CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation
A multinational group's Pillar Two computation for a low-tax jurisdiction shows GloBE income of Rs 400 crore, covered taxes of Rs 30 crore, and no substance-based income exclusion. The minimum rate is 15%. What is the top-up tax for the jurisdiction?
The top-up tax is Rs 30 crore. The jurisdictional effective rate is 7.5% (30/400), so the shortfall against the 15% minimum is 7.5%, which applied to GloBE income of Rs 400 crore gives Rs 30 crore.
- ARs 30 croreCorrect
- BRs 60 crore
- CRs 22.5 crore
- DRs 37.5 crore
Explanation
Effective tax rate = 30/400 = 7.5%. Top-up percentage = 15% - 7.5% = 7.5%. Top-up tax = 7.5% x 400 = Rs 30 crore. Rs 60 crore wrongly applies the full 15% to income and ignores covered taxes already paid.
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