1. Where the ultimate parent entity of an MNE group is located in a low-tax third country jurisdiction, Member States shall ensure that the constituent entities located in the Union are subject, in the Member State in which they are located, to an adjustment equal to the UTPR top-up tax amount allocated to that Member State for the fiscal year in accordance with Article 14. For that purpose, such adjustment may take the form of either a top-up tax due by those constituent entities or a denial of deduction against the taxable income of those constituent entities resulting in an amount of tax liability necessary to collect the UTPR top-up tax amount allocated to that Member State. The first subparagraph shall not apply where the ultimate parent entity in a low-tax third-country jurisdiction is subject to a qualified IIR in respect of itself and its low-taxed constituent entities located in that jurisdiction. 2. Where a Member State applies the adjustment pursuant to paragraph 1 of this Article in the form of a denial of deduction against taxable income, such adjustment shall apply to the extent possible with respect to the taxable year in which the fiscal year for which the UTPR top-up tax amount was computed and allocated to a Member State in accordance with Article 14 ends. Any UTPR top-up tax amount that remains due with respect to a fiscal year as a result of the application of a denial of deduction against taxable income for that fiscal year shall be carried forward to the extent necessary and shall be subject, with respect to each following fiscal year, to the adjustment pursuant to paragraph 1 until the full UTPR top-up tax amount allocated to that Member State for that fiscal year has been paid. 3. Constituent entities that are investment entities shall not be subject to this Article ...

1. Member States shall ensure that an intermediate parent entity located in a Member State and held by an ultimate parent entity that is located in a third-country jurisdiction is subject to the IIR top-up tax for the fiscal year in respect of its low-taxed constituent entities that are located in another jurisdiction or that are stateless. 2. Member States shall ensure that, where an intermediate parent entity is located in a Member State that is a low-tax jurisdiction and held by an ultimate parent entity that is located in a third-country jurisdiction, it is subject to the IIR top-up tax in respect of itself and of its low-taxed constituent entities located in the same Member State for the fiscal year. 3. Paragraphs 1 and 2 shall not apply where: (a) the ultimate parent entity is subject to a qualified IIR for that fiscal year; or (b) another intermediate parent entity is located in a jurisdiction where it is subject to a qualified IIR for that fiscal year and owns, directly or indirectly, a controlling interest in the intermediate parent entity ...

32. The definition of UPE is set out in Article 1.4. The UPE definition is used as part of the definition of Group and is the starting point for identifying all the Entities that comprise the MNE Group. The identification of the UPE is also relevant in other parts of the GloBE Rules. For example, the GloBE Rules give priority in the application of the IIR to the jurisdiction in which the UPE is located (the UPE Jurisdiction) and it will generally be the financial accounting standard of the UPE that is used as the basis for calculating the GloBE Income or Loss of Constituent Entities under Chapter 3. Article 1.4.1 33. There are two types of UPEs described in paragraphs (a) and (b) of this Article. Paragraph (a) is the most common scenario. It describes the UPE of a Group as defined in Article 1.2.2, i.e. the UPE of a Group comprised of at least two Entities , while paragraph (b) describes the UPE of a Group as defined in Article 1.2.3 (i.e. a Group that is made up of a Main Entity and one or more PEs). In this case the Main Entity is treated as the UPE of the Group. UPE of a Group as defined by Article 1.2.2 34. Paragraph (a) defines the term UPE in the case of a Group that is composed of at least two Entities in accordance with Article 1.2.2. To be a UPE of the Group, the Entity must comply with two requirements. The first condition is set out in subparagraph (i), which states that the UPE is an Entity that directly or indirectly owns a Controlling Interest in another Entity. The definition of Controlling Interest in Article 10.1 uses a consolidation test (including a deemed consolidation test) to determine whether an Entity owns a Controlling Interest in another Entity. Therefore, the requirement in subparagraph (i) is met if an Entity is required to consolidate the assets, liabilities, income, expenses and cash flows of another Entity on a line- by-line basis in accordance with an Acceptable Financial Accounting Standard or if it would have been so required if the first-mentioned Entity had prepared Consolidated Financial Statements in accordance with an Authorised Financial Accounting Standard that is either an Acceptable Financial Accounting Standard or another financial accounting standard that is adjusted to prevent any Material Competitive Distortions. 35. The second requirement is set in subparagraph (ii). It states that the Controlling Interests of the Entity should not be owned directly or indirectly by another Entity that is described in subparagraph (i). Therefore, it disqualifies an Entity from being the UPE of a Group if the Controlling Interests in that Entity are held by another Entity. Stated differently, an Entity is not considered the UPE of a Group if there is another Entity higher in the ownership chain that is required, or that would have been required, to consolidate the first-mentioned Entity on a line-by-line basis. UPE of a Group as defined by Article 1.2.3 36. The second type of UPE is described in Article 1.4.1(b). This paragraph provides that in those cases where the Group is a single Entity with one or more foreign PEs, then the Main Entity (as defined in Article 10.1) is the UPE. As explained in the Commentary to Article 1.2.3, this extended definition of UPE is necessary to ensure that a domestic Entity that engages in cross-border operations through PEs is subject to the GloBE Rules ...

