How to calculate the top-up tax?

The top-up tax is calculated by using the jurisdictional blending mechanism to determine the effective tax rate (ETR) for a jurisdiction. This involves aggregating the results of all consolidated group entities within each jurisdiction to determine the ETR.

If the jurisdictional ETR is below the minimum rate of 15%, a top-up tax is applied to bring it up to the minimum rate. The following illustrates the calculation of Jurisdictional Top-up Tax:

The steps to calculate the Top-up Tax can be summarised in the following manner:

   1. Compute each entity’s GloBE Income & Jurisdictional GloBE Income

   2. Compute each entity’s Covered Taxes & Jurisdictional Covered Taxes

   3. Compute Jurisdictional ETR

   4. Determine the Top-up Tax Percentage

   5. Compute Jurisdictional Substance Based Income Exclusion (SBIE)

   6. Determine the Jurisdictional Excess Profit

   7. Calculate the Jurisdictional Top-up Tax

   8. Determine each entity’s Top-up Tax
       (in proportion to the entity’s GloBE Income)

The steps above is applicable in the computation of both the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT).

However, there is a major difference in the formula to compute the DTT. When computing the DTT, the QDMTT portion in the formula above is removed to prevent a circular computation.

In conclusion, the Jurisdictional DTT = Excess Profit ×Top-up Tax Percentage.

A - MAIN REFERENCE MATERIALS

• Model GloBE Rules (Published 20/12/2021)
• Commentary to the GloBE Rules :
• First Edition (Published 14/03/2022)
• Consolidated Commentary (2023) (Published 25/04/2024)
• Consolidated Commentary to Model GloBE Rules (Published 09/05/2025)
• Agreed Administrative Guidance (AAG):
• Safe Harbours and Penalty Relief (Published 20/12/2022)
• AAG published on 02/02/2023
• AAG published on 17/07/2023
• AAG published on 18/12/2023
• AAG published on 17/06/2024
• AAG published on 15/01/2025 (Article 8)
• AAG published on 15/01/2025 (Article 9)
• AAG published on 05/01/2026 (Side-by-Side Package)^New!
• Guidance on the GloBE Information Return (GIR):
• Guidance published on 17/07/2023
• Guidance published on 15/01/2025 
• GIR (Pillar Two) XML Schema

B - SUPPLEMENTARY REFERENCE MATERIALS

• Summary : Pillar Two Model Rules in A Nutshell
• Pillar Two Model Rules Fact Sheets
• Minimum Tax Implementation Handbook (Published 11/10/2023)
• Illustrative Examples-Updated (Published 02/05/2025)

FOR RELATED GMT ISSUES, PLEASE CONTACT US :

tf2p@hasil.gov.my