Order of application: IIR before UTPR
- Applies
- FY2024 onwards
- Reviewed
- Rule
- P2-ORDER-2024.1
In what order do QDMTT, IIR and UTPR apply?
A QDMTT in the low-tax jurisdiction first, then the IIR from the top parent down, then the UTPR for any top-up tax not already charged.
Per GloBE Model Rules (Pillar Two), December 2021, Articles 2.1 to 2.3, Application of the IIR
A Qualified Domestic Minimum Top-up Tax payable in the low-tax jurisdiction is taken into account in its Top-up Tax first. The Income Inclusion Rule then applies from the top down: the Ultimate Parent Entity applies a Qualified IIR if its jurisdiction has one, and an Intermediate Parent Entity does not if the UPE or a higher Intermediate Parent Entity does. The Top-up Tax available to the UTPR is reduced to zero if all the UPE's Ownership Interests in the Low-Taxed Constituent Entity are held through Parent Entities applying a Qualified IIR, and otherwise by the Allocable Share brought into charge under a Qualified IIR.
The UTPR is a backstop: it reaches only Top-up Tax the QDMTT and the IIR did not, and only where a jurisdiction has a Qualified UTPR.
The order
1. The QDMTT
A Qualified Domestic Minimum Top-up Tax payable is taken into account in the jurisdiction's Top-up Tax, so the IIR and UTPR apply to what remains.
2. The IIR, top-down
- The UPE applies a Qualified IIR if its jurisdiction has one
- An Intermediate Parent Entity does not apply one if the UPE, or a higher Intermediate Parent Entity controlling it, does
- A Partially-Owned Parent Entity applies it notwithstanding, unless wholly owned by another that does
- An IIR charged at a lower level is offset against the higher one
3. The UTPR, for what the IIR did not reach
- Nil if all the UPE's interests are held through Parent Entities applying a Qualified IIR
- Otherwise reduced by the Allocable Share brought into charge under a Qualified IIR
- It needs a jurisdiction with a Qualified UTPR in force
What no qualified rule reaches
Top-up Tax that no QDMTT, IIR or UTPR reaches is not collected under the GloBE Rules.
In the group's reporting currency
The computations are made in the presentation currency of the Consolidated Financial Statements, so a Top-up Tax allocated to an entity may have to be translated into the local currency of the jurisdiction that charges it. Each jurisdiction's own law says how.
Order of testing
- 1
The IIR, top-down
Where the highest Parent applying a Qualified IIR covers all the ownership.
- 2
The IIR, top-down, then the UTPR
Where it covers only part.
- 3
The UTPR as the backstop
Where no Parent applies a Qualified IIR.
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.
The UPE applies an IIR throughout
The UPE's jurisdiction has a Qualified IIR and all ownership is held through Parent Entities applying one.
Computed
The Income Inclusion Rule reaches all of the remaining Top-up Tax as computed. No Qualified Domestic Minimum Top-up Tax is payable in the jurisdiction, so the whole of its Top-up Tax is open to the IIR and UTPR. The highest Parent Entity applying a Qualified IIR is the Ultimate Parent Entity (Article 2.1.1), and all the Ultimate Parent Entity's Ownership Interests in the Low-Taxed Constituent Entity are held through Parent Entities applying one, so Article 2.5.2 reduces its Top-up Tax for the UTPR to zero. A Parent Entity below it that applies a Qualified IIR is offset against the higher charge (Article 2.3). The amounts are the work of the IIR and UTPR allocation rules. Based on what you supplied.
Decided by the iir, top-down
A partial IIR
An Intermediate Parent Entity applies a Qualified IIR but not all the ownership runs through such Parents, and a jurisdiction has a Qualified UTPR.
Computed
The Income Inclusion Rule reaches part of the remaining Top-up Tax and the UTPR the rest as computed. A Qualified Domestic Minimum Top-up Tax payable in the jurisdiction is taken into account first (Article 5.2.3), so what follows applies to the Top-up Tax that remains. The highest Parent Entity applying a Qualified IIR is an Intermediate Parent Entity, none above it applying one (Article 2.1.2 and 2.1.3), but not all the ownership is held through such Parents, so Article 2.5.3 reduces the Top-up Tax for the UTPR only by the Allocable Share brought into charge under the IIR, and the balance is allocated between UTPR jurisdictions. The amounts are the work of the IIR and UTPR allocation rules. Based on what you supplied.
Decided by the iir, top-down, then the utpr
No IIR anywhere
No Parent Entity applies a Qualified IIR and no jurisdiction has a Qualified UTPR.
Computed
No qualified rule reaches the remaining Top-up Tax as computed. No Qualified Domestic Minimum Top-up Tax is payable in the jurisdiction, so the whole of its Top-up Tax is open to the IIR and UTPR. No Parent Entity applies a Qualified IIR and no jurisdiction has a Qualified UTPR in force, so it is not collected under the GloBE Rules. The amounts are the work of the IIR and UTPR allocation rules. Based on what you supplied.
Decided by the utpr as the backstop
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
3 inputs still need your determination:
- Is a Qualified Domestic Minimum Top-up Tax payable in the jurisdiction of the Low-Taxed Constituent Entity?
- What is the highest Parent Entity in the chain of ownership that is required to apply a Qualified IIR for the Fiscal Year — the Ultimate Parent Entity, an Intermediate Parent Entity with none above it applying one, a Partially-Owned Parent Entity — or none?
- Does any jurisdiction have a Qualified UTPR in force for the Fiscal Year?
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.
Sources
GloBE Model Rules (Pillar Two), December 2021 — Articles 2.1 to 2.3, Application of the IIR
The top-down order and the offset
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.pdfGloBE Model Rules (Pillar Two), December 2021 — Article 2.5, UTPR Top-up Tax Amount
How the IIR reduces the amount available to the UTPR
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 Chapter 2, paragraphs 1 to 10.1 and 41 to 42, with paragraphs 72 to 78
The top-down approach, split ownership, the priority of the IIR over the UTPR, and the currency of the charge
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