Allocation of Top-up Tax to Constituent Entities

5.2.4 — the formula

• Top-up Tax of a CE = Jurisdictional Top-up Tax × GloBE Income of the CE ÷ aggregate GloBE Income of all CEs that have GloBE Income

Only an entity with income takes a share

The article applies to each Constituent Entity "that has GloBE Income", and the denominator is the aggregate of those that do. A loss-making entity's share is nil, not negative, and its loss is not in the denominator. Dividing by the Net GloBE Income of the jurisdiction, losses netted, would allocate more than the Jurisdictional Top-up Tax.

The shares add up to the whole

Because the denominator is the sum of the positive incomes, the allocations across all entities with income equal the Jurisdictional Top-up Tax. A test checks that.

5.2.5 — no Net GloBE Income this year

Where the Top-up Tax comes from a recalculation and there is no Net GloBE Income this year, the entity's income in the years recalculated is used. The caller supplies the right year's figures; the question says so.

When the allocation matters

Where the UPE applies the Income Inclusion Rule and owns every low-taxed entity in the jurisdiction outright, the whole Top-up Tax falls on it and the split between entities changes nothing. The allocation matters where parents hold different shares of different entities — a Partially-Owned Parent Entity, an intermediate parent with a minority stake — and where part of an entity's Top-up Tax is charged under the Income Inclusion Rule and the rest under the Undertaxed Profits Rule. Where a Qualified Domestic Minimum Top-up Tax has taken the jurisdiction's figure to nil, no allocation is needed. An Article 4.1.5 amount is not allocated this way: it goes to the entity that generated it.