Transfers of assets and liabilities

An ordinary transfer

The disposing entity includes the whole gain or loss. The acquirer uses its own carrying value.

Within the group, at arm's length

A transfer between two Constituent Entities under the ordinary rule is priced under Article 3.2.3 even where the group books it at the seller's carrying value, and the acquirer's GloBE carrying value is the arm's length amount. Where the transfer is a business combination for accounting purposes — a business bought as assets, without the company — the purchase accounting adjustments and the deferred tax on them are taken into account, unlike on a share purchase. Goodwill and a bargain purchase gain count only as they appear in the acquirer's own accounts.

A GloBE Reorganisation — all three

• (a) Consideration wholly or in significant part equity of the acquirer or a connected person — or, in a liquidation, equity of the target
• (b) The disposing entity's gain or loss is not subject to tax, in whole or in part
• (c) The acquirer's tax law requires it to use the disposing entity's tax basis, adjusted for any Non-qualifying Gain or Loss

Fully deferred

The disposing entity excludes the gain or loss and the acquirer takes over the disposing entity's carrying values.

Partly taxed

Non-qualifying Gain or Loss is the lesser of the gain or loss subject to tax where the disposing entity is located and the accounting gain or loss — typically where cash or other non-equity consideration exceeds what the local reorganisation rules allow. That much is included, and the acquirer's carried-over values are increased by it, spread across the assets in the way its own tax law spreads the basis increase, and by no more than the Non-qualifying Gain or Loss.

A fair value election

Where a jurisdiction requires or permits the tax basis of an entity's assets and liabilities to be adjusted to fair value — an exit tax on a migration, joining or leaving a tax consolidated group, an elective step-up — the Filing Constituent Entity may elect under Article 6.3.4 to recognise the gain or loss for GloBE purposes and use fair value afterwards. The gain is the fair value after the event less the carrying value before it, less anything already taken as Non-qualifying Gain or Loss. It is taken in the year or spread evenly over five years, with the balance accelerated if the entity leaves the group. Existing deferred tax balances are reversed in full and the deferred tax created by the reset is ignored. The election does not reach ordinary sales or transfer pricing adjustments. It is not computed here.

Scope

Article 6.3 applies whether or not the other party is in the same group or in scope of the Rules at all, to domestic and cross-border transfers alike, and only to transfers in the Transition Year or later. An earlier transfer between group entities is dealt with under Article 9.1.3. After a GloBE Reorganisation the acquirer computes deferred tax on the carried-over values too, and must keep records that support them.