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Transitional treatment of asset basis

Applies
FY2024 onwards
Reviewed
Rule
P2-TAB-2024.1
By

What basis does an asset moved before Pillar Two keep?

An asset other than inventory moved within the group after 30 November 2021 and before the Transition Year keeps the seller's carrying value.

Per GloBE Model Rules (Pillar Two), December 2021, Article 9.1.3

In the case of a transfer of assets between Constituent Entities after 30 November 2021 and before the commencement of a Transition Year, the basis in the acquired assets, other than inventory, is based upon the disposing Entity's carrying value of the transferred assets upon disposition, with the deferred tax assets and liabilities brought into the GloBE Rules determined on that basis. Under the Commentary, the acquiring Entity may take into account a deferred tax asset to the extent the disposing Entity paid tax in respect of the transaction, not exceeding the Minimum Rate multiplied by the difference between the local tax basis in the asset and its GloBE carrying value.

A step-up created before the rules began cannot shelter later income from top-up tax, except to the extent tax was actually paid on it.

Carried-over value, with credit only for tax paid

When it applies

  • A transfer of an asset between entities that are, or would have been, Constituent Entities of the group — or a deemed transfer within one entity
  • After 30 November 2021
  • Before the disposing entity's Transition Year began
  • Not inventory

Whose Transition Year

The disposing entity's. The article applies wherever its income was not yet subject to the GloBE Rules or a Qualified Domestic Minimum Top-up Tax in the year of the transfer — including where it relied on a safe harbour, and even if the acquirer was already in scope.

What counts as a transfer

Read broadly: a sale; a finance lease; a licence accounted for as a sale; a sale of a Controlling Interest; a prepaid royalty or rent; a total return swap; a migration with a step-up; a change to fair value accounting. An ordinary lease or licence where income and expense are recognised in the same years is outside it.

The consequence

The acquirer's GloBE carrying value is the disposing entity's, then depreciated in the ordinary way. Depreciation on the step-up is excluded, and a later gain is measured from the carried-over value. Deferred tax the accounts created on the transfer is ignored.

A deferred tax asset for tax paid

Allowed to the extent the group proves the disposing entity paid tax on the transfer, capped at the Minimum Rate times the excess of local tax basis over GloBE carrying value. It does not reduce Adjusted Covered Taxes when created, and it reverses as the carrying value falls.

Fair value instead

Where that deferred tax asset would be at its cap, an acquirer that recorded the asset at fair value may use that value for GloBE purposes instead.

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

    A transfer between Constituent Entities

    Including a deemed transfer within one entity.

  3. 3

    Inventory

    Outside the article.

  4. 4

    The date of the transfer

    After 30 November 2021.

  5. 5

    The disposing Entity's Transition Year

    The transfer must be before it began.

  6. 6

    A transfer after 30 November 2021 and before the Transition Year

    The carrying value is carried over.

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.

Intellectual property sold within the group in 2023

Carried at EUR 2 million, sold for EUR 100 million, with EUR 5 million of tax paid by the seller.

Computed

The asset takes a GloBE carrying value of EUR 2,000,000, the disposing Entity's carrying value on disposition, as computed (Article 9.1.3): the transfer on 2023-06-30 was after 2021-11-30 and before the disposing Entity's Transition Year, and the asset is not inventory. The step-up of EUR 98,000,000 in the acquiring Entity's accounts is not recognised. A deferred tax asset of EUR 5,000,000 may be taken into account for GloBE purposes — the tax of EUR 5,000,000 paid on the transfer, limited to EUR 14,700,000 — in place of any deferred tax the accounts created; it does not reduce Adjusted Covered Taxes when created and reverses as the carrying value falls. Based on the figures you supplied.

Workings

Carrying value recorded by the acquiring EntityAs supplied
EUR 100,000,000
GloBE carrying valueArticle 9.1.3 — the disposing Entity's carrying value on disposition
EUR 2,000,000
Step-up not recognisedDepreciation or amortisation on it is excluded from GloBE Income or Loss
EUR 98,000,000
Local tax basisCommentary, paragraph 10.8.2 — as supplied
EUR 100,000,000
Cap on the deferred tax asset15% of the excess of the tax basis over the GloBE carrying value
EUR 14,700,000
Tax paid on the transferCommentary, paragraph 10.8.1 — as demonstrated by the group
EUR 5,000,000
Deferred tax asset for GloBE purposesCommentary, paragraphs 10.8.1 and 10.8.2 — the lesser of the tax paid and the cap
EUR 5,000,000

Decided by the a transfer after 30 november 2021 and before the transition year

The same sale, fully taxed

The seller paid EUR 25 million of tax on the gain.

Computed

The asset takes a GloBE carrying value of EUR 2,000,000, the disposing Entity's carrying value on disposition, as computed (Article 9.1.3): the transfer on 2023-06-30 was after 2021-11-30 and before the disposing Entity's Transition Year, and the asset is not inventory. The step-up of EUR 98,000,000 in the acquiring Entity's accounts is not recognised. A deferred tax asset of EUR 14,700,000 may be taken into account for GloBE purposes — the tax of EUR 25,000,000 paid on the transfer, limited to EUR 14,700,000 — in place of any deferred tax the accounts created; it does not reduce Adjusted Covered Taxes when created and reverses as the carrying value falls. Because that deferred tax asset is at its maximum, an acquiring Entity that recorded the asset at fair value may instead use its own carrying value for GloBE purposes (Commentary, paragraph 10.9). Based on the figures you supplied.

Workings

Carrying value recorded by the acquiring EntityAs supplied
EUR 100,000,000
GloBE carrying valueArticle 9.1.3 — the disposing Entity's carrying value on disposition
EUR 2,000,000
Step-up not recognisedDepreciation or amortisation on it is excluded from GloBE Income or Loss
EUR 98,000,000
Local tax basisCommentary, paragraph 10.8.2 — as supplied
EUR 100,000,000
Cap on the deferred tax asset15% of the excess of the tax basis over the GloBE carrying value
EUR 14,700,000
Tax paid on the transferCommentary, paragraph 10.8.1 — as demonstrated by the group
EUR 25,000,000
Deferred tax asset for GloBE purposesCommentary, paragraphs 10.8.1 and 10.8.2 — the lesser of the tax paid and the cap
EUR 14,700,000

Decided by the a transfer after 30 november 2021 and before the transition year

A transfer in mid-2021

The same sale on 30 June 2021.

Computed

Article 9.1.3 does not apply as computed: the transfer on 2021-06-30 was not after 2021-11-30. The acquiring Entity's carrying value under the accounting standard of the Consolidated Financial Statements is used, subject to Articles 3.2.3 and 6.3. Based on what you supplied.

Decided by the date of the transfer

A seller already within the rules

A 2025 transfer by an entity whose income was already subject to the GloBE Rules.

Computed

Article 9.1.3 does not apply as computed: the transfer was not before the commencement of the disposing Entity's Transition Year — its income was already subject to the GloBE Rules or a Qualified Domestic Minimum Top-up Tax, so the gain was within them. The acquiring Entity's carrying value under the accounting standard of the Consolidated Financial Statements is used, subject to Articles 3.2.3 and 6.3. Based on what you supplied.

Decided by the disposing entity's transition year

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

3 inputs still need your determination:

  • Is there a transfer of an asset — including a finance lease, a licence accounted for as a sale, a migration with a step-up or a change to fair value accounting — between entities that are, or would have been, Constituent Entities of the MNE Group, or a deemed transfer within one of them?
  • Is the asset inventory?
  • On what date is the transfer reflected in the disposing Entity's financial accounts, as a calendar date?

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.minimum_rate
15% · 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