CHAPTER 5 - EFFECTIVE TAX RATE AND TAX (TOP-UP TAX)
Article 43 - Substance-based Income Exclusion (SBIE)
The Net GloBE Income determined as per Paragraph 3 of Article 41 of these ERs shall be reduced by the SBIE to determine the Taxable Income (i.e., Excess Profit) for purposes of computing the Tax (Top-up Tax) under Article 42 of these ERs. A DCE of an MNE Group may make an election in each Tax Period not to apply the SBIE for by not computing the exclusion or claiming it in the computation of Tax (Top-up Tax) in the Tax Return submitted for the Tax Period.
The amount of SBIE is calculated as the sum of Eligible Payroll Costs and the Average Carrying Value of Eligible Tangible Assets, according to the percentages mentioned in Paragraph 4 of this Article, for each CE located in the State, except for CEs that are Investment Entities or Insurance Investment Entities located in the State, based on the following formula:
SBIE = (Eligible Payroll Costs × Payroll Percentage mentioned in Paragraph 4) + (Eligible Tangible Assets × Tangible Assets Percentage mentioned in Paragraph 4)
If a DCE that is part of an MNE Group elects not to claim the SBIE according to the first paragraph of this Article for a Tax Period, then the value of the excluded income shall be zero, except for the Entities referred to in Paragraphs 5 and 6 of Article 46 of these ERs.
The SBIE is determined as follows:
| Tax Periods beginning in | Eligible Payroll Costs Rate | Average carrying value of Eligible Tangible Assets at the beginning and ending of the Tax Period |
|---|---|---|
| 2025 | 9.6% | 7.6% |
| 2026 | 9.4% | 7.4% |
| 2027 | 9.2% | 7.2% |
| 2028 | 9.0% | 7.0% |
| 2029 | 8.2% | 6.6% |
| 2030 | 7.4% | 6.2% |
| 2031 | 6.6% | 5.8% |
| 2032 | 5.8% | 5.4% |
| 2033 onwards | 5% | 5% |
The provisions of this Article shall apply to Eligible Payroll Costs for Eligible Employees in accordance with Article 44 of these ERs, and to Eligible Tangible Assets in accordance with Article 45 of these ERs.
An MNE Group, when determining SBIE for CEs of that Group located in the State for a Tax Period, which are not included in the Entities referred to in Paragraphs 5 and 6 of Article 46 of these ERs, may apply the percentages stated in Paragraph 4 of this Article to a portion of the Eligible Payroll Costs and the average carrying value of Eligible Tangible Assets of those CEs for that period.
If the amount of the SBIE exceeds the Net GloBE Income for the Tax Period, the excess amount may not be carried forward to any subsequent Tax Period.
The DCE must provide the Tax Administration with supporting documents for the costs mentioned in this Article whenever requested.