Excluded Entities
- Applies
- FY2024 onwards
- Reviewed
- Rule
- P2-EXCL-2024.1
Which entities are excluded from Pillar Two?
Government entities, international and non-profit bodies, pension funds, fund or REIT parents, and entities 95% owned by them that hold their assets.
Per GloBE Model Rules (Pillar Two), December 2021, Article 1.5, Excluded Entity
An Excluded Entity is a Governmental Entity, International Organisation, Non-profit Organisation or Pension Fund, or an Investment Fund or Real Estate Investment Vehicle that is an Ultimate Parent Entity. It is also an Entity at least the published share of whose value is owned, directly or through a chain of Excluded Entities, by such Excluded Entities, where it operates exclusively or almost exclusively to hold assets or invest funds for them or carries out only ancillary activities; or at least a lower published share of whose value is so owned and substantially all of whose income is Excluded Dividends or Excluded Equity Gain or Loss. An Entity held by a Pension Services Entity cannot qualify under the second route. A Filing Constituent Entity may elect, as a Five-Year Election, not to treat an Entity as an Excluded Entity under the second route.
An Excluded Entity is not a Constituent Entity, so the GloBE Rules do not apply to it.
Three routes, in order
1. By type — Article 1.5.1
- A Governmental Entity, International Organisation, Non-profit Organisation or Pension Fund
- An Investment Fund or Real Estate Investment Vehicle — only if it is the Ultimate Parent Entity. One that is not can still be a Constituent Entity and an Investment Entity under Articles 7.4 to 7.6
- The election in Article 1.5.3 does not reach an Entity excluded by type
2. Ownership and activities — Article 1.5.2(a)
- At least the published share of the value of the Entity is owned by Excluded Entities, directly or through a chain — and the chain multiplies, so 95% of 95% is 90%
- It operates exclusively or almost exclusively to hold assets or invest funds for the benefit of the Excluded Entity, or carries out only ancillary activities — or a mix of the two
- 'Value of the Entity' is the value of the issued Ownership Interests, measured at the last change in the relative holdings, not the share of any one right
3. Ownership and income — Article 1.5.2(b)
At least a lower published share owned in the same way, and substantially all of the Entity's income — all or almost all — is Excluded Dividends or Excluded Equity Gain or Loss. Insignificant bank interest does not prevent it.
A Pension Services Entity cannot pass status on
Article 1.5.2 does not apply to an Entity held by a Pension Services Entity, whatever its ownership and activities.
The Non-profit bright line
The activities of an Entity wholly owned by Non-profit Organisations are deemed ancillary if the aggregate revenue of the Group Entities, leaving out the Non-profit Organisation and the Excluded Entities, is less than the revenue threshold or the published share of the MNE Group's revenue, whichever is lower. At or above either, the Entity must meet the tests on its facts.
The election
A Five-Year Election of the Filing Constituent Entity to treat an Entity excluded under Article 1.5.2 as a Constituent Entity — for instance to apply the IIR to a group's subsidiaries rather than leave them to the UTPR.
Order of testing
- 1
Excluded by type
Article 1.5.1. A fund or vehicle must be the UPE.
- 2
Held by a Pension Services Entity
Defeats Article 1.5.2 outright.
- 3
Excluded by ownership and activities or income
Article 1.5.2(a) or (b) against the published shares.
- 4
The election under Article 1.5.3
Reaches only an Entity excluded under Article 1.5.2.
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 pension fund
A Pension Fund is excluded by type.
Computed
The Entity is an Excluded Entity as computed: Article 1.5.1(d) — a Pension Fund. Article 1.5.3 does not let it be treated as a Constituent Entity, because that election reaches only an Entity excluded under Article 1.5.2. Based on what you supplied.
Decided by the excluded by type
A fund's holding vehicle
A vehicle wholly owned by an Investment Fund that is the UPE, holding the fund's assets, with no election made.
Computed
The Entity is an Excluded Entity as computed: Article 1.5.2(a) — at least the required share of its value is owned by Excluded Entities, and its activities meet the activities test. Article 1.5.3 lets the Filing Constituent Entity elect to treat it as a Constituent Entity, which you have indicated has not been done. Based on what you supplied.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 100%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
Decided by the excluded by ownership and activities or income
A sovereign wealth fund's holding company
A special purpose company wholly owned by a sovereign wealth fund that qualifies as a Governmental Entity, existing only to hold the fund's shareholdings. It is excluded through its owner.
