Simplified calculations safe harbour: non-material entities
- Applies
- FY2024 onwards
- Reviewed
- Rule
- P2-SCSH-2026.1
What is the Pillar Two simplified calculations safe harbour?
Top-up tax is nil where a jurisdiction passes a routine profits, de minimis or ETR test, and non-material entities may use CbC revenue and tax.
Per Consolidated Commentary to the GloBE Model Rules (May 2026), Annex A, Chapter 2, Simplified Calculations Safe Harbour
The Top-up Tax, other than Additional Current Top-up Tax, for a jurisdiction is deemed to be zero for a Fiscal Year when the Tested Jurisdiction meets the Routine Profits Test, the De Minimis Test or the Effective Tax Rate Test, and a Constituent Entity may use a Simplified Income, Revenue or Tax Calculation to determine whether a test is met. A Filing Constituent Entity may make an Annual Election to determine the GloBE Income or Loss, GloBE Revenue and Adjusted Covered Taxes of a Non-material Constituent Entity — an Entity not consolidated line by line in the Ultimate Parent Entity's Consolidated Financial Statements solely on size or materiality grounds, where those statements are externally audited — using its Total Revenue and its Income Tax Accrued (Current Year) as determined under the Relevant CbC Regulations.
A group does not have to build a full GloBE computation for entities its own auditors treat as immaterial. Using revenue as income overstates income, so the simplification leans against the taxpayer.
A permanent safe harbour with one agreed simplification
The three tests
- Routine Profits — GloBE Income no more than the Substance-based Income Exclusion; a loss meets it
- De Minimis — the average revenue and income limits of the de minimis exclusion
- Effective Tax Rate — at least the Minimum Rate
What a met test does
The Top-up Tax for the jurisdiction is deemed to be zero for the year. Additional Current Top-up Tax is not.
A Non-material Constituent Entity — all of these
- Not consolidated line by line solely on size or materiality grounds
- The Consolidated Financial Statements are actual consolidated statements — prepared under an Acceptable Financial Accounting Standard, or under another standard and adjusted for Material Competitive Distortions
- They are externally audited
- Above the published Total Revenue, the accounts used for the CbC Report are on an Acceptable or Authorised Financial Accounting Standard
The three figures, used together
- GloBE Income = Total Revenue
- GloBE Revenue = Total Revenue
- Adjusted Covered Taxes = Income Tax Accrued (Current Year)
By Annual Election
Made by the Filing Constituent Entity, entity by entity and year by year.
Order of testing
- 1
Inputs requiring your determination
Every input the computation reaches must be supplied; nil is entered, not left blank.
- 2
The definition of a Non-material Constituent Entity
Size or materiality, the kind of consolidated statements, the audit, and the accounting standard above the revenue amount.
- 3
The Annual Election
The simplified calculations apply only if elected.
- 4
The Non-material Constituent Entity Simplified Calculations
The three figures.
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 small unconsolidated subsidiary
Total Revenue of EUR 4 million and EUR 300,000 of income tax accrued, with the election made.
Computed
The Non-material Constituent Entity Simplified Calculations apply as computed: the Entity is left out of line-by-line consolidation solely on size or materiality grounds, the Consolidated Financial Statements are of the required kind and externally audited, and the Annual Election is made. For the safe harbour tests its GloBE Income and its GloBE Revenue are both its Total Revenue of EUR 4,000,000, and its Adjusted Covered Taxes are its Income Tax Accrued (Current Year) of EUR 300,000. All three are used together. These figures go into the jurisdiction's Routine Profits, De Minimis or Effective Tax Rate test, which this rule does not run; meeting one deems the Top-up Tax zero, other than Additional Current Top-up Tax. Based on the figures you supplied.
Workings
- Total Revenue under the Relevant CbC RegulationsBox 2.2, paragraph 3 — as supplied
- EUR 4,000,000
- Simplified GloBE IncomeBox 2.2, paragraph 3(a) — equal to Total Revenue
- EUR 4,000,000
- Simplified GloBE RevenueBox 2.2, paragraph 3(b) — equal to Total Revenue
- EUR 4,000,000
- Simplified Adjusted Covered TaxesBox 2.2, paragraph 3(c) — Income Tax Accrued (Current Year)
- EUR 300,000
Decided by the non-material constituent entity simplified calculations
A larger one on a local standard
Total Revenue of EUR 80 million, with accounts not on an Acceptable or Authorised standard.
Computed
The Entity is not a Non-material Constituent Entity as computed: its Total Revenue of EUR 80,000,000 exceeds EUR 50,000,000 and the accounts used for the Country-by-Country Report are not prepared under an Acceptable or Authorised Financial Accounting Standard. The simplified calculations are not available for it, and its GloBE Income or Loss, GloBE Revenue and Adjusted Covered Taxes are computed in full. Based on what you supplied.
Decided by the definition of a non-material constituent entity
Unaudited group accounts
Consolidated Financial Statements that are not externally audited.
Computed
The Entity is not a Non-material Constituent Entity as computed: the Consolidated Financial Statements are not externally audited. The simplified calculations are not available for it, and its GloBE Income or Loss, GloBE Revenue and Adjusted Covered Taxes are computed in full. Based on what you supplied.
Decided by the definition of a non-material constituent entity
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
4 inputs still need your determination:
- Is the Entity excluded from line-by-line consolidation in the Ultimate Parent Entity's Consolidated Financial Statements solely on size or materiality grounds, so that it is a Constituent Entity under Article 1.2.2?
- Are the Consolidated Financial Statements those described in paragraph (a) or (c) of the definition in Article 10.1 — consolidated statements actually prepared, under an Acceptable Financial Accounting Standard or under another standard adjusted for Material Competitive Distortions?
- Are the Consolidated Financial Statements externally audited?
- What is the Entity's Total Revenue for the Fiscal Year as determined under the Relevant CbC Regulations, in euro?
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.nmce_total_revenue_threshold
- EUR 50,000,000 · 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
Consolidated Commentary to the GloBE Model Rules (May 2026) — Annex A, Chapter 2, Simplified Calculations Safe Harbour
Box 2.1 and paragraphs 2 to 17: the framework and the three tests; Box 2.2 and paragraphs 18 and 19: the Non-material Constituent Entity calculations
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.pdfGloBE Model Rules (Pillar Two), December 2021 — Articles 8.2 and 8.3
The safe harbour provision, and how agreed guidance has effect
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.pdf