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Opening deferred tax attributes

Applies
FY2024 onwards
Reviewed
Rule
P2-DTA-2024.1
By

How are opening deferred taxes brought into Pillar Two?

Deferred tax in the Transition Year accounts is taken in at the lower of 15% and the local rate, ignoring valuation adjustments.

Per GloBE Model Rules (Pillar Two), December 2021, Article 9.1, Tax Attributes Upon Transition

When determining the Effective Tax Rate for a jurisdiction in its Transition Year and afterwards, the Group takes into account the deferred tax assets and liabilities reflected or disclosed in the financial accounts of its Constituent Entities there for the Transition Year, at the lower of the Minimum Rate and the applicable domestic tax rate. A deferred tax asset recorded below the Minimum Rate may be taken at the Minimum Rate if it can be demonstrated that it is attributable to a GloBE Loss. The effect of a valuation adjustment or accounting recognition adjustment is disregarded. A deferred tax asset arising from an item excluded from GloBE Income or Loss, in a transaction after 30 November 2021, is excluded.

A balance recorded above the Minimum Rate is scaled down to it; one recorded at or below it is taken as recorded, never increased — except an asset attributable to a GloBE Loss.

What the result turns on

The recast

  • Recorded balance divided by the rate recorded at, times the lower of the Minimum Rate and that rate
  • A balance at or below the Minimum Rate is taken as recorded
  • A balance above it is scaled down

The GloBE Loss uplift

A deferred tax asset recorded below the Minimum Rate can be taken at the Minimum Rate if the filer can demonstrate it is attributable to a loss that would have been a GloBE Loss had the Group been in scope that year. Assets only; the filer has to show it.

Gross, not net of valuation allowances

The balance is the attribute as reflected or disclosed, before any valuation adjustment or accounting recognition adjustment, which are disregarded. An asset not recognised because of expected insufficient taxable income is still included.

Left out

  • Anything arising under a Blended CFC Tax Regime, for every jurisdiction
  • A deferred tax asset from an item excluded from GloBE Income or Loss in a transaction after 30 November 2021

Order of testing

  1. 1

    Blended CFC Tax Regimes

    Disregarded for all jurisdictions.

  2. 2

    Items excluded from GloBE Income or Loss

    Article 9.1.2, for an asset from a transaction after 30 November 2021.

  3. 3

    Recast at the lower of the Minimum Rate and the rate recorded at

    One item at a time.

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.

Recorded at 30%

A deferred tax asset of EUR 300 recorded at 30% is recast to EUR 150 at the 15% Minimum Rate.

Computed

The deferred tax asset is taken into account at EUR 150 as computed: it was recorded at 30%, above the Minimum Rate of 15%, so Article 9.1.1 recasts it at the Minimum Rate, reducing it from EUR 300. Not modelled: the tax credit carry-forward formula, the Grace Period for deferred tax assets provided by a General Government, and the carrying value rule in Article 9.1.3. Based on the figures you supplied.

Workings

Recorded balanceArticle 9.1.1 — as supplied, before any valuation adjustment
EUR 300
Rate recorded atArticle 9.1.1 — as supplied
30%
Minimum RateArticle 9.1.1 — published value
15%
Rate appliedThe lower of the Minimum Rate and the rate recorded at
15%
Amount for the Article 9.1.1 computationThe recorded balance divided by the rate recorded at, times the rate applied
EUR 150

Decided by the recast at the lower of the minimum rate and the rate recorded at

Recorded at 10%, GloBE Loss

An asset of EUR 100 recorded at 10%, attributable to a loss that would have been a GloBE Loss, is lifted to EUR 150 at the Minimum Rate.

Computed

The deferred tax asset is taken into account at EUR 150 as computed: it was recorded at 10%, below the Minimum Rate of 15%, and you have indicated it is attributable to a GloBE Loss, so Article 9.1.1 allows it to be taken at the Minimum Rate. Not modelled: the tax credit carry-forward formula, the Grace Period for deferred tax assets provided by a General Government, and the carrying value rule in Article 9.1.3. Based on the figures you supplied.

Workings

Recorded balanceArticle 9.1.1 — as supplied, before any valuation adjustment
EUR 100
Rate recorded atArticle 9.1.1 — as supplied
10%
Minimum RateArticle 9.1.1 — published value
15%
Rate appliedThe lower of the two, lifted to the Minimum Rate because the asset is attributable to a GloBE Loss
15%
Amount for the Article 9.1.1 computationThe recorded balance divided by the rate recorded at, times the rate applied
EUR 150

Decided by the recast at the lower of the minimum rate and the rate recorded at

Recorded at 10%, no GloBE Loss

The same asset without that showing is taken as recorded at EUR 100.

Computed

The deferred tax asset is taken into account at EUR 100 as computed: it was recorded at 10%, which is not above the Minimum Rate of 15%, so Article 9.1.1 takes it as recorded. Not modelled: the tax credit carry-forward formula, the Grace Period for deferred tax assets provided by a General Government, and the carrying value rule in Article 9.1.3. Based on the figures you supplied.

Workings

Recorded balanceArticle 9.1.1 — as supplied, before any valuation adjustment
EUR 100
Rate recorded atArticle 9.1.1 — as supplied
10%
Minimum RateArticle 9.1.1 — published value
15%
Rate appliedThe lower of the Minimum Rate and the rate recorded at
10%
Amount for the Article 9.1.1 computationThe recorded balance divided by the rate recorded at, times the rate applied
EUR 100

Decided by the recast at the lower of the minimum rate and the rate recorded at

An excluded item

A deferred tax asset from an item excluded from GloBE Income, generated in a transaction on 1 March 2022.

Computed

The deferred tax asset is excluded from the Article 9.1.1 computation as computed: it arises from an item excluded from GloBE Income or Loss under Chapter 3 in a transaction on 2022-03-01, after 2021-11-30, so Article 9.1.2 excludes it. Based on what you supplied.

Decided by the items excluded from globe income or loss

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:

  • Is the item a deferred tax asset or a deferred tax liability?

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