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The GloBE Loss Election

Applies
FY2024 onwards
Reviewed
Rule
P2-GLE-2024.1
By

What is the GloBE Loss Election?

Instead of deferred tax accounting, a net GloBE loss creates a deferred tax asset at 15%, used against later net GloBE income in the jurisdiction.

Per GloBE Model Rules (Pillar Two), December 2021, Article 4.5, The GloBE Loss Election

In lieu of applying Article 4.4, a Filing Constituent Entity may make a GloBE Loss Election for a jurisdiction. A GloBE Loss Deferred Tax Asset is then established in each Fiscal Year in which there is a Net GloBE Loss for the jurisdiction, equal to the Net GloBE Loss multiplied by the Minimum Rate. The balance is carried forward to subsequent Fiscal Years, reduced by the amount used. It must be used in any subsequent Fiscal Year in which there is Net GloBE Income for the jurisdiction, in an amount equal to the lower of the Net GloBE Income multiplied by the Minimum Rate and the amount of GloBE Loss Deferred Tax Asset available. If the election is revoked, any remaining asset is reduced to zero as of the first day of the first Fiscal Year in which the election no longer applies. The election must be filed with the first GloBE Information Return of the MNE Group that includes the jurisdiction, and cannot be made for a jurisdiction with an Eligible Distribution Tax System.

A loss in a jurisdiction with no corporate income tax produces no deferred tax asset in the accounts, so under Article 4.4 it would shelter nothing. The election gives it one at the Minimum Rate. The price is that Article 4.4 stops applying there, so timing differences are no longer neutralised.

A running balance, in place of deferred tax accounting

The three steps

  • 4.5.1 — a Net GloBE Loss establishes an asset: the loss multiplied by the Minimum Rate
  • 4.5.2 — the balance is carried forward without a time limit, reduced by what is used
  • 4.5.3 — in a year with Net GloBE Income the asset must be used: the lower of that income at the Minimum Rate and the balance
  • 4.1.2(b) — the amount used is an Addition to Covered Taxes for that year

The use is required

Article 4.5.3 says the asset "must be used". A group cannot hold it back for a year in which it would do more good.

What it replaces

The election applies in lieu of Article 4.4 for the jurisdiction. Deferred tax expense in the accounts is no longer counted in Adjusted Covered Taxes there, so a temporary difference — accelerated depreciation, a provision deducted later for tax — can produce Top-up Tax. The opening deferred tax attributes that Article 9.1.1 would bring in are eliminated. The Commentary expects the election to be of greatest use where a jurisdiction imposes no corporate income tax or a very low one.

One chance

The election is filed with the first GloBE Information Return of the group that includes the jurisdiction. It cannot be made in a later year, and a group that revokes it cannot make it again.

Not available

For a jurisdiction with an Eligible Distribution Tax System. A distribution tax is charged only when positive earnings are distributed, so a deemed asset for losses would overstate the Effective Tax Rate.

On revocation

Any remaining GloBE Loss Deferred Tax Asset is reduced to zero from the first day of the first Fiscal Year in which the election no longer applies. The jurisdiction moves to Article 4.4, and its historic deferred tax assets and liabilities are taken into account as if they had always been computed under Articles 4.4 and 9.1.

It belongs to the group, not the entity

The asset is a jurisdictional attribute of the MNE Group. It does not transfer with a Constituent Entity that is sold, even where every entity in the jurisdiction is sold, and a buyer acquires none of it. The buyer may make its own election with its first return that includes the jurisdiction.

A Flow-through Ultimate Parent Entity

May make the election; its asset is computed on the GloBE Loss after the reduction in Article 7.1.2.

Order of testing

  1. 1

    Inputs requiring your determination

    Whether the jurisdiction has an Eligible Distribution Tax System, whether the election is in force, and then the two figures — nil entered, not left blank.

  2. 2

    Eligible Distribution Tax Systems

    Article 4.5.5 — the election cannot be made for such a jurisdiction.

  3. 3

    The GloBE Loss Election

    Without it Article 4.4 applies and nothing is established or used here.

  4. 4

    A Net GloBE Loss for the jurisdiction

    Article 4.5.1 — the loss at the Minimum Rate is added to the balance.

  5. 5

    Net GloBE Income for the jurisdiction

    Article 4.5.3 — the lower of the income at the Minimum Rate and the balance is used, and must be.

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 start-up loss in a no-tax jurisdiction

A group's new operation in a jurisdiction with no corporate income tax makes a Net GloBE Loss of EUR 100 million. The accounts carry no deferred tax asset, because there is no tax to defer; with the election, an asset of EUR 15 million is established.

Computed

A GloBE Loss Deferred Tax Asset of EUR 15,000,000 is established for FY2025 as computed: the Net GloBE Loss of EUR 100,000,000 multiplied by the Minimum Rate of 15% (Article 4.5.1). With the balance brought forward of EUR 0, EUR 15,000,000 is carried forward under Article 4.5.2 and must be used in the next Fiscal Year in which the jurisdiction has Net GloBE Income. While the election is in force Article 4.4 does not apply to the jurisdiction, so deferred tax on timing differences is not counted in its Adjusted Covered Taxes. Based on the figures you supplied.

