GloBE Rules for Corporate Restructurings and Holding Structures

Article 6 in Context: Restructurings and Holding Structures

This is the sixth part of our series on the OECD/G20 Global Anti-Base Erosion (GloBE) Model Rules. Here we look at how the rules treat corporate restructurings and holding structures. Mergers, demergers, asset transfers, joint ventures and groups with more than one parent all change the shape of a multinational group, or MNE. Article 6 sets out how the GloBE framework follows the group through those changes, so the group still meets its GloBE duties.

Corporate Restructuring and Holding Structures

A restructuring changes a group’s legal form, its ownership, or both. Those changes can move profit between countries. That in turn shifts what the group owes under the GloBE rules.

Overview

The GloBE rules set out how to treat the tax effects of each common restructuring. The aim is that a restructuring does not, by itself, cut the group’s tax bill in any country.

- Regulatory Context: Restructuring and the GloBE rules run together. A group that changes shape must keep its GloBE filings in step with the new shape.

- Impact on Tax Base: A restructuring moves profit between countries. Where the group reports a profit decides which country taxes it, so the tax base of each country can change.

Article 6.1: Revenue Threshold for Mergers and Demergers

Article 6.1 deals with mergers and demergers. It sets out how such a deal affects the consolidated revenue test. That test decides whether the GloBE rules apply to the group at all.

- Threshold Application: After a merger or a demerger, the group works out the threshold again on the new structure. Each entity that comes out of the deal is then tested on the right revenue figure.

- Continuity and Compliance: The aim is continuity. The same test applies after the deal as before it, so a change of structure alone does not reset the group’s position.

Article 6.2: Constituent Entities Joining and Leaving an MNE Group

Article 6.2 covers constituent entities that join or leave an MNE group. It protects the tax base, and it keeps the rules pointed at the right entities.

- Joining and Leaving: The rules say how a joining entity is treated. In particular, they say how its earlier profits and losses, booked outside the group, come into the group’s overall tax computation.

- Compliance Tracking: The GloBE duties follow the entity through the change of hands. That keeps compliance intact in each country involved.

Article 6.3: Transfer of Assets and Liabilities

A transfer of assets or liabilities within a group can change where profit is booked, and where it is taxed.

- Asset and Liability Management: The rules say how to treat such a transfer. The purpose is to stop a group eroding its tax base by moving assets to a low-tax entity.

- Fair Market Value Consideration: A transfer should be priced at fair market value. That keeps the accounts close to the real activity, and it leaves little room to shift profit.

Article 6.4: Joint Ventures

A joint venture has more than one parent. That makes the GloBE maths harder, above all where income and expenses are split between the parents.

- Tax Treatment of Joint Ventures: The rules say how the venture’s tax duties are handled. In particular, they say how profit is split among the parents, and taxed in each of their hands.

Article 6.5: Multi-Parented MNE Groups

Some groups have more than one parent entity. Overlapping tax systems and competing interests then make the analysis harder.

- Coordination Among Parents: The rules help the parents coordinate. Each one meets its own tax duties, and the group avoids taxing the same profit twice, or leaving a liability out.

Conclusion

A restructuring and the GloBE Model Rules have to be read together. A group that merges, demerges, moves assets or adds a parent changes its global tax position. A group should weigh that position before the deal, not after. Article 6 sets out how the framework follows the group through each change, so compliance and fairness survive them. The next article in this series looks at tax neutrality and distribution regimes. That subject matters to any group that has to plan tax across very different markets.