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Undertaxed Profits Rule: allocation between jurisdictions

Applies
FY2024 onwards
Reviewed
Rule
P2-UTPRALLOC-2024.1
By

How is UTPR top-up tax allocated between jurisdictions?

50% by each jurisdiction's share of employees and 50% by its share of tangible assets, across UTPR jurisdictions.

Per GloBE Model Rules (Pillar Two), December 2021, Article 2.6, Allocation of Top-up Tax for the UTPR

The UTPR Top-up Tax Amount allocated to a jurisdiction is the Total UTPR Top-up Tax Amount multiplied by the UTPR Percentage of the jurisdiction. The UTPR Percentage is the published employee weight multiplied by the Number of Employees in the jurisdiction over the Number of Employees in all UTPR jurisdictions, plus the published tangible asset weight multiplied by the total value of Tangible Assets in the jurisdiction over the total value of Tangible Assets in all UTPR jurisdictions. The UTPR Percentage of a jurisdiction is deemed to be zero for a Fiscal Year as long as the UTPR Top-up Tax Amount allocated to it in a prior Fiscal Year has not resulted in additional cash tax expense equal, in total, to that amount, and its employees and tangible assets are then left out of the formula for the other jurisdictions.

It tells a jurisdiction how much additional cash tax its Constituent Entities of the group must bear, through a denied deduction or an equivalent adjustment, for the year.

Two factors, weighted; and a zero where earlier amounts are unrealised

2.6.1 — the formula

  • UTPR Percentage = employee weight × (employees in the jurisdiction ÷ employees in all UTPR jurisdictions) + tangible asset weight × (assets in the jurisdiction ÷ assets in all UTPR jurisdictions)
  • Allocated amount = Total UTPR Top-up Tax Amount × UTPR Percentage

The weights are published values

Article 2.6.1 gives employees and tangible assets half each. Both resolve from the rate table; this page states none. A jurisdiction large on one measure and small on the other therefore pays between the two, not on the larger.

The denominators are the UTPR jurisdictions only

"All UTPR jurisdictions" are those with a Qualified UTPR in force for the year, so the totals leave out the group's employees and assets in jurisdictions that have none. The jurisdiction's own figure is a part of the total and cannot exceed it; a total of nil gives no ratio. Either is a question, not a share.

2.6.3 — a zero until earlier amounts are realised

If an amount allocated to the jurisdiction in a prior year has not yet produced additional cash tax equal to it, the percentage is zero this year and the jurisdiction's employees and assets leave the formula for the others. Article 2.6.4 lifts that where every UTPR jurisdiction is at zero. Whether the earlier amounts were realised is the reader's determination; utpr-top-up-tax-carry-forward works out the shortfall.

Points the Commentary settles

  • A UTPR jurisdiction is allocated its share even if it is itself a Low-Tax Jurisdiction for the group — including the UPE Jurisdiction
  • The zero under Article 2.6.3 is specific to the MNE Group: the same jurisdiction can still be allocated another group's Top-up Tax
  • An amount carried forward under Article 2.4.2 stays with the jurisdiction it was first allocated to and is not put through the formula again
  • The employee and asset figures may be taken from a Country-by-Country Report prepared on the Article 10.1 definitions
  • A Flow-through Entity's employees and assets that are not attributed to a Permanent Establishment go to the Constituent Entities in the jurisdiction where it was created; if there are none, they are left out

What arrives net

  • Investment Entities' employees and assets are left out (Article 2.6.2(a))
  • A Flow-through Entity's are allocated as Article 2.6.2(b) provides
  • Employees are full-time equivalents and include independent contractors
  • Tangible assets do not include cash, intangibles or financial assets

Order of testing

  1. 1

    Inputs requiring your determination

    The Total, both employee figures, both asset figures and the 2.6.3 question must all be supplied.

  2. 2

    Earlier allocations not yet realised

    If earlier amounts have not been realised, the percentage is deemed zero.

  3. 3

    UTPR Percentage

    Otherwise the weighted sum of the two shares, applied to the Total.

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 fifth of employees, three tenths of assets

A jurisdiction with 200 of 1,000 employees and EUR 30 million of EUR 100 million of tangible assets, against a Total UTPR Top-up Tax Amount of EUR 10 million.

Computed

A UTPR Top-up Tax Amount of EUR 2,500,000 is allocated to this jurisdiction for FY2026 as computed: the Total UTPR Top-up Tax Amount of EUR 10,000,000 multiplied by a UTPR Percentage of 25% — 50% weight on its 20% share of employees and 50% on its 30% share of tangible assets. The jurisdiction collects it by denying a deduction, or an equivalent adjustment, so that the Constituent Entities there bear additional cash tax expense of that amount (Article 2.4). Based on the figures you supplied.