17. Article 1.2 defines the terms “MNE Group” and “Group” for the purposes of the GloBE Rules. These terms, which are used to determine the scope of the GloBE Rules under Article 1.1, perform two key functions. Firstly, they restrict the GloBE Rules to those Groups or Entities with foreign subsidiaries or branches. Second they define the degree of common ownership and control required for two or more entities to be members of the same Group. 18. As described in the Commentary on Article 1.1, the Constituent Entities of a Group will not be subject to the GloBE Rules unless they are members of an MNE Group. Article 1.2.1 sets out the definition of an MNE Group. There are two elements to this definition: a. Whether two or more Entities form a Group is based on an accounting consolidation test. This consolidation test is determined based on the Consolidated Financial Statements prepared by the UPE. Subparagraph (d) of the definition of Consolidated Financial Statements in Article 10.1 includes a deeming provision for those UPEs that do not prepare Consolidated Financial Statements. This provision requires the use of the financial statements that would have been prepared if the UPE had been required to prepare such statements in accordance with an Authorised Financial Accounting Standard that is either an Acceptable Financial Accounting Standard or another financial accounting standard that is adjusted to prevent any Material Competitive Distortions. b. A Group will be an MNE Group if it has one or more Entities or PEs located in a jurisdiction other than the UPE jurisdiction. 19. The extended definition of Group in Article 1.2.3 ensures that the GloBE Rules also apply to a standalone Entity located in a jurisdiction that has one or more PEs located in another jurisdiction. Article 1.2.1 20. Article 1.2.1 requires a UPE of the Group to have, directly or indirectly, at least one foreign subsidiary or PE before the Group will be considered an MNE Group. A single subsidiary or PE as defined by Article 10.1 (even one that does not earn income) located in a jurisdiction other than the one where the UPE is located is sufficient to bring a Group within the definition of an MNE Group. Article 1.2.2 21. Article 1.2.2 defines a Group based on an accounting consolidation test. A Group is comprised of Entities (including arrangements such as partnerships or trusts that prepare separate financial accounts) that are related through ownership or control and meet either of the requirements set out in paragraph (a) or (b) of Article 1.2.2. This definition is used for purposes of defining a Constituent Entity in Article 1.3. 22. Paragraph (a) refers to a collection of Entities that are included in the Consolidated Financial Statements of the UPE. This means that the assets, liabilities, income, expenses, and cash flows (i.e. the financial results) of the Entity (including the ones of its PEs) are consolidated on a line-by-line basis in the Consolidated Financial Statements that the UPE prepares for the MNE Group. If no consolidated accounts exist, a collection of Entities would still be considered a Group if these Entities would have been so consolidated if an Entity were required to prepare such accounts with respect to the Entities it controls because the definition of term “Consolidated Financial Statements” in Article 10.1 also includes a “deemed consolidation test” in paragraph (d) which considers these Entities consolidating together and therefore, forming part of the same Group. 23. Whether an Entity is part of a Group depends on whether it meets the definition of an “Entity” under Article 10.1 and the requirements set out in paragraph (a). For example, a joint operation (as defined by IFRS (IFRS Foundation, 2022[2])) could be a separate Entity of the Group provided that it meets the definition of an Entity (e.g., partnership) such that the portion of its assets, income, expenses, cash flows and liabilities belonging to the joint operators that are other Entities of the Group is included in the Consolidated Financial Statements on a line-by-line basis. Therefore, Entities reported under the pro rata or proportional consolidation method are Constituent Entities of the Group. In these cases, the portion of the Entity’s assets, income, expenses, cash flows and liabilities that are reflected in the Consolidated Financial Statements are taken into account for purposes of the GloBE Rules (e.g., the consolidated revenue threshold in Article 1.1 only takes into account the amount of the revenue of the Entity that is reflected in Consolidated Financial Statements). 24. Paragraph (b) states that a Group is also comprised of Entities that are not consolidated on a line- by-line basis because they are subject to a special reporting treatment under an Acceptable Financial Accounting Standard on the grounds that the Entity is held for sale, or is excluded from consolidation based on size or materiality grounds. This type of Entity is also treated as part of the Group as long as it remains sufficiently within the control of the UPE to fall within the general consolidation requirements of the relevant Acceptable Financial Accounting Standard. Article 1.2.3 25. In order to ensure MNE Groups that meet the consolidated revenue threshold and engage in cross- border operations through PEs rather than subsidiaries are also subject to the GloBE Rules, Article 1.2.3 provides a supplementary definition of “Group”. The definition provides that a standalone Entity, which otherwise is not a member of a Group as defined in Article 1.2.2, but has one or more PEs located in other jurisdictions, will be treated as a Group for GloBE purposes. Thus, in combination with Article 1.2.1, an Entity and its foreign PE will meet the definition of Group and MNE Group. 26. Article 1.2.3 will not apply where the Entity only has a stateless PE in accordance with paragraph (d) of the definition in Article 10.1 and Article 10.3.3(d) because such a PE is not recognised under the laws of any other jurisdiction. This narrow situation only occurs where a standalone Entity has a PE ...

1.4.1. Ultimate Parent Entity means either: (a) an Entity that: i.  owns directly or indirectly a Controlling Interest in any other Entity; and ii. is not owned, with a Controlling Interest, directly or indirectly by another Entity; or (b) the Main Entity of a Group that is within Article 1.2.3 ...

1.2.1. An MNE Group means any Group that includes at least one Entity or Permanent Establishment that is not located in the jurisdiction of the Ultimate Parent Entity. 1.2.2. A Group means a collection of Entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those Entities: (a) are included in the Consolidated Financial Statements of the Ultimate Parent Entity; or (b) are excluded from the Consolidated Financial Statements of the Ultimate Parent Entity solely on size or materiality grounds, or on the grounds that the Entity is held for sale. 1.2.3. A Group also means an Entity that is located in one jurisdiction and has one or more Permanent Establishments located in other jurisdictions provided that the Entity is not a part of another Group described in Article 1.2.2 ...