QDMTT: The Domestic Minimum Top-Up Tax

Definition

The QDMTT — the qualified domestic minimum top-up tax — is the jurisdiction’s own 15% minimum top-up tax: the domestic charge the jurisdiction enacts (the legislation, the domestic minimum) that charges the top-up tax on the undertaxed profit in the jurisdiction itself. The QDMTT is the domestic mechanism in the IIR, UTPR & QDMTT sequence — and it takes priority over the IIR (the primary, the parent’s inclusion) and the UTPR (the secondary, the other in-scope jurisdictions’ charge): where the jurisdiction has enacted the QDMTT, the top-up is charged domestically first, and the IIR / UTPR are the fallback (the charge where the QDMTT does not cover).

The QDMTT, in one computation:
  1. The in-scope group entity (the consolidated CbC group, the €750m
     test) in the jurisdiction with the ETR < 15%
  2. The top-up tax (the (15% − ETR) × (ACI − SBIE) — the base, the rate)
  3. The jurisdiction’s QDMTT (enacted): the top-up charged domestically
     (the jurisdiction’s own 15% minimum, the domestic charge)
  4. The priority: the QDMTT takes priority over the IIR / UTPR — the
     domestic charge first, the IIR / UTPR the fallback where the QDMTT
     does not cover

The element	The content
The trigger	The in-scope group entity’s jurisdictional ETR below 15% (the undertaxed profit, the top-up tax computed) — and the jurisdiction having enacted the QDMTT (the domestic minimum legislation)
The charge	The top-up tax ((15% − ETR) × (ACI − SBIE)) — charged domestically (in the jurisdiction itself, the jurisdiction’s own minimum)
The charger	The jurisdiction (the domestic authority, the jurisdiction’s own 15% minimum) — the domestic charge, the top-up collected in the jurisdiction
The priority	The QDMTT takes priority over the IIR (the primary) and the UTPR (the secondary) — the domestic charge first, the IIR / UTPR the fallback where the QDMTT does not cover the full top-up
The sequence	The QDMTT (the domestic, where enacted, the priority) → the IIR (the primary, the fallback) → the UTPR (the secondary, the backstop) — the IIR, UTPR & QDMTT guide

The working read (the IIR, UTPR & QDMTT guide): the QDMTT is the domestic minimum — the jurisdiction’s own legislation (the domestic top-up tax, the 15% floor enacted domestically) that charges the top-up in the jurisdiction itself. The priority (the QDMTT over the IIR / UTPR) is the design: the jurisdiction that enacts the QDMTT collects the top-up itself (the domestic charge), and the parent’s IIR / the other jurisdictions’ UTPR are the fallback (the charge where the QDMTT does not cover the full top-up — the gap, the residual). The enactment (the jurisdiction’s legislation, the domestic minimum) is the QDMTT’s condition — the QDMTT applies where enacted; the jurisdictions without the QDMTT (the no-domestic-minimum jurisdictions) fall to the IIR (the primary) and the UTPR (the secondary). The transitional safe harbour (the CbCR-based ETR test) can avoid the top-up (and the QDMTT) for the applicable years.

Example

The MNE group (the consolidated revenue €2bn, in scope): the Luxembourg entity (the in-scope group entity) has the jurisdictional ETR of 4% (the ACI €25m, the covered taxes €1m — below the 15% floor). Luxembourg has enacted the QDMTT (the domestic minimum legislation, the 15% floor domestically). The top-up tax: (15% − 4%) × (€25m − SBIE). The QDMTT applies (the priority): the top-up is charged domestically (in Luxembourg, the jurisdiction’s own 15% minimum) — the Luxembourg authority collects the top-up. The sequence: the QDMTT (the domestic, enacted, the priority) charges the top-up; the IIR (the primary) does not engage (the QDMTT covered the top-up); the UTPR (the secondary) does not engage (the QDMTT reached the top-up, the backstop not needed). The transitional safe harbour checked for the applicable years (the CbCR-based ETR, the 5% differential) — where it applies, the top-up (and the QDMTT) is avoided for those years.

See also

• IIR, UTPR & QDMTT: The Three Charging Mechanisms (the guide)
• IIR (Income Inclusion Rule) · UTPR
• Top-Up Tax · GloBE

FAQ

QDMTT or IIR — which charges the top-up where both could apply? The QDMTT (the jurisdiction’s own domestic minimum, where enacted) takes priority — the domestic charge first, the top-up charged in the jurisdiction itself. The IIR (the parent’s inclusion, the primary) is the fallback — where the jurisdiction has not enacted the QDMTT (no domestic minimum), or the QDMTT does not cover the full top-up (the gap, the residual), the IIR (and the UTPR) charge the remainder. The sequence: the QDMTT (where enacted, the priority) → the IIR (the primary, the fallback) → the UTPR (the secondary, the backstop). The IIR, UTPR & QDMTT guide has the priority mechanics.

Why do jurisdictions enact the QDMTT? To collect the top-up themselves — the jurisdiction that enacts the QDMTT keeps the top-up tax (domestic revenue), rather than the top-up being charged by the parent jurisdiction (the IIR) or the other in-scope jurisdictions (the UTPR). The QDMTT is the jurisdiction’s sovereignty over the minimum tax — the domestic charge, the domestic revenue. The Pillar Two guide has the jurisdictional enactment landscape (the QDMTTs enacted, the timelines).

Does the QDMTT change the top-up amount? No — the QDMTT changes the charger (the domestic jurisdiction, rather than the parent’s IIR or the other jurisdictions’ UTPR), not the amount (the top-up tax is the same computation — the (15% − ETR) × (ACI − SBIE) — regardless of the mechanism that charges it). The QDMTT’s role is the priority (the domestic charge first) and the collection (the jurisdiction keeps the revenue) — the top-up amount is the GloBE computation’s, the mechanism’s choice is the charger. The IIR, UTPR & QDMTT guide has the mechanics; the top-up amount is the top-up tax computation, the same on any mechanism.