Computed
The Entity is an Excluded Entity as computed: Article 1.5.2(a) — at least the required share of its value is owned by Excluded Entities, and its activities meet the activities test. Article 1.5.3 lets the Filing Constituent Entity elect to treat it as a Constituent Entity, which you have indicated has not been done. Based on what you supplied.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 100%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
Decided by the excluded by ownership and activities or income
An operating company owned by a sovereign wealth fund
An airline, a bank or a manufacturer wholly owned by the same fund. Ownership by an Excluded Entity is not enough: it trades on its own account, so it neither holds assets for its owner nor carries out only ancillary activities, and its income is not dividends and equity gains. It is not an Excluded Entity.
Computed
The Entity is not an Excluded Entity as computed: it is not of a kind in Article 1.5.1, and it meets neither Article 1.5.2(a) — 95% owned by Excluded Entities and the activities test — nor Article 1.5.2(b) — 85% owned and substantially all income Excluded Dividends or Excluded Equity Gain or Loss — on the figures you supplied. It is a Constituent Entity if it is in the Group.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 100%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
Decided by the excluded by ownership and activities or income
An investment fund that is not the top of the group
A fund consolidated by a bank or an insurer above it. An Investment Fund is excluded by type only where it is the Ultimate Parent Entity; this one is a Constituent Entity and is computed under the Investment Entity rules.
Computed
The Entity is not an Excluded Entity as computed: it is not of a kind in Article 1.5.1, and it meets neither Article 1.5.2(a) — 95% owned by Excluded Entities and the activities test — nor Article 1.5.2(b) — 85% owned and substantially all income Excluded Dividends or Excluded Equity Gain or Loss — on the figures you supplied. It is a Constituent Entity if it is in the Group.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 0%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Not met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Not met
- 85%
Decided by the excluded by ownership and activities or income
Ownership diluted down a chain
A Co owns 95% of B Co, which owns 95% of C Co: A Co's share of C Co is 90.25%, below the 95% test.
Computed
The Entity is not an Excluded Entity as computed: it is not of a kind in Article 1.5.1, and it meets neither Article 1.5.2(a) — 95% owned by Excluded Entities and the activities test — nor Article 1.5.2(b) — 85% owned and substantially all income Excluded Dividends or Excluded Equity Gain or Loss — on the figures you supplied. It is a Constituent Entity if it is in the Group.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 90.25%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Not met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
Decided by the excluded by ownership and activities or income
Held by a Pension Services Entity
Wholly owned and holding assets, but held by a Pension Services Entity.
Computed
The Entity is not an Excluded Entity as computed: Article 1.5.2 does not apply to an Entity held by a Pension Services Entity, whatever its ownership and activities, so that such a vehicle cannot create a further excluded vehicle. Based on what you supplied.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 100%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
Decided by the held by a pension services entity
The Non-profit bright line
A subsidiary wholly owned by a Non-profit Organisation, with EUR 100 million of aggregate Group Entity revenue against EUR 1 billion of MNE Group revenue: below both EUR 750 million and 25% of Group revenue, so its activities are deemed ancillary.
Computed
The Entity is an Excluded Entity as computed: Article 1.5.2(a) with paragraph 54.3 — the Entity is wholly owned by Non-profit Organisations and its activities are deemed ancillary by the bright-line revenue test. Article 1.5.3 lets the Filing Constituent Entity elect to treat it as a Constituent Entity, which you have indicated has not been done. Based on what you supplied.
Workings
- Value owned by Excluded EntitiesArticle 1.5.2 — as supplied
- 100%
- Ownership required for the activities testArticle 1.5.2(a) — published value. Met
- 95%
- Ownership required for the income testArticle 1.5.2(b) — published value. Met
- 85%
- Aggregate revenue of Group EntitiesParagraph 54.3 — as supplied
- EUR 100,000,000
- Lower of the revenue threshold and the published share of Group revenueParagraph 54.3 — the lower of EUR 750,000,000 and 25% of EUR 1,000,000,000. Aggregate revenue is below it
- EUR 250,000,000
Decided by the excluded by ownership and activities or income
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
1 input still need your determination:
- Is the Entity a Governmental Entity, an International Organisation, a Non-profit Organisation, a Pension Fund, an Investment Fund, a Real Estate Investment Vehicle — or none of these? Each is defined in Article 10.1.
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.
Thresholds
- pillar_two.excluded_entity_ownership_activities
- 95% · reviewed 2026-10-04 · source
- pillar_two.excluded_entity_ownership_income
- 85% · reviewed 2026-10-04 · source
- pillar_two.nfp_ancillary_revenue_share
- 25% · reviewed 2026-10-04 · source
- pillar_two.revenue_threshold
- EUR 750,000,000 · 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
GloBE Model Rules (Pillar Two), December 2021 — Article 1.5, Excluded Entity
The article this rule encodes; Articles 1.5.1 to 1.5.3
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 Article 1.5
Paragraphs 38 to 57, including the Non-profit bright line in 54.3 and 54.4 and the Pension Services Entity carve-out in 44
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