CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation
Under the Pillar Two GloBE rules, Arvind Holdings group has in Country X: GloBE income of EUR 200 million and covered taxes of EUR 20 million. Assume the substance-based income exclusion is nil and no other adjustments. What is the top-up tax for Country X?
The top-up tax is EUR 10 million. The effective tax rate is 20/200 = 10%, which is 5 percentage points below the 15% minimum. Applying 5% to GloBE income of EUR 200 million, with no exclusion, gives EUR 10 million.
- AEUR 10 millionCorrect
- BEUR 0 million
- CEUR 30 million
- DEUR 20 million
Explanation
Effective tax rate = 20/200 = 10%. Top-up percentage = 15% - 10% = 5%. Top-up tax = 5% x 200 = EUR 10 million. Taking 15% of 200 = 30 ignores covered taxes already paid (wrong base), and 20 is just the taxes paid.
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