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

Kaveri Tech Pvt Ltd, an Indian company, is a constituent entity of a multinational group. Which of the following about the Qualified Domestic Minimum Top-up Tax (QDMTT) is correct?

A QDMTT allows the jurisdiction where a low-taxed constituent entity is located to collect the top-up tax itself. Under the GloBE ordering, the QDMTT is credited first and so reduces top-up taxes otherwise collectable by other jurisdictions through the income inclusion rule or undertaxed payments rule.

  1. AIt lets the source jurisdiction collect the top-up tax on low-taxed domestic profits of the constituent entity, with priority over the parent jurisdiction's claim under the income inclusion ruleCorrect
  2. BIt is levied only by the ultimate parent entity's jurisdiction after the undertaxed payments rule applies
  3. CIt replaces the 15% minimum rate with the domestic statutory rate
  4. DIt applies only to individuals who are non-residents

Explanation

A QDMTT is a domestic top-up tax that a jurisdiction imposes on its own low-taxed constituent entities, which brings the domestic ETR up to the minimum and is credited ahead of the IIR and UTPR top-up claims by other jurisdictions. The other options misdescribe who levies it, what rate is used and who is taxed.

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