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Additional Current Top-up Tax

Applies
FY2024 onwards
Reviewed
Rule
P2-ACTT-2024.1
By

What is Additional Current Top-up Tax?

Top-up tax charged this year because an earlier year's ETR and top-up tax were recalculated upward, plus any arising from negative covered taxes.

Per GloBE Model Rules (Pillar Two), December 2021, Article 5.4.1, Additional Current Top-up Tax

Where the Effective Tax Rate and Top-up Tax for a prior Fiscal Year is required or permitted to be recalculated under an ETR Adjustment Article, the prior year is recalculated under Articles 5.1 to 5.3 after taking into account the adjustments to Adjusted Covered Taxes and GloBE Income or Loss, and any amount of incremental Top-up Tax resulting from the recalculation is treated as Additional Current Top-up Tax arising in the current Fiscal Year. The amount treated as Additional Current Top-up Tax under Article 4.1.5 is also Additional Current Top-up Tax.

It lets a correction to an earlier year be taxed now, without reopening that year's return. The total is the Additional Current Top-up Tax input to jurisdictional-top-up-tax.

A correction to a past year, charged in the current one

5.4.1 — the recalculation

  • (a) the prior year's Effective Tax Rate and Top-up Tax are recalculated under Articles 5.1 to 5.3 with the adjustments an ETR Adjustment Article requires
  • (b) any incremental Top-up Tax from the recalculation is Additional Current Top-up Tax of the current Fiscal Year
  • The ETR Adjustment Articles are 3.2.6, 4.4.4, 4.6.1, 4.6.4 and 7.3

What it is not for

An ordinary mistake in a GloBE computation, or an adjustment found on an audit of the Income Inclusion Rule or Undertaxed Profits Rule, is not put right this way. Those follow the jurisdiction's normal procedures — an amended return, with interest and penalties. Article 5.4.1 is for a change in a local tax item that feeds through to the GloBE computation, under one of the ETR Adjustment Articles.

Only an increase counts, year by year

Each recalculated year is floored at nil on its own. A recalculation that falls neither reduces the Additional Current Top-up Tax another year produces nor is treated as a relief; whether a decrease gives any relief is not decided by this article, so the working shows nil and the result says so.

The Article 4.1.5 amount is added

Negative Adjusted Covered Taxes in a year with no Net GloBE Income produce Additional Current Top-up Tax of their own unless the group elects to carry the amount forward as Excess Negative Tax Expense instead (see excess-negative-tax-expense). Supplied here so the total that goes into the Jurisdictional Top-up Tax is a single figure.

Who bears it, and on what income

  • Recalculation amounts are allocated between the entities like any other Top-up Tax, by their GloBE Income — of the years recalculated, where the jurisdiction has no Net GloBE Income this year
  • An Article 4.1.5 amount is allocated to the entity that generated the permanent difference: with two entities each losing 100, one with taxes of minus 15 and the other minus 18, the whole 3 goes to the second
  • Where there is no Net GloBE Income for the year, each entity is treated as having GloBE Income equal to the tax allocated to it divided by the Minimum Rate, so that a Parent Entity's Inclusion Ratio can be worked out
  • An entity allocated Additional Current Top-up Tax is treated as a Low-Taxed Constituent Entity for the charging rules, even if its jurisdiction is not low-taxed that year
  • It is worked out before any Qualified Domestic Minimum Top-up Tax is deducted

Whether anything is recalculated is a determination

An empty list is indistinguishable from an unfilled form, so the rule asks first, and requires a row for each recalculation once the answer is yes.

Order of testing

  1. 1

    Inputs requiring your determination

    Whether any prior year is recalculated must be answered; if so, each year needs both its original and recalculated figures.

  2. 2

    Recalculation of prior Fiscal Years

    The incremental Top-up Tax of each recalculated year, floored at nil, plus any Article 4.1.5 amount.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

One prior year recalculated upward

A prior year's Top-up Tax rises from EUR 10 million to EUR 14 million after an adjustment.

Computed

Additional Current Top-up Tax of EUR 4,000,000 arises for FY2026 as computed: Article 5.4.1(b) treats the incremental Top-up Tax from recalculating 1 prior Fiscal Year as Additional Current Top-up Tax arising in the current Fiscal Year. The prior years' own figures are not reopened. It is an input to the Jurisdictional Top-up Tax under Article 5.2.3(c). Based on the figures you supplied.

