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CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation

Case: Kaveri Ltd, an Indian company, has a subsidiary in a low-tax country. The group is within the scope of GloBE rules. In a jurisdiction, the GloBE income is Rs 200 crore and covered taxes are Rs 20 crore. Ignoring substance-based income exclusion and other adjustments, what is the top-up tax at the minimum rate of 15%?

The effective tax rate is 20/200 = 10%, so the top-up percentage is 15% minus 10% = 5%. Applied to GloBE income of Rs 200 crore, the top-up tax is Rs 10 crore. Rs 30 crore is total tax at 15% without deducting taxes already paid.

  1. ARs 5 croreCorrect
  2. BRs 10 crore
  3. CRs 30 crore
  4. DRs 20 crore

Explanation

Effective tax rate = 20/200 = 10%. Top-up percentage = 15% - 10% = 5%. Top-up tax = 5% x 200 = Rs 10 crore. Rs 30 crore is the full tax at 15%, wrongly taken without reducing covered taxes of Rs 20 crore... Correct is Rs 10 crore.

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