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Transitional CbCR safe harbour

Applies
FY2023–FY2027
Reviewed
Rule
P2-TCBCR-2026.1
By

How does the transitional CbCR safe harbour work?

Top-up tax is nil if CbC revenue is under EUR 10 million and profit under EUR 1 million, the ETR is 17% or more, or profit is within the SBIE.

Per Consolidated Commentary to the GloBE Model Rules (May 2026), Annex A, Chapter 1, Transitional CbCR Safe Harbour

During the Transition Period the Top-up Tax in a jurisdiction for a Fiscal Year is deemed to be zero where: (a) the MNE Group reports Total Revenue below the de minimis revenue limit and Profit (Loss) before Income Tax below the de minimis profit limit on its Qualified CbC Report; or (b) its Simplified ETR is at least the Transition Rate for the Fiscal Year; or (c) its Profit (Loss) before Income Tax is no more than the Substance-based Income Exclusion amount. The Transition Period has no start date of its own: it runs from the first Fiscal Year in which the GloBE Rules apply to the group in the jurisdiction, for most groups a Fiscal Year beginning in 2024. It ends with the last Fiscal Year that begins on or before 31 December 2027, and excludes any Fiscal Year that ends after 30 June 2029. The safe harbour applies at the annual election of the Filing Constituent Entity.

Where it applies, the full GloBE calculation for the jurisdiction is not needed for that year, and no Top-up Tax arises for it, including Additional Current Top-up Tax. A group that does not apply it in a jurisdiction in a year it is subject to the GloBE Rules cannot use it there later.

The three tests, and what the result turns on

(a) De minimis

  • Total Revenue below the revenue limit AND Profit (Loss) before Income Tax below the profit limit — both limbs, both strict
  • Current year only, from the Qualified CbC Report; a loss meets the profit limb
  • Revenue of Entities held for sale in the jurisdiction is added for this test, and a total at the revenue limit defeats it

(b) Simplified ETR

  • Simplified Covered Taxes divided by Profit before Income Tax from the Qualified CbC Report
  • Simplified Covered Taxes are income tax expense from the Qualified Financial Statements — deferred taxes included — after removing taxes that are not Covered Taxes and uncertain tax positions
  • At least the Transition Rate, which depends on the year the Fiscal Year begins: 15% for 2023 and 2024, 16% for 2025, 17% for 2026 and 2027
  • A loss or nil profit has no ETR, and a jurisdictional ETR below the rate cannot be used for the Top-up Tax Percentage

(c) Routine profits

  • Profit (Loss) before Income Tax is no more than the Substance-based Income Exclusion computed under Article 5.3
  • A loss or nil profit always meets it, with no SBIE calculation needed

Net Unrealised Fair Value Loss

A Net Unrealised Fair Value Loss — losses on Ownership Interests other than Portfolio Shareholdings, less gains — that exceeds the published ceiling in a jurisdiction is excluded from Profit before Income Tax for the tests.

Hybrid Arbitrage Arrangements

For arrangements entered into after 15 December 2022, the figures are adjusted before the tests are run. An expense or loss arising from a deduction / non-inclusion arrangement or a duplicate loss arrangement is excluded from Profit (Loss) before Income Tax, and income tax expense arising from a duplicate tax recognition arrangement is excluded from the tax figure. A deduction / non-inclusion arrangement is intragroup credit or investment that produces an expense in one Constituent Entity with no commensurate increase in the counterparty's revenue or, over the life of the arrangement, in its taxable income. An arrangement in place before that date is treated as new if it is amended or transferred, if performance under it changes, or if its accounting treatment changes.

Not available at all

  • The UPE is a Flow-through Entity not wholly held by Qualified Persons, in the UPE Jurisdiction
  • Stateless Constituent Entities
  • A Multi-parented MNE Group where a single Qualified CbC Report does not include the combined groups
  • A jurisdiction with an Eligible Distribution Tax System election
  • The group did not benefit in a previous Fiscal Year in which it was subject to the GloBE Rules — unless it then had no Constituent Entities in that jurisdiction. Once out, always out
  • Data for one Entity or Permanent Establishment comes from different sources of Qualified Financial Statements

Meeting a test is not applying the safe harbour

Article 8.2.1 applies it at the annual election of the Filing Constituent Entity, and Article 8.2.2 lets a tax administration challenge the eligibility. The result says whether the election has been made.