Workings

FY2025 — Top-up Tax as originally computedArticle 5.4.1 — as supplied
EUR 10,000,000
FY2025 — Top-up Tax as recalculatedArticle 5.4.1(a) — as supplied
EUR 14,000,000
FY2025 — incremental Top-up TaxArticle 5.4.1(b) — the recalculated figure less the original
EUR 4,000,000
Additional Current Top-up Tax for the current yearArticle 5.4.1(b) — the incremental Top-up Tax from each recalculation, with any Article 4.1.5 amount
EUR 4,000,000

Decided by the recalculation of prior fiscal years

One up, one down

One year rises by EUR 4 million and another falls: the fall does not offset the rise.

Computed

Additional Current Top-up Tax of EUR 4,000,000 arises for FY2026 as computed: Article 5.4.1(b) treats the incremental Top-up Tax from recalculating 2 prior Fiscal Years as Additional Current Top-up Tax arising in the current Fiscal Year. The prior years' own figures are not reopened. It is an input to the Jurisdictional Top-up Tax under Article 5.2.3(c). At least one recalculation is lower than the original; Article 5.4.1(b) counts only incremental Top-up Tax, so a decrease neither reduces the figure nor is treated as a relief here. Based on the figures you supplied.

Workings

FY2024 — Top-up Tax as originally computedArticle 5.4.1 — as supplied
EUR 9,000,000
FY2024 — Top-up Tax as recalculatedArticle 5.4.1(a) — as supplied
EUR 2,000,000
FY2024 — incremental Top-up TaxArticle 5.4.1(b) — nil: the recalculation is lower, and a decrease is not incremental Top-up Tax
EUR 0
FY2025 — Top-up Tax as originally computedArticle 5.4.1 — as supplied
EUR 10,000,000
FY2025 — Top-up Tax as recalculatedArticle 5.4.1(a) — as supplied
EUR 14,000,000
FY2025 — incremental Top-up TaxArticle 5.4.1(b) — the recalculated figure less the original
EUR 4,000,000
Additional Current Top-up Tax for the current yearArticle 5.4.1(b) — the incremental Top-up Tax from each recalculation, with any Article 4.1.5 amount
EUR 4,000,000

Decided by the recalculation of prior fiscal years

Nothing recalculated

No prior year is required or permitted to be recalculated.

Computed

No Additional Current Top-up Tax arises for FY2026 as computed: you have indicated that no prior Fiscal Year is required or permitted to be recalculated under an ETR Adjustment Article, and no amount arises under Article 4.1.5. Based on the figures you supplied.

Workings

Additional Current Top-up Tax for the current yearArticle 5.4.1(b) — the incremental Top-up Tax from each recalculation, with any Article 4.1.5 amount
EUR 0

Decided by the recalculation of prior fiscal years

A recalculation and an Article 4.1.5 amount

The first example, with EUR 2 million also arising from negative covered taxes in a loss year.

Computed

Additional Current Top-up Tax of EUR 6,000,000 arises for FY2026 as computed: Article 5.4.1(b) treats the incremental Top-up Tax from recalculating 1 prior Fiscal Year, together with EUR 2,000,000 under Article 4.1.5, as Additional Current Top-up Tax arising in the current Fiscal Year. The prior years' own figures are not reopened. It is an input to the Jurisdictional Top-up Tax under Article 5.2.3(c). Based on the figures you supplied.

Workings

FY2025 — Top-up Tax as originally computedArticle 5.4.1 — as supplied
EUR 10,000,000
FY2025 — Top-up Tax as recalculatedArticle 5.4.1(a) — as supplied
EUR 14,000,000
FY2025 — incremental Top-up TaxArticle 5.4.1(b) — the recalculated figure less the original
EUR 4,000,000
Additional Current Top-up Tax under Article 4.1.5Article 4.1.5 — as supplied
EUR 2,000,000
Additional Current Top-up Tax for the current yearArticle 5.4.1(b) — the incremental Top-up Tax from each recalculation, with any Article 4.1.5 amount
EUR 6,000,000

Decided by the recalculation of prior fiscal years

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Prior Fiscal Years recalculated

One row for each prior Fiscal Year recalculated under an ETR Adjustment Article. Use the Jurisdictional Top-up Tax as originally computed and as recalculated; enter nil where a year originally gave none. Only needed if you answered Yes above.

Not computed yet

1 input still need your determination:

  • Is the Effective Tax Rate and Top-up Tax for any prior Fiscal Year required or permitted to be recalculated under an ETR Adjustment Article — Articles 3.2.6, 4.4.4, 4.6.1, 4.6.4 or 7.3 (Article 5.4.1)?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Sources

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader