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Qualified Refundable Tax Credits

Applies
FY2024 onwards
Reviewed
Rule
P2-QRTC-2024.1
By

What is a Qualified Refundable Tax Credit?

A credit that must be paid in cash or equivalents within 4 years. It is treated as GloBE income; a non-qualified one is not.

Per GloBE Model Rules (Pillar Two), December 2021, Article 3.2.4, and Articles 4.1.2(d) and 4.1.3(b)

Qualified Refundable Tax Credits are treated as income in the computation of GloBE Income or Loss of a Constituent Entity; Non-Qualified Refundable Tax Credits are not. A Qualified Refundable Tax Credit is a refundable tax credit designed in a way such that it must be paid as cash or available as cash equivalents within the published number of years from when a Constituent Entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting it. A tax credit that is refundable in part is a Qualified Refundable Tax Credit to the extent it must be so paid. It does not include any amount of tax creditable or refundable pursuant to a Qualified Imputation Tax or a Disqualified Refundable Imputation Tax.

The same incentive lowers the Effective Tax Rate much less as income than as a reduction of tax. That is the whole significance of the label.

Income or a reduction of tax

A Qualified Refundable Tax Credit

  • Its face value is GloBE Income in the year the entitlement accrues
  • Any amount the accounts recorded as a reduction of current tax is added back to Covered Taxes
  • Where it relates to an asset and the accounts spread it over the asset's life, GloBE Income may follow

A Non-Qualified Refundable Tax Credit

  • It is not GloBE Income; if the accounts treated it as income it is taken out
  • It reduces Covered Taxes, to the extent not already recorded as a reduction of current tax

A partly refundable credit is split

Only the refundable part is tested. The part that is not refundable at all reduces Covered Taxes when it is used — unless it is a Marketable Transferable Tax Credit.

Refundability first

A credit that meets the refundability test is a Qualified Refundable Tax Credit even if it could also be sold. Transferability is tested only for a credit that fails it.

Not this kind of credit

An ordinary refund of tax overpaid, and a credit or refund under an imputation system.

Order of testing

  1. 1

    Inputs requiring your determination

    Every input the computation reaches must be supplied; nil is entered, not left blank.

  2. 2

    Imputation taxes

    Never a Qualified Refundable Tax Credit.

  3. 3

    Whether the credit is refundable

    A credit with no refundable part is neither kind.

  4. 4

    The time within which the credit must be paid

    Within the published number of years, counted from when the conditions are satisfied.

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 research credit paid out within three years

A EUR 10 million credit, fully refundable, payable within three years if unused.

Computed

EUR 10,000,000 of the credit is a Qualified Refundable Tax Credit as computed: it must be paid as cash or cash equivalents within 3 years of the conditions being satisfied, within the 4 years the definition allows. It is treated as GloBE Income in the year the entitlement accrues (Article 3.2.4), and any of it recorded as a reduction to current tax expense is added back to Covered Taxes (Article 4.1.2(d)). Where the credit relates to an asset and the accounts spread it over the asset's life, GloBE Income may follow that policy. Based on the figures you supplied.

Workings

Face value of the creditArticle 3.2.4 — as supplied
EUR 10,000,000
Refundable part100% of the face value — the part that is tested
EUR 10,000,000
Years until it must be paidArticle 10.1 — within 4 years qualifies
3
Treated as GloBE IncomeArticle 3.2.4 — the Qualified Refundable Tax Credit, in the year the entitlement accrues
EUR 10,000,000
Reduces Covered Taxes insteadArticle 4.1.3(c) — the part that is not refundable, when used
EUR 0

Decided by the time within which the credit must be paid

A credit refundable only after ten years

The same credit where the refund is available after ten years.

Computed

The refundable part of the credit, EUR 10,000,000, is a Non-Qualified Refundable Tax Credit as computed: it need not be paid as cash or cash equivalents until 10 years after the conditions are satisfied, which is not within 4 years. It is not treated as income — if the accounts recorded it as income it is taken out of GloBE Income or Loss — and it reduces Covered Taxes to the extent not already recorded as a reduction to current tax expense (Article 4.1.3(b)). Based on the figures you supplied.

Workings

Face value of the creditArticle 3.2.4 — as supplied
EUR 10,000,000
Refundable part100% of the face value — the part that is tested
EUR 10,000,000
Years until it must be paidArticle 10.1 — within 4 years qualifies
10
Treated as GloBE IncomeNil — a Non-Qualified Refundable Tax Credit is not income
EUR 0
Reduces Covered Taxes insteadArticle 4.1.3(b) and (c) — treated as a reduction of tax, not as income
EUR 10,000,000

Decided by the time within which the credit must be paid

A credit refundable as to 60%

A EUR 10 million credit of which 60% is refundable within two years.

Computed

EUR 6,000,000 of the credit is a Qualified Refundable Tax Credit as computed: it must be paid as cash or cash equivalents within 2 years of the conditions being satisfied, within the 4 years the definition allows. It is treated as GloBE Income in the year the entitlement accrues (Article 3.2.4), and any of it recorded as a reduction to current tax expense is added back to Covered Taxes (Article 4.1.2(d)). The EUR 4,000,000 that is not refundable is tested separately and otherwise reduces Covered Taxes when used. Where the credit relates to an asset and the accounts spread it over the asset's life, GloBE Income may follow that policy. Based on the figures you supplied.

Workings

Face value of the creditArticle 3.2.4 — as supplied
EUR 10,000,000
Refundable part60% of the face value — the part that is tested
EUR 6,000,000
Years until it must be paidArticle 10.1 — within 4 years qualifies
2
Treated as GloBE IncomeArticle 3.2.4 — the Qualified Refundable Tax Credit, in the year the entitlement accrues
EUR 6,000,000
Reduces Covered Taxes insteadArticle 4.1.3(c) — the part that is not refundable, when used
EUR 4,000,000

Decided by the time within which the credit must be paid

A non-refundable credit

A credit that can only be set against tax.

Computed

The credit of EUR 10,000,000 is neither a Qualified nor a Non-Qualified Refundable Tax Credit as computed, because no part of it is refundable. It is not GloBE Income; it reduces Covered Taxes to the extent it is used against a Covered Tax liability (Article 4.1.3(c)) — unless it is a Marketable Transferable Tax Credit, which is tested separately. Based on the figures you supplied.

Workings

Face value of the creditArticle 3.2.4 — as supplied
EUR 10,000,000
Treated as GloBE IncomeNil — the credit is not refundable
EUR 0

Decided by the whether the credit is refundable

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 amount creditable or refundable pursuant to a Qualified Imputation Tax or a Disqualified Refundable Imputation Tax?

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.qrtc_refund_years
count 4 · 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