More than one safe harbour

A group that qualifies for more than one may choose which to apply — it can elect this one rather than the Transitional UTPR Safe Harbour to avoid losing it under once out, always out.

Order of testing

  1. 1

    Inputs requiring your determination

    The Fiscal Year dates, whether any disapplying case applies, whether the election has been made, and the CbC Report figures including nil for held-for-sale revenue and any fair value loss.

  2. 2

    The Transition Period

    Tested first. A year outside it cannot carry the safe harbour, so no test is computed.

  3. 3

    Cases in which the safe harbour does not apply

    Any one of the disapplying cases ends the enquiry.

  4. 4

    The three tests in Box 1.1

    Any one is enough. A failure names which limb of the de minimis test failed and why the others did not apply.

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.

Simplified ETR met

A calendar 2025 year. Profit is EUR 100 million on revenue of EUR 400 million, and Simplified Covered Taxes are EUR 18 million: an 18% ETR against the 16% Transition Rate for a year beginning in 2025.

Computed

The Top-up Tax of the jurisdiction is deemed to be zero for the Fiscal Year as computed: Box 1.1 so provides during the Transition Period, and Article 8.2.1 applies it at the election of the Filing Constituent Entity, which you have indicated has been made. The test met: the simplified ETR test. Only one is needed. Based on the figures you supplied.

Workings

Total RevenueBox 1.1 paragraph 1(a) — as supplied
EUR 400,000,000
Profit (Loss) before Income TaxBox 1.1 — as supplied
EUR 100,000,000
De minimis revenue limitBox 1.1 paragraph 1(a) — published value. Revenue is not below it
EUR 10,000,000
De minimis profit limitBox 1.1 paragraph 1(a) — published value. Profit is not below it
EUR 1,000,000
Simplified Covered TaxesBox 1.1 paragraph 2 — as supplied
EUR 18,000,000
Simplified ETRBox 1.1 paragraph 2 — Simplified Covered Taxes over Profit before Income Tax
18%
Transition RateBox 1.1 paragraph 2 — published value for Fiscal Years beginning in 2025
16%
Substance-based Income ExclusionBox 1.1 paragraph 1(c), per Article 5.3 — as supplied
EUR 20,000,000

Decided by the three tests in box 1.1

The same figures a year later

For a year beginning in 2026 the Transition Rate is 17%, so an ETR of 16% no longer passes — and neither does the routine profits test.

Computed

The Transitional CbCR Safe Harbour is not met as computed: Box 1.1 deems the Top-up Tax to be zero if any one of its three tests is met, and none is on the figures you supplied. The de minimis test requires both a revenue limb and a profit limb and neither of its limbs is met; the Simplified ETR of 16% is below the Transition Rate of 17%; and Profit before Income Tax exceeds the Substance-based Income Exclusion. The Top-up Tax falls to be computed under Chapter 5, and the jurisdictional ETR from this calculation cannot be used for that. Based on the figures you supplied.

Workings

Total RevenueBox 1.1 paragraph 1(a) — as supplied
EUR 400,000,000
Profit (Loss) before Income TaxBox 1.1 — as supplied
EUR 100,000,000
De minimis revenue limitBox 1.1 paragraph 1(a) — published value. Revenue is not below it
EUR 10,000,000
De minimis profit limitBox 1.1 paragraph 1(a) — published value. Profit is not below it
EUR 1,000,000
Simplified Covered TaxesBox 1.1 paragraph 2 — as supplied
EUR 16,000,000
Simplified ETRBox 1.1 paragraph 2 — Simplified Covered Taxes over Profit before Income Tax
16%
Transition RateBox 1.1 paragraph 2 — published value for Fiscal Years beginning in 2026
17%
Substance-based Income ExclusionBox 1.1 paragraph 1(c), per Article 5.3 — as supplied
EUR 20,000,000

Decided by the three tests in box 1.1

Routine profits met

Profit of EUR 8 million is below a Substance-based Income Exclusion of EUR 9 million, though the ETR is only 5%.

Computed

The Top-up Tax of the jurisdiction is deemed to be zero for the Fiscal Year as computed: Box 1.1 so provides during the Transition Period, and Article 8.2.1 applies it at the election of the Filing Constituent Entity, which you have indicated has been made. The test met: the routine profits test. Only one is needed. Based on the figures you supplied.

