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Mergers and demergers

Applies
FY2024 onwards
Reviewed
Rule
P2-MERGE-2024.1
By

How does the Pillar Two revenue test apply after a merger?

Merging groups add their revenues for earlier years against the EUR 750 million threshold. A demerged group is tested on its own revenue afterwards.

Per GloBE Model Rules (Pillar Two), December 2021, Article 6.1, Application of Consolidated Revenue Threshold to Group Mergers and Demergers

The consolidated revenue threshold in Article 1.1 is deemed met in three cases. Where two or more Groups merge in any of the four preceding years, it is deemed met for a year before the merger if the sum of the revenue in each Group's Consolidated Financial Statements for that year is equal to or greater than the threshold. Where an Entity in no Group merges with an Entity or Group in the tested year, it is deemed met if the sum of their revenue is equal to or greater than the threshold. Where a Group demerges, a demerged Group is deemed to meet it for the first tested year ending after the demerger if its revenue is at or above the threshold that year, and for the second to fourth if it is at or above in at least two of the Fiscal Years following the year of the demerger.

A deeming that substitutes for the group's own revenue history. Where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope.

What the result turns on

Every comparison is 'equal to or greater'

Revenue of exactly the threshold meets it.

A merger of Groups

  • Applies to a year before the merger, within the four preceding years
  • The revenue of each Group is taken from its own Consolidated Financial Statements for that year and added together

An Entity in no Group merges in

  • The target or acquirer had no Consolidated Financial Statements in a prior year because it was in no Group
  • The sum is of their financial statements' revenue for that year

A demerger

  • First tested year after it: the demerged Group's revenue in that year alone
  • Second to fourth tested years: at least two of the Fiscal Years following the year of the demerger at or above the threshold

What counts as a merger or demerger

A merger brings all or substantially all of the entities of separate Groups, or an Entity in no Group, under common control. A demerger separates the entities of a Group into Groups no longer consolidated by one Ultimate Parent Entity.

Points the Commentary settles

  • The groups' pre-merger revenues are simply added: they are not reduced for sales between the two groups in those years, although such sales are eliminated after the merger
  • Each of the four preceding years is tested separately on the combined figure, and two qualifying years are still needed
  • A standalone company that buys a group already in scope does not restart the four-year clock on the footing that the new parent has no consolidated history
  • Where the parties' accounting periods differ, the acquired entity's periods ending with or within the group's Fiscal Year are used
  • A sale of a division is not a merger unless it is virtually the whole of the seller's business; two groups bought by an Investment Fund that does not consolidate them do not form a combined Group
  • The demerger test is an additional test, for groups split out of an MNE Group that was in scope when it demerged; it does not replace the ordinary four-year test
  • A demerged group's first year is the first Fiscal Year ending after the demerger; if that is a short period the threshold is reduced in proportion
  • Selling one company is not a demerger, because it does not create a Group — unless that company has a Permanent Establishment abroad, in which case it is one

Order of testing

  1. 1

    Article 6.1 deeming

    The sum or the revenue against the published threshold, or the count of qualifying years.

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.

Two groups merge

Two Groups with EUR 400 million of revenue each, for a year before they merged: together EUR 800 million.

Computed

The consolidated revenue threshold is deemed to be met for the year as computed: under Article 6.1.1(a) the revenue of EUR 800,000,000 is equal to or greater than EUR 750,000,000. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Sum of the merging parties' revenueArticle 6.1.1(a) or (b) — as supplied
EUR 800,000,000
Revenue thresholdArticle 1.1.1 — published value. The revenue is equal to or greater than it
EUR 750,000,000

Decided by the article 6.1 deeming

Just short

Two Groups with a combined EUR 700 million.

Computed

Article 6.1.1(a) does not deem the threshold met as computed: the revenue of EUR 700,000,000 is less than EUR 750,000,000. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Sum of the merging parties' revenueArticle 6.1.1(a) or (b) — as supplied
EUR 700,000,000
Revenue thresholdArticle 1.1.1 — published value. The revenue is less than it
EUR 750,000,000

Decided by the article 6.1 deeming

The Commentary's two groups

A Group and B Group each reported EUR 400 million, 300 million, 300 million and 400 million in Years 1 to 4 and merged in Year 5. Tested for Year 1: the combined EUR 800 million meets the threshold. Year 4 gives the same answer and Years 2 and 3, at EUR 600 million, do not — two qualifying years, so the merged group is in scope in Year 5.

Computed

The consolidated revenue threshold is deemed to be met for the year as computed: under Article 6.1.1(a) the revenue of EUR 800,000,000 is equal to or greater than EUR 750,000,000. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Sum of the merging parties' revenueArticle 6.1.1(a) or (b) — as supplied
EUR 800,000,000
Revenue thresholdArticle 1.1.1 — published value. The revenue is equal to or greater than it
EUR 750,000,000

Decided by the article 6.1 deeming

A group buys a large standalone company

The Commentary's A Group, with EUR 500 million of revenue in each of the four preceding years, acquires in the tested year a company that was in no Group and reported EUR 800 million in each of them. The sum for each prior year is EUR 1.3 billion.

Computed

The consolidated revenue threshold is deemed to be met for the year as computed: under Article 6.1.1(b) the revenue of EUR 1,300,000,000 is equal to or greater than EUR 750,000,000. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Sum of the merging parties' revenueArticle 6.1.1(a) or (b) — as supplied
EUR 1,300,000,000
Revenue thresholdArticle 1.1.1 — published value. The revenue is equal to or greater than it
EUR 750,000,000

Decided by the article 6.1 deeming

A demerged Group's first year

A demerged Group with EUR 900 million of revenue in the first tested year after the demerger.

Computed

The consolidated revenue threshold is deemed to be met for the year as computed: under Article 6.1.1(c)(i) the revenue of EUR 900,000,000 is equal to or greater than EUR 750,000,000. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Demerged Group's revenueArticle 6.1.1(c)(i) — as supplied
EUR 900,000,000
Revenue thresholdArticle 1.1.1 — published value. The revenue is equal to or greater than it
EUR 750,000,000

Decided by the article 6.1 deeming

A demerged Group's later year

In only one of the Fiscal Years after the demerger did the demerged Group reach the threshold.

Computed

Article 6.1.1(c)(ii) does not deem the threshold met as computed: the demerged Group had revenue at or above EUR 750,000,000 in only 1 of the Fiscal Years following the year of the demerger, at least 2 being required. This is a deeming under Article 6.1 only; where it does not apply, the ordinary Article 1.1 test still decides whether the Group is in scope. Based on the figures you supplied.

Workings

Fiscal Years following the demerger at or above the thresholdArticle 6.1.1(c)(ii) — as supplied
1
Years requiredArticle 6.1.1(c)(ii) — published value. Not met
2

Decided by the article 6.1 deeming

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:

  • Which applies: two or more Groups merged and the year is before the merger; an Entity in no Group merged with an Entity or Group in the tested year; a Group demerged and this is the first tested year ending after it; or a Group demerged and this is the second to fourth tested year after it?

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.revenue_threshold
EUR 750,000,000 · reviewed 2026-10-04 · source
pillar_two.qualifying_preceding_years
count 2 · 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