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Tax certainty: challenging a safe harbour election

Applies
FY2024 onwards
Reviewed
Rule
P2-CERT-2024.1
By

Can a tax authority challenge a Pillar Two safe harbour?

Yes, within 36 months of the GloBE return, on specific facts. The group then has 6 months to show eligibility was not affected.

Per GloBE Model Rules (Pillar Two), December 2021, Article 8.2.2

An election made for a jurisdiction under Article 8.2.1 does not apply where the challenging jurisdiction could be allocated Top-up Tax if the Effective Tax Rate of the safe harbour jurisdiction were below the Minimum Rate; its tax administration notifies the Liable Constituent Entities, within the published number of months after the GloBE Information Return was filed, of specific facts and circumstances that may have materially affected eligibility and invites them to clarify within a further published number of months; and the Liable Constituent Entities fail to demonstrate within that period that those facts did not materially affect eligibility.

A group that elects a safe harbour is not open to challenge indefinitely, and a tax administration cannot disregard the election without following the process.

What the result turns on

Three conditions, all required

  • The challenging jurisdiction could be allocated Top-up Tax if the safe harbour jurisdiction's ETR were below the Minimum Rate — a test of the group's structure that does not require the ETR to be computed
  • A notification of specific facts within the published months after the return was filed, inviting clarification within the published months
  • The group fails to demonstrate in time that those facts did not materially affect eligibility

Demonstrating it

If the group shows in time that the facts did not materially affect eligibility, the safe harbour still applies and the jurisdiction's ETR is still treated as above the Minimum Rate.

The clocks

  • The notification period runs from the date the return was filed. Where the return arrives by exchange of information or from several entities, when it starts is for the Implementation Framework
  • The response period runs from the notification

No notification is not the end

Where none has been made the election stands for now, until the window closes.

Not modelled

What happens when a safe harbour is found not to apply is for the Implementation Framework.

Order of testing

  1. 1

    Who may challenge

    Article 8.2.2(a).

  2. 2

    The notification

    Article 8.2.2(b): within the months after the return was filed.

  3. 3

    The response

    Article 8.2.2(c): demonstrated in time, or not.

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 challenge that succeeds

The return was filed on 31 March 2028, the tax administration notified on 15 January 2030, and the group did not demonstrate in time.

Computed

The election does not apply as computed: all three conditions in Article 8.2.2 are met — the challenging jurisdiction could be allocated Top-up Tax, it notified within 36 months of the return being filed, and the Liable Constituent Entities did not demonstrate by 2030-07-15 that the facts did not materially affect eligibility. The consequences of a safe harbour being found not to apply are for the Implementation Framework. Based on what you supplied.

Workings

Return filedArticle 8.2.2(b) — as supplied
2028-03-31
Last day to notifyArticle 8.2.2(b) — 36 months after the return was filed
2031-03-31
NotifiedArticle 8.2.2(b) — as supplied
2030-01-15
Last day to clarifyArticle 8.2.2(b) — 6 months after the notification
2030-07-15

Decided by the response

Notified too late

The notification came after the window.

Computed

The election stands as computed: the notification was made on 2031-06-01, after 2031-03-31, which is 36 months after the return was filed, so Article 8.2.2(b) is not met. Based on what you supplied.

Workings

Return filedArticle 8.2.2(b) — as supplied
2028-03-31
Last day to notifyArticle 8.2.2(b) — 36 months after the return was filed
2031-03-31
NotifiedArticle 8.2.2(b) — as supplied
2031-06-01

Decided by the notification

No notification yet

The tax administration has not notified.

Computed

The election stands for now as computed: no notification has been made. Article 8.2.2(b) allows one only within 36 months after the return was filed — until 2031-03-31. That is not a bar on a later challenge within the window. Based on what you supplied.

Workings

Return filedArticle 8.2.2(b) — as supplied
2028-03-31
Last day to notifyArticle 8.2.2(b) — 36 months after the return was filed
2031-03-31

Decided by the notification

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:

  • Could the jurisdiction wishing to challenge be allocated Top-up Tax under the GloBE Rules if the Effective Tax Rate of the safe harbour jurisdiction were below the Minimum Rate? Test this on the group's structure; do not compute the ETR.

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.safe_harbour_challenge_months
count 36 · reviewed 2026-10-04 · source
pillar_two.safe_harbour_response_months
count 6 · 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

Share this rule

Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader