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Excluded Dividends

Applies
FY2024 onwards
Reviewed
Rule
P2-EXDIV-2024.1
By

Which dividends are excluded from GloBE Income?

All except those on a holding under 10% held for less than 12 months, and on some Investment Entity interests.

Per GloBE Model Rules (Pillar Two), December 2021, Article 3.2.1(b), Excluded Dividends

A Constituent Entity's Financial Accounting Net Income or Loss is reduced by Excluded Dividends: dividends or other distributions received or accrued in respect of an Ownership Interest, except for a Short-term Portfolio Shareholding and an Ownership Interest in an Investment Entity that is subject to an election under Article 7.6. A Portfolio Shareholding is Ownership Interests held by the MNE Group carrying rights to less than the published share of the profits, capital, reserves or voting rights of the Entity at the date of the distribution; it is short-term where the Constituent Entity receiving the dividend has economically held it for less than the published period at that date.

A participation exemption of the Rules' own, applied the same way whatever local law does. Only a holding that is both small and recent stays in income.

Two tests, measured differently

Which dividends stay in income

  • Portfolio and short-term: INCLUDED
  • Portfolio, held for the published period or longer: excluded
  • Non-portfolio, however briefly held: excluded
  • An Investment Entity under an Article 7.6 election: INCLUDED

The size test is the group's

All Ownership Interests carrying the same rights held anywhere in the MNE Group are added together. Because the definition says profits, capital, reserves OR voting rights, the lowest of the four decides: a holding is non-portfolio only if it reaches the share on every one.

The time test is the entity's

It is the receiving Constituent Entity's own uninterrupted economic ownership at the date of the distribution. An intra-group transfer restarts it; a GloBE Reorganisation does not. Where shares of one class were bought at different times, each tranche is tested on its own, and a disposal is treated as coming from the most recently acquired shares.

An election the other way

A Five-Year Election, entity by entity, includes all dividends on Portfolio Shareholdings whatever the holding period. It does not reach non-portfolio holdings.

Expenses are not disallowed

The adjustment is the dividend alone. Tax paid on a dividend that stays in income counts as a Covered Tax; tax on an Excluded Dividend comes out of Adjusted Covered Taxes.

Order of testing

  1. 1

    Inputs requiring your determination

    Every input the computation reaches must be supplied; nil is entered, not left blank.

  2. 2

    An Investment Entity under an Article 7.6 election

    Paragraph (b) of the definition takes these out of the exclusion.

  3. 3

    Portfolio Shareholding

    The MNE Group's lowest right against the published share: 'less than'.

  4. 4

    The election to include dividends on Portfolio Shareholdings

    A Five-Year Election, per Constituent Entity.

  5. 5

    Short-term Portfolio Shareholding

    The receiving entity's months of economic ownership against the published period: 'less than'.

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 dividend from a subsidiary

EUR 40 million from a wholly owned subsidiary acquired four months ago.

Computed

The dividend of EUR 40,000,000 is an Excluded Dividend as computed and is taken out of Financial Accounting Net Income or Loss (Article 3.2.1(b)): the MNE Group's rights of 100% are not less than 10% of the profits, capital, reserves or voting rights, so the holding is not a Portfolio Shareholding and the holding period does not matter. Expenses related to the dividend are not disallowed. Based on the figures you supplied.

Workings

Dividend received or accruedArticle 3.2.1(b) — as supplied
EUR 40,000,000
MNE Group's lowest right in the EntityPortfolio Shareholding — less than 10% is a portfolio holding
100%
Adjustment to Financial Accounting Net Income or LossArticle 3.2.1(b) — the Excluded Dividend, removed
(EUR 40,000,000)

Decided by the portfolio shareholding

A recent small holding

EUR 10 on 100 shares of a 3% holding, bought nine months before the dividend — the first tranche of the OECD's Example 3.2.1(b)-1.

Computed

The dividend of EUR 10 is not an Excluded Dividend as computed and stays in GloBE Income or Loss: the MNE Group's rights of 3% are less than 10%, and the receiving Constituent Entity has economically held the interest for 9 months, less than 12, at the date of the distribution — a Short-term Portfolio Shareholding. Tax paid on the dividend counts as a Covered Tax. Based on the figures you supplied.

Workings

Dividend received or accruedArticle 3.2.1(b) — as supplied
EUR 10
MNE Group's lowest right in the EntityPortfolio Shareholding — less than 10% is a portfolio holding
3%
Months economically held by the receiving entityShort-term Portfolio Shareholding — less than 12 months is short-term
9 months
Adjustment to Financial Accounting Net Income or LossNil — paragraph (a) of the definition of Excluded Dividends
EUR 0

Decided by the short-term portfolio shareholding

The older tranche of the same holding

EUR 20 on the 200 shares held for eighteen months.

Computed

The dividend of EUR 20 is an Excluded Dividend as computed and is taken out of Financial Accounting Net Income or Loss (Article 3.2.1(b)): the holding is a Portfolio Shareholding at 3%, but the receiving Constituent Entity has economically held it for 18 months, not less than 12, so it is not short-term. Expenses related to the dividend are not disallowed. Based on the figures you supplied.

Workings

Dividend received or accruedArticle 3.2.1(b) — as supplied
EUR 20
MNE Group's lowest right in the EntityPortfolio Shareholding — less than 10% is a portfolio holding
3%
Months economically held by the receiving entityShort-term Portfolio Shareholding — less than 12 months is short-term
18 months
Adjustment to Financial Accounting Net Income or LossArticle 3.2.1(b) — the Excluded Dividend, removed
(EUR 20)

Decided by the short-term portfolio shareholding

A treasury portfolio under the election

EUR 2 million on a long-held 4% holding, with the Five-Year Election in force.

Computed

The dividend of EUR 2,000,000 stays in GloBE Income or Loss as computed: the MNE Group's rights of 4% are less than 10%, so the holding is a Portfolio Shareholding, and a Five-Year Election is in force for the Constituent Entity to include all dividends on Portfolio Shareholdings whatever the holding period. Based on what you supplied.

Workings

Dividend received or accruedArticle 3.2.1(b) — as supplied
EUR 2,000,000
MNE Group's lowest right in the EntityPortfolio Shareholding — less than 10% is a portfolio holding
4%
Adjustment to Financial Accounting Net Income or LossNil — included under the Five-Year Election (Commentary to Article 3.2.1, paragraph 45)
EUR 0

Decided by the election to include dividends on portfolio shareholdings

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:

  • What dividend or other distribution was received or accrued in respect of the Ownership Interest in the Fiscal Year?
  • Is the Ownership Interest in an Investment Entity that is subject to a Taxable Distribution Method election under Article 7.6?

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.

Thresholds

pillar_two.portfolio_shareholding_share
10% · reviewed 2026-10-04 · source
pillar_two.short_term_holding_months
count 12 · reviewed 2026-10-04 · source

Threshold values are published separately from the rule and carried with a citation. Where none has been published for the period being computed, the rule reports that rather than applying a default.

Sources

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader