Article 8.2.1

32. Article 8.2.1 and the definition of GloBE Safe Harbour contemplate that any GloBE Safe Harbour will be developed and released as part of the GloBE Implementation Framework. The terms of any GloBE Safe Harbour agreed under the GloBE Implementation Framework would specify the conditions that an MNE Group would need to meet in order to be able to rely on that GloBE Safe Harbour. These conditions would be designed to limit compliance costs for MNE Groups as well as administrative burden for tax authorities and incorporate thresholds that ensure only those parts of the MNE Group’s operations that are nearly certain to have jurisdictional ETRs above the Minimum Rate would be eligible for the GloBE Safe Harbour. The GloBE Implementation Framework could also explore whether a GloBE Safe Harbour could cover the situations where no Top-up Tax would be due (for instance, in respect of a jurisdiction where MNE Groups are subject to a Qualified Domestic Minimum Top-up Tax).

33. If a Filing Constituent Entity elects to apply any GloBE Safe Harbour to the MNE Group’s operations in a jurisdiction that would be eligible for the GloBE Safe Harbour, then the Top-up Tax for this jurisdiction would be deemed to be zero for the Fiscal Year of the election. The election for a GloBE Safe Harbour would be made on an annual basis. An MNE Group that elects to apply the GloBE Safe Harbour in respect of its Constituent Entities in a jurisdiction (the safe harbour jurisdiction) should not be required to compute the jurisdictional ETR for those Constituent Entities under Chapters 3-5 but should provide a record of the election to use the GloBE Safe Harbour, identify all the Constituent Entities in the safe harbour jurisdiction and provide any other relevant information, as part of the GloBE Information Return, consistent with Article 8.1.4 (a), (d) and (e).

Article 8.2.2

34. Where an MNE Group elects to apply a GloBE Safe Harbour, a tax administration could apply its ordinary assessment, investigation and audit processes to determine whether the GloBE Safe Harbour was applied in accordance with any criteria set out in the GloBE Implementation Framework and to assess the reasonableness of underlying data used for purposes of the GloBE Safe Harbour. Having done so, Article 8.2.2 provides a tax administration with a specific framework that would allow the tax administration to challenge the use of a GloBE Safe Harbour where specific facts and circumstances may have materially affected the eligibility of the Constituent Entities for the relevant GloBE Safe Harbour.

35. Article 8.2.2(a) provides that only a jurisdiction that could be allocated Top-up Tax under the GloBE Rules if the ETR of the safe harbour jurisdiction was below the Minimum Rate could challenge the use of a GloBE Safe Harbour with respect to the safe harbour jurisdiction. This paragraph ensures that the only jurisdictions that could challenge the use of a GloBE Safe Harbour are those that are affected by their use, that is those jurisdictions that would otherwise be allocated Top-up Tax if not for the use of a GloBE Safe Harbour. This paragraph would apply on an MNE Group-by-MNE Group basis and require testing whether the jurisdiction could be allocated Top-up Tax if the ETR of the safe harbour jurisdiction was below the Minimum Rate, by applying the allocation mechanics of the GloBE Rules and taking into account the MNE Group’s structure. However, this paragraph by itself assumes that the ETR could be below the Minimum Rate and does not require the tax administration or the taxpayer to compute the ETR of the jurisdiction to test whether the ETR is below the Minimum Rate.

36. Article 8.2.2(b) provides that the tax administration that wishes to challenge the use of a GloBE Safe Harbour notifies the Liable Constituent Entity (or Entities) within 36 months after the GloBE Information Return is filed. The GloBE Implementation Framework should consider the date on which the 36 month-period is considered to start in circumstances where the GloBE Information Return is received through an information exchange mechanism or by multiple domestic Constituent Entities. The notification provides those specific facts and circumstances that may have materially affected the eligibility of the Constituent Entities for the relevant GloBE Safe Harbour. As provided in Article 10.1, the Liable Constituent Entities are those that could be liable for Top-up Tax (or subject to an adjustment under Chapter 2) in the jurisdiction of such tax administration if the GloBE Safe Harbour in Article 8.2.1 did not apply. While the tax administration should make its best efforts to notify all Liable Constituent Entities located in the jurisdiction, there may be circumstances where it would be enough to notify substantially all Liable Constituent Entities, but not all of them, for instance because of a complex holding structure of the MNE Group in the jurisdiction. In addition, the tax administration may allow that only one of the Liable Constituent Entities of the MNE Group gives a response to the tax administration on behalf of the other Liable Constituent Entities, so that not all Liable Constituent Entities are required to give a response to the tax administration.

37. Article 8.2.2 (b) further provides that the Liable Constituent Entity (or Entities) is invited by the tax administration to clarify the effect of those facts and circumstances on the application of the GloBE Safe Harbour. The timeframe for clarifying the effect of those facts and circumstances is 6 months.

38. Article 8.2.2(c) provides that if the Liable Constituent Entity (or Entities) fails to demonstrate that the facts and circumstances identified by the tax administration did not affect materially the eligibility of the MNE for the GloBE Safe Harbour for this jurisdiction within the 6-month response period, the GloBE Safe Harbour would not be applicable. If the Liable Constituent Entity (or Entities), instead, demonstrates that the facts and circumstances identified by the tax administration did not affect materially the eligibility of the MNE for the GloBE Safe Harbour for the Constituent Entities located in the safe harbour jurisdiction, the GloBE Safe Harbour would still be applicable and the ETR of the jurisdiction would still be treated as if it was above the Minimum Rate.

39. The details of the consequences where the GloBE Safe Harbour is found not applicable as a result of Article 8.2.2 should be considered in the GloBE Implementation Framework.