Acquisitions and disposals of Constituent Entities

First: is it taxed as an asset deal

If the target's jurisdiction treats the sale of the Controlling Interest like a sale of the assets and liabilities, and taxes the seller on the difference between tax basis and price or fair value, Article 6.3 applies instead.

Membership in the acquisition year

Any line-by-line consolidation in the year makes the target a member of that Group for the year. It can be a member of the selling Group and the buying Group in the same year, each counting only what is in its own consolidated statements.

Historical carrying values

The target computes GloBE Income or Loss and Adjusted Covered Taxes on its historical carrying values, in the acquisition year and every later year. Purchase accounting adjustments stay out.

The carve-out: pro rata, and at the stepped-up value

Eligible Payroll Costs are those in the Group's consolidated statements. Eligible Tangible Assets are taken in proportion to the part of the year in the Group.

Two carrying values for one asset

For GloBE Income or Loss the target keeps its historical carrying values: the purchase price creates no step-up, and goodwill, customer lists and other intangibles recognised on the acquisition are ignored, with the deferred tax on them. For the Substance-based Income Exclusion the opposite holds: Eligible Tangible Assets are taken at the value in the buyer's Consolidated Financial Statements, purchase accounting adjustments included, because that is what the group actually paid. Eligible Payroll Costs are those in each group's own consolidated statements for its period of ownership.

Deferred tax follows the target

Its deferred tax assets and liabilities carry over as if the buyer had always controlled it — except a GloBE Loss Deferred Tax Asset, which does not. For the recapture rule its deferred tax liabilities are treated as reversed by the seller and as arising in the acquisition year for the buyer.

The five-year recapture clock restarts

For the seller, the target's deferred tax liabilities are treated as reversed when it leaves, so nothing is recaptured afterwards. For the buyer, the five years run afresh from the acquisition. If an acquired liability has still not reversed at the end of the fifth year, the buyer's Covered Taxes are reduced in that year — the earlier year is not recalculated, since the buyer never computed it — and Article 4.1.5 can follow if that makes them negative. The exception for fair value accounting does not cover every liability created by purchase accounting: only those on assets that go on being carried at fair value.

A parent in two groups

A target that is a Parent Entity applies the Income Inclusion Rule separately to its Allocable Share for each Group.

Points the Commentary settles

• Whether an entity the target owns is low-taxed is decided separately for each group, on that group's own blending in the jurisdiction: it can be low-taxed for the seller and not for the buyer
• The historical-value rule applies to acquisitions made before the GloBE Rules applied as well as after; the rest of Article 6.2 applies from the Transition Year
• Push-down accounting may be used only for an acquisition before 1 December 2021 where the group lacks the records to work from unadjusted values, and then the purchase accounting deferred tax counts too
• A share deal is treated as an asset deal only if the target's jurisdiction treats it as one — which includes the target joining a tax consolidated group — and taxes the seller by reference to the target's inside basis. The seller's own gain on the shares remains an Excluded Equity Gain; the target's gain is counted in its jurisdiction
• Control can be acquired by a small purchase that tops up an existing holding; later purchases are not acquisitions of control