GloBE Administrative Guidance – The QDMTT and GILTI Allocation

Abstract

Two days ago, the OECD/G20 Inclusive Framework released a package of Administrative Guidance (AG) for the Pillar Two GloBE Rules. The package addressed a variety of key outstanding issues which had been subject to ongoing negotiations by the Inclusive Framework’s Working Party 11. This preliminary analysis addresses the following three developments/clarifications:

1) the GILTI regime is a CFC Tax Regime;
2) the QDMTT applies before CFC Taxes; and
3) there is a new allocation mechanism of GILTI as a Blended CFC Tax.

The document contains three Appendices. The first sets out the ordering priority rules created by the GloBE Rules as clarified in the AG. The second is a step-by-step example of allocating GILTI as a Blended CFC Tax. The third demonstrates the impact of the allocation mechanism on incentives to adopt a QDMTT.

Keywords: Pillar Two, Pillar 2, GloBE Rules, Inclusive Framework, Administrative Guidance