Workings

Total RevenueBox 1.1 paragraph 1(a) — as supplied
EUR 90,000,000
Profit (Loss) before Income TaxBox 1.1 — as supplied
EUR 8,000,000
De minimis revenue limitBox 1.1 paragraph 1(a) — published value. Revenue is not below it
EUR 10,000,000
De minimis profit limitBox 1.1 paragraph 1(a) — published value. Profit is not below it
EUR 1,000,000
Simplified Covered TaxesBox 1.1 paragraph 2 — as supplied
EUR 400,000
Simplified ETRBox 1.1 paragraph 2 — Simplified Covered Taxes over Profit before Income Tax
5%
Transition RateBox 1.1 paragraph 2 — published value for Fiscal Years beginning in 2025
16%
Substance-based Income ExclusionBox 1.1 paragraph 1(c), per Article 5.3 — as supplied
EUR 9,000,000

Decided by the three tests in box 1.1

De minimis met, not elected

Revenue of EUR 6 million and profit of EUR 0.4 million meet the de minimis test, but the Filing Constituent Entity has not made the election.

Computed

The Transitional CbCR Safe Harbour is available but has not been elected as computed. The test met: the de minimis test, both limbs of it. Only one is needed. Article 8.2.1 applies it at the election of the Filing Constituent Entity, so meeting a test makes the safe harbour available rather than applying it — until the election is made the Top-up Tax falls to be computed under Chapter 5. Based on the figures you supplied.

Workings

Total RevenueBox 1.1 paragraph 1(a) — as supplied
EUR 6,000,000
Profit (Loss) before Income TaxBox 1.1 — as supplied
EUR 400,000
De minimis revenue limitBox 1.1 paragraph 1(a) — published value. Revenue is below it
EUR 10,000,000
De minimis profit limitBox 1.1 paragraph 1(a) — published value. Profit is below it
EUR 1,000,000

Decided by the three tests in box 1.1

Held-for-sale revenue defeats the de minimis test

The same EUR 6 million of revenue plus EUR 4 million from an Entity held for sale reaches the EUR 10 million limit, so the de minimis test is not met.

Computed

The Transitional CbCR Safe Harbour is not met as computed: Box 1.1 deems the Top-up Tax to be zero if any one of its three tests is met, and none is on the figures you supplied. The de minimis test requires both a revenue limb and a profit limb and its revenue limb is not met; no Simplified Covered Taxes were supplied for the simplified ETR test; and no Substance-based Income Exclusion was supplied for the routine profits test. The Top-up Tax falls to be computed under Chapter 5, and the jurisdictional ETR from this calculation cannot be used for that. Based on the figures you supplied.

Workings

Total RevenueBox 1.1 paragraph 1(a) — as supplied
EUR 6,000,000
Revenue of Entities held for saleParagraph 18 — added for the de minimis test only
EUR 4,000,000
Profit (Loss) before Income TaxBox 1.1 — as supplied
EUR 400,000
De minimis revenue limitBox 1.1 paragraph 1(a) — published value. Revenue is not below it
EUR 10,000,000
De minimis profit limitBox 1.1 paragraph 1(a) — published value. Profit is below it
EUR 1,000,000

Decided by the three tests in box 1.1

Once out, always out

The group did not apply the safe harbour in the jurisdiction in an earlier year in which it was subject to the GloBE Rules, and it had Constituent Entities there.

Computed

The Transitional CbCR Safe Harbour is not available as computed: Box 1.3 paragraph 10(d) and Commentary paragraphs 27 and 28 — the group did not benefit from the safe harbour in the jurisdiction in a previous Fiscal Year in which it was subject to the GloBE Rules, and it did have Constituent Entities there that year. Once out, always out. The three tests are not computed. The Top-up Tax falls to be computed under Chapter 5 of the Model Rules unless another safe harbour applies.

Decided by the cases in which the safe harbour does not apply

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:

  • What is the first day of the Fiscal Year, as a calendar date?
  • What is the last day of the Fiscal Year, as a calendar date?
  • Does any case apply that makes the safe harbour unavailable — including whether the group failed to benefit from it in a previous Fiscal Year in which it was subject to the GloBE Rules, unless it then had no Constituent Entities in this jurisdiction?

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.cbcr_de_minimis_revenue
EUR 10,000,000 · reviewed 2026-10-04 · source
pillar_two.cbcr_de_minimis_profit
EUR 1,000,000 · reviewed 2026-10-04 · source
pillar_two.cbcr_transition_rate
17% · reviewed 2026-10-04 · source
pillar_two.cbcr_fair_value_loss_exclusion
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

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader