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Initial phase of international activity

Applies
FY2024 onwards
Reviewed
Rule
P2-INIT-2024.1
By

What is the Pillar Two initial phase UTPR exclusion?

A group in no more than 6 jurisdictions, with foreign tangible assets up to EUR 50 million, pays no UTPR for its first 5 years in scope.

Per GloBE Model Rules (Pillar Two), December 2021, Article 9.3, Exclusion from the UTPR of MNE Groups in the initial phase of their international activity

During the initial phase of an MNE Group's international activity the Top-up Tax taken into account for the UTPR Top-up Tax Amount is reduced to zero. A Group is in the initial phase for a Fiscal Year if it has Constituent Entities in no more than the published number of jurisdictions and the Net Book Value of Tangible Assets of all Constituent Entities outside the Reference Jurisdiction does not exceed the published amount. The relief does not apply to a Fiscal Year that starts later than the published number of years after the first day of the first Fiscal Year in which the Group came within scope.

It is a relief from the UTPR only. The IIR and a QDMTT are not affected, and the Top-up Tax itself is not reduced.

What the result turns on

Both limbs are required

  • Constituent Entities in no more than the published number of jurisdictions — Stateless Constituent Entities, Investment Entities and Joint Ventures are not counted
  • Tangible Assets outside the Reference Jurisdiction at or below the published amount — those of Stateless and Minority-Owned Constituent Entities count as outside it unless shown to be inside

The Reference Jurisdiction

The jurisdiction with the highest Tangible Assets in the first Fiscal Year the group is in scope. It does not change over the period.

The five-year limit

The relief does not apply to a Fiscal Year that starts after five years from the first day of the first Fiscal Year in scope. A group first in scope for a year beginning 1 January 2025 has none for a year beginning after 31 December 2029. A group in scope before 2024 counts from 1 January 2024, the earliest the UTPR could take effect. The period is never suspended, even if the group drops out of scope.

A choice for the Reference Jurisdiction

The optional Article 9.3.5 lets a Reference Jurisdiction that implements the UTPR disapply the relief to protect its base. It is a jurisdiction's election and is not modelled.

Order of testing

  1. 1

    The five-year limit

    Tested first; a year outside it cannot carry the relief.

  2. 2

    The two limbs of Article 9.3.2

    Jurisdictions and Tangible Assets, both inclusive, both required.

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 small new multinational

In scope since a Fiscal Year beginning 1 January 2025; four jurisdictions and EUR 20 million of Tangible Assets outside the Reference Jurisdiction, tested for a year beginning 1 January 2026.

Computed

The Top-up Tax taken into account for the UTPR Top-up Tax Amount is reduced to zero for this Fiscal Year as computed: the group is in the initial phase of its international activity — 4 jurisdictions against a limit of 6, and EUR 20,000,000 of Tangible Assets outside the Reference Jurisdiction against EUR 50,000,000 — and the Fiscal Year starts within the 5-year limit. The relief is from the UTPR only; the IIR and any QDMTT are not affected. Based on the figures you supplied.

Workings

Jurisdictions with Constituent EntitiesArticle 9.3.2(a) — as supplied
4
Most jurisdictions allowedArticle 9.3.2(a) — published value. Met
6
Tangible Assets outside the Reference JurisdictionArticle 9.3.2(b) — as supplied
EUR 20,000,000
Most Tangible Assets allowed outside itArticle 9.3.2(b) — published value. Met
EUR 50,000,000

Decided by the two limbs of article 9.3.2

Too many jurisdictions

The same group with Constituent Entities in seven jurisdictions.

Computed

The group is not in the initial phase of its international activity as computed: the group has Constituent Entities in 7 jurisdictions, more than 6. Both limbs of Article 9.3.2 are required, so the exclusion does not apply and the UTPR Top-up Tax Amount is determined under Article 2.5. Based on the figures you supplied.

Workings

Jurisdictions with Constituent EntitiesArticle 9.3.2(a) — as supplied
7
Most jurisdictions allowedArticle 9.3.2(a) — published value. Not met
6
Tangible Assets outside the Reference JurisdictionArticle 9.3.2(b) — as supplied
EUR 20,000,000
Most Tangible Assets allowed outside itArticle 9.3.2(b) — published value. Met
EUR 50,000,000

Decided by the two limbs of article 9.3.2

Too late

A Fiscal Year beginning 1 January 2030 for a group first in scope for a year beginning 1 January 2025.

Computed

The exclusion does not apply to this Fiscal Year as computed: it starts on 2030-01-01, later than 5 years after the first day of the first Fiscal Year in scope (2025-01-01, counted from no earlier than 2024-01-01), so a Fiscal Year starting after 2029-12-31 is outside Article 9.3.4. The period is not suspended by any circumstance. No other test is computed.

Decided by the five-year limit

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 is the first day of the Fiscal Year being tested, as a calendar date?
  • What is the first day of the first Fiscal Year for which the MNE Group came within the scope of the GloBE Rules — the first year it met the Article 1.1 revenue test? The five years run from there and are never suspended.

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.initial_phase_jurisdictions
count 6 · reviewed 2026-10-04 · source
pillar_two.initial_phase_tangible_assets
EUR 50,000,000 · reviewed 2026-10-04 · source
pillar_two.initial_phase_years
count 5 · 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