Partially-Owned Parent Entities
- Applies
- FY2024 onwards
- Reviewed
- Rule
- P2-POPE-2024.1
What is a Partially-Owned Parent Entity?
A group holding entity with more than 20% of its profits owned outside the group. It applies the IIR itself.
Per GloBE Model Rules (Pillar Two), December 2021, Articles 2.1.4 and 2.1.5
A Partially-Owned Parent Entity is a Constituent Entity, other than the Ultimate Parent Entity, a Permanent Establishment or an Investment Entity, that owns an Ownership Interest in another Constituent Entity of the same MNE Group and has more than the published share of the Ownership Interests in its profits held, directly or indirectly, by persons that are not Constituent Entities of the Group. It applies the IIR to its Allocable Share of the Top-up Tax of a Low-Taxed Constituent Entity notwithstanding the exclusion for Intermediate Parent Entities, unless it is wholly owned by another Partially-Owned Parent Entity that is required to apply a Qualified IIR.
The outside shareholders' share of the profit is what the UPE's own IIR does not reach, so the Partially-Owned Parent Entity charges it.
What the result turns on
'More than'
Exactly the published share is not enough. It is measured on the Ownership Interests in profits, not capital or votes.
Outside the Definition
- The Ultimate Parent Entity
- A Permanent Establishment
- An Investment Entity
- An Entity that owns nothing in another Constituent Entity
Notwithstanding
An ordinary Intermediate Parent Entity does not apply the IIR where the UPE or a higher Intermediate Parent Entity does. A Partially-Owned Parent Entity does, regardless.
The one exception
It does not apply the IIR where it is wholly owned, directly or indirectly, by another Partially-Owned Parent Entity that must apply a Qualified IIR for the Fiscal Year.
Why 'wholly owned', and not 'controlled'
An ordinary Intermediate Parent Entity is switched off by a higher one that controls it. A Partially-Owned Parent Entity is switched off only by a higher one that owns all of it. The difference is deliberate: with minority shareholders at each level, a control test would move the charge up the chain and leave the lower-tier minority's share of the Top-up Tax uncollected. Where both apply the rule, the higher one deducts what the lower one brings into charge.
What it is for
Where the UPE owns 60% of a holding company that owns a low-taxed subsidiary, the UPE's own share of the Top-up Tax is 60%. Without this rule the other 40% would escape, and a group could shrink its liability by spinning off a minority stake. The holding company pays on the whole of its share instead, so the outside shareholders bear their proportion.
Order of testing
- 1
The definition of a Partially-Owned Parent Entity
The kind of Entity, the holding below it and the share outside the Group.
- 2
The exception in Article 2.1.5
Wholly owned by another Partially-Owned Parent applying 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.
35% held outside the Group
A subsidiary with a holding below it and 35% of its profits held by outside shareholders.
Computed
The Entity is a Partially-Owned Parent Entity that applies the IIR as computed: it owns an interest in another Constituent Entity and 35% of its profits is held outside the Group, more than 20%. Article 2.1.4 requires it to apply the IIR to its Allocable Share of the Top-up Tax of a Low-Taxed Constituent Entity notwithstanding Articles 2.1.1 to 2.1.3, even where the Ultimate Parent Entity or a higher Intermediate Parent Entity applies a Qualified IIR. Based on what you supplied.
Workings
- Share of profits held outside the GroupArticle 10.1 — as supplied
- 35%
- Share above which the parent is Partially-OwnedArticle 10.1 — published value. The share is more than it
- 20%
Decided by the definition of a partially-owned parent entity
A listed regional holding company
A regional sub-holding company floated on a stock exchange, with 40% of its shares held by the public and 60% by the group. It owns low-taxed operating subsidiaries. It applies the Income Inclusion Rule itself, even though the group's UPE also does.
Computed
The Entity is a Partially-Owned Parent Entity that applies the IIR as computed: it owns an interest in another Constituent Entity and 40% of its profits is held outside the Group, more than 20%. Article 2.1.4 requires it to apply the IIR to its Allocable Share of the Top-up Tax of a Low-Taxed Constituent Entity notwithstanding Articles 2.1.1 to 2.1.3, even where the Ultimate Parent Entity or a higher Intermediate Parent Entity applies a Qualified IIR. Based on what you supplied.
Workings
- Share of profits held outside the GroupArticle 10.1 — as supplied
- 40%
- Share above which the parent is Partially-OwnedArticle 10.1 — published value. The share is more than it
- 20%
Decided by the definition of a partially-owned parent entity
Exactly 20%
The same subsidiary with 20% outside: not more than the published share.
Computed
The Entity is not a Partially-Owned Parent Entity as computed: 20% of the Ownership Interests in its profits is held outside the Group, which is not more than 20%. Where it owns an interest in another Constituent Entity it may still be an Intermediate Parent Entity, which Article 2.1.3 excludes from the IIR if the Ultimate Parent Entity or a higher Intermediate Parent Entity applies a Qualified IIR. Based on what you supplied.
Workings
- Share of profits held outside the GroupArticle 10.1 — as supplied
- 20%
- Share above which the parent is Partially-OwnedArticle 10.1 — published value. The share is not more than it
- 20%
Decided by the definition of a partially-owned parent entity
Wholly owned by a higher one
A Partially-Owned Parent Entity wholly owned by another that applies a Qualified IIR.
Computed
The Entity is a Partially-Owned Parent Entity but is not required to apply the IIR as computed: 35% of its profits is held outside the Group, more than 20%, but Article 2.1.5 does not apply Article 2.1.4 where it is wholly owned by another Partially-Owned Parent Entity that is required to apply a Qualified IIR. Based on what you supplied.
Workings
- Share of profits held outside the GroupArticle 10.1 — as supplied
- 35%
- Share above which the parent is Partially-OwnedArticle 10.1 — published value. The share is more than it
- 20%
Decided by the exception in article 2.1.5
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:
- Is the Entity a Constituent Entity, the Ultimate Parent Entity, a Permanent Establishment, or an Investment Entity?
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.partially_owned_outside_share
- 20% · 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
GloBE Model Rules (Pillar Two), December 2021 — Articles 2.1.4 and 2.1.5
The IIR for a Partially-Owned Parent Entity and the exception
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 10.1, definitions of Partially-Owned Parent Entity and Intermediate Parent Entity
The definitions this rule encodes
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 7 to 9, and to Articles 2.1.4 and 2.1.5, paragraphs 21 to 23
Split-ownership structures: why a Partially-Owned Parent Entity applies the rule, and why its exception turns on whole ownership
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