4.1/4.2
What is the starting point for calculating adjusted covered taxes?
Financial accounting tax expense
True or False? In some cases, Covered Taxes may be imposed on the Constituent Entity in respect of income included in another Constituent Entity’s GloBE computation.
True
What are temporary differences?
When income or loss is recognized in a different year.
What is the GloBE Loss Election?
Calculates the GloBE Loss Deferred Tax Asset
What is the goal of chapter 4?
Define the Numerator of the ETR Calculation (Adjusted Covered Taxes)
What are the 2 key attributes of adjusted covered taxes?
The amount of any Covered Taxes included in the financial accounts of a Constituent Entity with respect to GloBE Income or Loss of a PE is allocated to whom?
The Permanent Establishment
How many years can a deferred tax liability not be paid before the amount is recaptured?
5 years
How do we calculate a GloBE Loss Deferred Tax Asset?
Net GloBE loss * minimum rate
What is the effect of an increase of Covered Taxes for a Previous Fiscal Year?
There is an adjustment of covered taxes in the FY in which adjustments are made.
How many times can an adjustment be claimed?
Once and for only one entity
The amount of any Covered Taxes included in the financial accounts of its direct or indirect owners under a Foreign Company Tax Regime on their share of the Foreign Company’s income are allocated to whom?
The Constituent Entity
What is the name of the tool that will assist with this calculation
The Pillar Two modeling tool or GloBE Tool
What type of entity is required to make the election at the time of filing of the first GloBE Information Return of the MNE Group that includes the relevant jurisdiction?
A Filing Constituent Entity
What is the effect of decrease of Covered Taxes for a Previous Fiscal Year?
Recalculation of effective tax rate and top-up tax for FY subject to adjustments.
Bonus +200: If decrease is immaterial (<€1m) then annual election will treat it as adjustment of covered taxes in the FY they were made.
Do Covered Taxes include Top Up Taxes?
No
For a Constituent Entity that is a Hybrid, passive income is included in an amount equal to the LESSER or GREATER of: Covered taxes allocated in respect to passive income or top-up tax percentage for the Constituent entity’s jurisdiction multiplied by the amount of the passive income
Where will you go to access the Tool?
BEPS 2.0 | International Tax and Transaction Services (ITTS) | Discover (ey.com)
Can the GloBE Loss Election can be subsequently revoked?
Yes!
And any remaining GloBE Loss Deferred Tax Asset reduced to zero effective as of the start of the first Fiscal Year in which the GloBE Loss Election no longer applies.
What happens in case there is a reduction of applicable domestic tax rate used for computation of deferred tax expense below minimum tax rate?
Same adjustments for previous FY
Which industry has specific taxes related to their business that are called out in Section 4.2 as being excluded from Covered Taxes?
Insurance
Where the GloBE Income of a PE is treated as GloBE Income of the Main Entity, any Covered Taxes in the location of the PE and associated with such income are treated as Covered Taxes of the Main Entity up to:
An amount not exceeding such income multiplied by the highest corporate tax rate on ordinary income in the jurisdiction where the Main Entity is located
Give two examples of a Recapture Exception Accrual
Allison to list
What jurisdictions can an election NOT be made?
Eligible Distribution Tax System.
What happens if €1 million of accrued taxes has been included in adjusted covered taxes and has not been paid within three years after end of FY?
ETR and Top-Up Tax need to be recalculated excluding unpaid amounts from Adjusted Covered Taxes