Constituent Entities
- Applies
- FY2024 onwards
- Reviewed
- Rule
- P2-CE-2024.1
What is a Constituent Entity under Pillar Two?
Any entity in the consolidated accounts, or left out only for size, materiality or sale, and each permanent establishment, other than an Excluded Entity.
Per GloBE Model Rules (Pillar Two), December 2021, Article 1.2, MNE Group and Group
A Constituent Entity is any Entity included in a Group, and any Permanent Establishment of a Main Entity that is. A Group is a collection of Entities related through ownership or control whose assets, liabilities, income, expenses and cash flows are included in the Consolidated Financial Statements of the Ultimate Parent Entity, or are excluded from them solely on size or materiality grounds or because the Entity is held for sale; and also an Entity with Permanent Establishments in other jurisdictions that is not part of another Group. A Permanent Establishment is treated as separate from its Main Entity and from its other Permanent Establishments. A Constituent Entity does not include an Excluded Entity.
Each Constituent Entity has its own GloBE Income or Loss and Adjusted Covered Taxes, and is located in a jurisdiction for the jurisdictional calculation.
What catches people
Left out of the accounts, still in the Group
- An Entity excluded from the consolidated financial statements solely on size or materiality grounds
- An Entity excluded solely because it is held for sale
- Any other reason for leaving an Entity out does not bring it into the Group on this ground
Proportionally consolidated entities and joint operations
An Entity whose share of assets, liabilities, income and expenses is brought into the Consolidated Financial Statements line by line — a joint operation, or an Entity reported under proportional consolidation — is a Constituent Entity. Only the portion reflected in the consolidated statements is taken into account, for the revenue threshold as for everything else.
A single entity with branches
An Entity in one jurisdiction with Permanent Establishments in others, not part of another Group, is a Group in itself. The Main Entity and each Permanent Establishment are Constituent Entities.
One foreign entity or branch is enough — but not a stateless one alone
A single subsidiary or Permanent Establishment in another jurisdiction makes a Group an MNE Group, even one that earns no income. A standalone Entity whose only Permanent Establishment is a stateless one — the fourth kind in the definition, recognised by no other jurisdiction — is not a Group under Article 1.2.3.
A Permanent Establishment stands apart
It is treated as separate from the Main Entity and from every other Permanent Establishment of that Main Entity.
The last word is the Excluded Entity carve-out
An Excluded Entity is never a Constituent Entity, even if it is in a Group.
Order of testing
- 1
Membership of a Group
Article 1.2: consolidated, left out only for size, materiality or held for sale, or a Main Entity of its own.
- 2
Excluded Entities
Article 1.3.3: an Excluded Entity is not a Constituent Entity.
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.
A consolidated subsidiary
The Entity is consolidated line by line in the Ultimate Parent Entity's statements and is not an Excluded Entity.
Computed
The Entity is a Constituent Entity as computed: its assets, liabilities, income, expenses and cash flows are included in the Consolidated Financial Statements of the Ultimate Parent Entity (Article 1.2.2(a)), and it is not an Excluded Entity. Based on what you supplied.
Decided by the membership of a group
Left out for materiality
A small subsidiary the Ultimate Parent Entity does not consolidate solely because it is immaterial.
Computed
The Entity is a Constituent Entity as computed: it is left out of the Consolidated Financial Statements solely on size or materiality grounds, which does not take it out of the Group (Article 1.2.2(b)), and it is not an Excluded Entity. Based on what you supplied.
Decided by the membership of a group
A branch
A Permanent Establishment of a Main Entity that is a Group in itself.
Computed
The Permanent Establishment is a Constituent Entity as computed: its Main Entity is in a Group because it is an Entity located in one jurisdiction with Permanent Establishments in others and is not part of another Group, which is a Group in itself (Article 1.2.3), and Article 1.3(b) makes any Permanent Establishment of such a Main Entity a Constituent Entity. It is treated as separate from the Main Entity and from every other Permanent Establishment of that Main Entity. Based on what you supplied.
Decided by the membership of a group
An Excluded Entity in the Group
An Entity in the Group that is an Excluded Entity is not a Constituent Entity.
Computed
It is not a Constituent Entity as computed: although it is in a Group, Article 1.3.3 provides that a Constituent Entity does not include an Entity that is an Excluded Entity. Based on what you supplied.
Decided by the excluded entities
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.
Not computed yet
2 inputs still need your determination:
- Are you asking about an Entity, or about a Permanent Establishment of a Main Entity?
- How does the Entity — or the Main Entity of the Permanent Establishment — come to be in a Group? Its figures are in the Ultimate Parent Entity's Consolidated Financial Statements; or it is left out of them solely on size or materiality grounds or because it is held for sale (neither takes it out of the Group); or it is a Main Entity with Permanent Establishments that is a Group in itself; or none of these.
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
GloBE Model Rules (Pillar Two), December 2021 — Article 1.2, MNE Group and Group
What is in a Group
https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/12/tax-challenges-arising-from-digitalisation-of-the-economy-global-anti-base-erosion-model-rules-pillar-two_eed81a23/782bac33-en.pdfGloBE Model Rules (Pillar Two), December 2021 — Article 1.3, Constituent Entity
The article this rule encodes
https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/12/tax-challenges-arising-from-digitalisation-of-the-economy-global-anti-base-erosion-model-rules-pillar-two_eed81a23/782bac33-en.pdfConsolidated Commentary to the GloBE Model Rules (May 2026) — Commentary to Articles 1.2 and 1.3, paragraphs 17 to 31
Joint operations and proportional consolidation; held-for-sale and immaterial entities; the single foreign entity or branch; the stateless Permanent Establishment
https://www.oecd.org/content/dam/oecd/en/publications/reports/2026/05/tax-challenges-arising-from-the-digitalisation-of-the-economy-consolidated-commentary-to-the-global-anti-base-erosion-model-rules-2026_24289ddf/4377e89f-en.pdf