Workings

Net GloBE Loss of the jurisdictionAs supplied
EUR 100,000,000
Minimum RatePublished value for FY2025
15%
GloBE Loss Deferred Tax Asset brought forwardArticle 4.5.2 — as supplied
EUR 0
GloBE Loss Deferred Tax Asset established in the yearArticle 4.5.1 — the Net GloBE Loss multiplied by the Minimum Rate
EUR 15,000,000
GloBE Loss Deferred Tax Asset carried forwardArticle 4.5.2
EUR 15,000,000

Decided by the a net globe loss for the jurisdiction

The next year, a smaller profit

The same jurisdiction earns Net GloBE Income of EUR 60 million. EUR 9 million of the asset is used and added to Covered Taxes — taking a rate of nil to the Minimum Rate, so no Top-up Tax arises — and EUR 6 million is carried forward.

Computed

EUR 9,000,000 of the GloBE Loss Deferred Tax Asset is used in FY2026 as computed: the lower of the Net GloBE Income of EUR 60,000,000 multiplied by the Minimum Rate of 15% — EUR 9,000,000 — and the balance available of EUR 15,000,000 (Article 4.5.3). The use is required, not elective. The amount used is an Addition to Covered Taxes for the year under Article 4.1.2(b), and EUR 6,000,000 is carried forward. While the election is in force Article 4.4 does not apply to the jurisdiction, so deferred tax on timing differences is not counted in its Adjusted Covered Taxes. Based on the figures you supplied.

Workings

Net GloBE Income of the jurisdictionAs supplied
EUR 60,000,000
Minimum RatePublished value for FY2026
15%
GloBE Loss Deferred Tax Asset brought forwardArticle 4.5.2 — as supplied
EUR 15,000,000
Net GloBE Income at the Minimum RateArticle 4.5.3 — the most that can be used in the year
EUR 9,000,000
GloBE Loss Deferred Tax Asset usedArticle 4.5.3 — the lower of the two; added to Covered Taxes under Article 4.1.2(b)
EUR 9,000,000
GloBE Loss Deferred Tax Asset carried forwardArticle 4.5.2
EUR 6,000,000

Decided by the net globe income for the jurisdiction

The year after, a larger profit

Net GloBE Income of EUR 200 million against the EUR 6 million left: the whole balance is used, covering EUR 40 million of the income, and the rest of the income is exposed to Top-up Tax.

Computed

EUR 6,000,000 of the GloBE Loss Deferred Tax Asset is used in FY2027 as computed: the lower of the Net GloBE Income of EUR 200,000,000 multiplied by the Minimum Rate of 15% — EUR 30,000,000 — and the balance available of EUR 6,000,000 (Article 4.5.3). The use is required, not elective. The amount used is an Addition to Covered Taxes for the year under Article 4.1.2(b), and EUR 0 is carried forward. While the election is in force Article 4.4 does not apply to the jurisdiction, so deferred tax on timing differences is not counted in its Adjusted Covered Taxes. Based on the figures you supplied.

Workings

Net GloBE Income of the jurisdictionAs supplied
EUR 200,000,000
Minimum RatePublished value for FY2027
15%
GloBE Loss Deferred Tax Asset brought forwardArticle 4.5.2 — as supplied
EUR 6,000,000
Net GloBE Income at the Minimum RateArticle 4.5.3 — the most that can be used in the year
EUR 30,000,000
GloBE Loss Deferred Tax Asset usedArticle 4.5.3 — the lower of the two; added to Covered Taxes under Article 4.1.2(b)
EUR 6,000,000
GloBE Loss Deferred Tax Asset carried forwardArticle 4.5.2
EUR 0

Decided by the net globe income for the jurisdiction

No election

A jurisdiction with an ordinary corporate income tax where the group keeps Article 4.4: losses are carried through the deferred tax asset in the accounts.

Computed

No GloBE Loss Deferred Tax Asset is established or used, as determined: no GloBE Loss Election is in force for the jurisdiction, so Article 4.4 applies and losses are carried through the deferred tax asset in the financial accounts. The election can be made only with the first GloBE Information Return that includes the jurisdiction (Article 4.5.5); and if one was made and has been revoked, any remaining GloBE Loss Deferred Tax Asset was reduced to zero from the first day of the first Fiscal Year in which it no longer applied (Article 4.5.4). Based on the determinations you supplied.

Decided by the globe loss election

A distribution-tax jurisdiction

A jurisdiction that taxes companies only when profits are distributed, under a system in force since before July 2021.

Computed

A GloBE Loss Election cannot be made for this jurisdiction, as determined: Article 4.5.5 excludes a jurisdiction with an Eligible Distribution Tax System as defined in Article 7.3. The Commentary gives the reason — a distribution tax is charged only when positive earnings are distributed, so a deemed deferred tax asset for losses would overstate the Effective Tax Rate there. Based on the determinations you supplied.

Decided by the eligible distribution tax systems

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:

  • Does the jurisdiction have an Eligible Distribution Tax System as defined in Article 7.3 — a corporate income tax generally payable only when profits are distributed? A GloBE Loss Election cannot be made for such a jurisdiction (Article 4.5.5).

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.minimum_rate
15% · 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

Share this rule

Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader