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Joint ventures and JV Groups

Applies
FY2024 onwards
Reviewed
Rule
P2-JV-2024.1
By

What is a joint venture under Pillar Two?

An equity-accounted entity in which the UPE holds at least 50%. With its subsidiaries it is treated as a separate group.

Per GloBE Model Rules (Pillar Two), December 2021, Article 6.4, Joint Ventures

A Joint Venture is an Entity whose financial results are reported under the equity method in the Consolidated Financial Statements of the Ultimate Parent Entity, provided the Ultimate Parent Entity holds directly or indirectly at least the published share of its Ownership Interests, and which is not the UPE of an MNE Group subject to the GloBE Rules, an Excluded Entity, an Entity held directly through an Excluded Entity that meets an activities or income test, an Entity held by an MNE Group composed only of Excluded Entities, or a JV Subsidiary. The Joint Venture and its JV Subsidiaries are treated as a separate MNE Group with the Joint Venture as its Ultimate Parent Entity. The JV Group Top-up Tax is reduced by each Parent Entity's Allocable Share brought into charge under a Qualified IIR, and any remaining amount is added to the Total UTPR Top-up Tax Amount.

A joint venture is outside the group's own calculation and has its own, with the owners' IIR first and the UTPR as the backstop.

What the result turns on

'At least'

Exactly the published share is a Joint Venture; one share below is not.

Both limbs

  • Reported under the equity method in the UPE's consolidated statements
  • The UPE holds at least the published share of its Ownership Interests

Five exclusions

  • The UPE of an MNE Group subject to the GloBE Rules
  • An Excluded Entity
  • An Entity held directly through an Excluded Entity that holds assets, does ancillary activities or has substantially all income excluded
  • An Entity held by an MNE Group composed only of Excluded Entities
  • A JV Subsidiary

The remainder goes to the UTPR

The JV Group Top-up Tax less the Allocable Shares brought into charge under a Qualified IIR, not below nil, is added to the Total UTPR Top-up Tax Amount.

How the joint venture's own top-up tax is worked out

  • The Joint Venture and its subsidiaries are computed as if they were a separate MNE Group with the Joint Venture as its Ultimate Parent Entity
  • On the Joint Venture's own accounting standard, not the investing group's
  • Never blended with the investing group's entities in the same jurisdiction, in either direction
  • The substance exclusion, the safe harbours and the transition rules all apply to it
  • Tax the investing group's entities record on the venture's income is allocated to it under Article 4.3
  • The venture and its subsidiaries are never themselves required to apply the Income Inclusion Rule or the Undertaxed Profits Rule: the investing group's parents and entities are

The group's share

The JV Group Top-up Tax is the Ultimate Parent Entity's Allocable Share of the Top-up Tax of each member. The Commentary's example: a parent holds 50% of a Joint Venture, which holds 80% of a subsidiary, and each has Top-up Tax of 100. The share is 50 for the venture and 40 for the subsidiary — 90 in all. Whatever of that a Parent Entity's Qualified IIR does not charge goes to the Undertaxed Profits Rule.

Not every accounting joint venture is one

The test is equity-method reporting with at least half of the Ownership Interests, not joint control. A jointly controlled entity in which the group holds 40% is not a Joint Venture here, and an associate held at 30% is not either. Where two groups each hold half, each applies these rules to its own half.

Order of testing

  1. 1

    The definition of a Joint Venture

    The equity method, the ownership share and the exclusions.

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 50:50 venture

An equity-accounted Entity in which the UPE holds 50% and no exclusion applies.

Computed

The Entity is a Joint Venture as computed: its results are reported under the equity method, the Ultimate Parent Entity holds 50% of its Ownership Interests, at least 50%, and no exclusion applies. Article 6.4 applies the GloBE Rules to it and its JV Subsidiaries as a separate MNE Group with the Joint Venture as its Ultimate Parent Entity. Where the JV Group Top-up Tax and the amount brought into charge under a Qualified IIR are supplied, the rule shows the remainder added to the UTPR. Based on what you supplied.

Workings

Ultimate Parent Entity's Ownership InterestArticle 10.1 — as supplied
50%
Ownership requiredArticle 10.1 — published value. The interest is at least it
50%

Decided by the definition of a joint venture

Top-up Tax left for the UTPR

The JV Group Top-up Tax is EUR 1,000,000 and EUR 600,000 is brought into charge under Qualified IIRs.

Computed

The Entity is a Joint Venture as computed: its results are reported under the equity method, the Ultimate Parent Entity holds 50% of its Ownership Interests, at least 50%, and no exclusion applies. Article 6.4 applies the GloBE Rules to it and its JV Subsidiaries as a separate MNE Group with the Joint Venture as its Ultimate Parent Entity. The JV Group Top-up Tax of EUR 1,000,000 is reduced by the EUR 600,000 brought into charge under a Qualified IIR, leaving EUR 400,000, which Article 6.4(c) adds to the Total UTPR Top-up Tax Amount under Article 2.5.1. Based on the figures you supplied.

Workings

Ultimate Parent Entity's Ownership InterestArticle 10.1 — as supplied
50%
Ownership requiredArticle 10.1 — published value. The interest is at least it
50%
JV Group Top-up TaxArticle 6.4(c) — as supplied
EUR 1,000,000
Allocable Shares brought into charge under a Qualified IIRArticle 6.4(c) — as supplied
(EUR 600,000)
Remaining amount added to the Total UTPR Top-up Tax AmountArticle 6.4(c) — not below nil
EUR 400,000

Decided by the definition of a joint venture

A 30% associate

An equity-accounted associate in which the UPE holds 30%. It is not a Joint Venture for these rules, and its results are simply taken out of GloBE Income as equity-method profit or loss.

Computed

The Entity is not a Joint Venture as computed: the Ultimate Parent Entity holds 30% of its Ownership Interests, less than the 50% required. It is dealt with under the ordinary rules, as a Constituent Entity if it is in the Group. Based on what you supplied.

Decided by the definition of a joint venture

A consolidated 60% subsidiary

An entity the group consolidates line by line with a 40% outside shareholder. It is a Constituent Entity, not a Joint Venture: the definition needs equity-method reporting.

Computed

The Entity is not a Joint Venture as computed: its results are not reported under the equity method in the Ultimate Parent Entity's Consolidated Financial Statements. It is dealt with under the ordinary rules, as a Constituent Entity if it is in the Group. Based on what you supplied.

Decided by the definition of a joint venture

The Commentary's JV Co and Sub Co

A parent holds 50% of JV Co, which holds 80% of Sub Co; each has Top-up Tax of 100. The JV Group Top-up Tax is 90 — 50 for JV Co and 40 for Sub Co. Here the parent's jurisdiction has no Qualified IIR, so the whole 90 goes to the Undertaxed Profits Rule.

Computed

The Entity is a Joint Venture as computed: its results are reported under the equity method, the Ultimate Parent Entity holds 50% of its Ownership Interests, at least 50%, and no exclusion applies. Article 6.4 applies the GloBE Rules to it and its JV Subsidiaries as a separate MNE Group with the Joint Venture as its Ultimate Parent Entity. The JV Group Top-up Tax of EUR 90 is reduced by the EUR 0 brought into charge under a Qualified IIR, leaving EUR 90, which Article 6.4(c) adds to the Total UTPR Top-up Tax Amount under Article 2.5.1. Based on the figures you supplied.

Workings

Ultimate Parent Entity's Ownership InterestArticle 10.1 — as supplied
50%
Ownership requiredArticle 10.1 — published value. The interest is at least it
50%
JV Group Top-up TaxArticle 6.4(c) — as supplied
EUR 90
Allocable Shares brought into charge under a Qualified IIRArticle 6.4(c) — as supplied
EUR 0
Remaining amount added to the Total UTPR Top-up Tax AmountArticle 6.4(c) — not below nil
EUR 90

Decided by the definition of a joint venture

Just under half

The UPE holds 49.99%.

Computed

The Entity is not a Joint Venture as computed: the Ultimate Parent Entity holds 49.99% of its Ownership Interests, less than the 50% required. It is dealt with under the ordinary rules, as a Constituent Entity if it is in the Group. Based on what you supplied.

Decided by the definition of a joint venture

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:

  • Are the Entity's financial results reported under the equity method in the Ultimate Parent Entity's Consolidated Financial Statements?
  • What Ownership Interests does the Ultimate Parent Entity hold in the Entity, directly or indirectly, as a percentage?

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.joint_venture_ownership
50% · 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