Workings

Employees in the jurisdictionArticle 2.6.1(a) — as supplied
200
Employees in all UTPR jurisdictionsArticle 2.6.1(b) — as supplied
1,000
Employee shareArticle 2.6.1 — the jurisdiction's employees over all
20%
Tangible assets in the jurisdictionArticle 2.6.1(c) — as supplied
EUR 30,000,000
Tangible assets in all UTPR jurisdictionsArticle 2.6.1(d) — as supplied
EUR 100,000,000
Tangible asset shareArticle 2.6.1 — the jurisdiction's assets over all
30%
Employee weightArticle 2.6.1 — published value for FY2026
50%
Tangible asset weightArticle 2.6.1 — published value for FY2026
50%
UTPR PercentageArticle 2.6.1 — the weighted sum of the two shares
25%
UTPR Top-up Tax Amount allocated to the jurisdictionArticle 2.6.1 — the Total UTPR Top-up Tax Amount multiplied by the UTPR Percentage
EUR 2,500,000

Decided by the utpr percentage

Heavy on one measure

Most of the employees but almost none of the assets: the percentage lands between the two shares.

Computed

A UTPR Top-up Tax Amount of EUR 4,550,000 is allocated to this jurisdiction for FY2026 as computed: the Total UTPR Top-up Tax Amount of EUR 10,000,000 multiplied by a UTPR Percentage of 45.5% — 50% weight on its 90% share of employees and 50% on its 1% share of tangible assets. The jurisdiction collects it by denying a deduction, or an equivalent adjustment, so that the Constituent Entities there bear additional cash tax expense of that amount (Article 2.4). Based on the figures you supplied.

Workings

Employees in the jurisdictionArticle 2.6.1(a) — as supplied
900
Employees in all UTPR jurisdictionsArticle 2.6.1(b) — as supplied
1,000
Employee shareArticle 2.6.1 — the jurisdiction's employees over all
90%
Tangible assets in the jurisdictionArticle 2.6.1(c) — as supplied
EUR 1,000,000
Tangible assets in all UTPR jurisdictionsArticle 2.6.1(d) — as supplied
EUR 100,000,000
Tangible asset shareArticle 2.6.1 — the jurisdiction's assets over all
1%
Employee weightArticle 2.6.1 — published value for FY2026
50%
Tangible asset weightArticle 2.6.1 — published value for FY2026
50%
UTPR PercentageArticle 2.6.1 — the weighted sum of the two shares
45.5%
UTPR Top-up Tax Amount allocated to the jurisdictionArticle 2.6.1 — the Total UTPR Top-up Tax Amount multiplied by the UTPR Percentage
EUR 4,550,000

Decided by the utpr percentage

Earlier amount not yet realised

An amount allocated in a prior year has not yet produced its additional cash tax, so the percentage is zero.

Computed

No UTPR Top-up Tax Amount is allocated to this jurisdiction for FY2026 as computed: Article 2.6.3 deems its UTPR Percentage to be zero for as long as an amount allocated to it in a prior Fiscal Year has not resulted in additional cash tax expense equal, in total, to that amount, and you have indicated that is so. Its employees and tangible assets are then left out of the formula for the other jurisdictions (Article 2.6.3), unless every UTPR jurisdiction is at zero (Article 2.6.4). Based on what you supplied.

Workings

UTPR PercentageArticle 2.6.3 — deemed zero
0%
UTPR Top-up Tax Amount allocated to the jurisdictionArticle 2.6.1 — the Total multiplied by a nil percentage
EUR 0

Decided by the earlier allocations not yet realised

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

6 inputs still need your determination:

  • Has every UTPR Top-up Tax Amount allocated to this jurisdiction in a prior Fiscal Year resulted in additional cash tax expense equal, in total, to that amount (Article 2.6.3)? Answer yes if nothing was allocated to it before. If not, its UTPR Percentage is deemed to be zero this year.
  • What is the Total UTPR Top-up Tax Amount for the Fiscal Year (Article 2.5.1)?
  • What is the Number of Employees — full-time equivalents, independent contractors included — of the group's Constituent Entities located in the jurisdiction (Article 2.6.1(a))? Leave out Investment Entities.
  • What is the Number of Employees of the group's Constituent Entities in ALL jurisdictions with a Qualified UTPR in force for the year (Article 2.6.1(b)) — leaving out jurisdictions with none, and any with a UTPR Percentage of zero under Article 2.6.3?
  • What is the Net Book Value of Tangible Assets of the Constituent Entities located in the jurisdiction (Article 2.6.1(c)) — not counting cash, intangibles or financial assets?
  • What is the Net Book Value of Tangible Assets of the group's Constituent Entities in ALL jurisdictions with a Qualified UTPR in force (Article 2.6.1(d))?

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.utpr_employee_weight
50% · reviewed 2026-10-04 · source
pillar_two.utpr_asset_weight
50% · 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