the jurisdiction of the Constituent Entity and which is operational for that reporting year.

If there is no operative Qualifying Competent Authority Filing Agreement in place between the UPE or Designated Filing Entity jurisdiction and the local jurisdiction of the Constituent Entity, then the Constituent Entity will be required to file a GIR with the local revenue authorities.

Where there is Designated Filing Entity, a Constituent Entity is required to notify the local revenue authority that such a Designated Filing Entity has been appointed.

A Multilateral Instrument will need to be developed for the exchange of information between revenue authorities. 

The GIR needs to be lodged up to 15 months after the last day of the reporting period.

Jurisdictions have broad flexibility to apply domestic rules for the administration of GIRs including payments, penalties and amendments. This may lead to a divergence of procedures which MNEs may need to manage on a case by case basis.

Whilst the Transitional Safe Harbor will provide a basis for a reduction of compliance for most MNEs, it is unlikely to eliminate the need to put in place very significant processes for the GloBE calculations for most MNEs. Given the information required is now known though this release, it is time for MNEs to accelerate their GloBE projects to ensure systems are in place for data collection in many cases from January 1 2024.  MNEs should not underestimate the task ahead.

MNEs will be required to make a decision on whether they will  prepare data on a Constituent Entity by Constituent Entity basis or a Jurisdictional basis knowing that lodgement based on a Jurisdictional basis is likely to be available only for the first 3 years.