IIR, UTPR and QDMTT: The Three Charging Mechanisms

The GloBE computation (the worked computation) produces the top-up tax per sub-15% jurisdiction. The question this guide answers is who charges it — and the answer is the three mechanisms, in a priority order that determines where the tax lands and who collects it.

The three mechanisms

Mechanism	Who charges	What it charges	When it applies
IIR — the Income Inclusion Rule	The ultimate parent’s jurisdiction (the parent jurisdiction)	The parent jurisdiction includes, in its own tax base, the top-up tax on the sub-15% foreign jurisdictions’ profits — the parent’s tax on the top-up amount, with the credit for the tax already paid in the low-tax jurisdiction	The parent jurisdiction has enacted the IIR, and the low-tax jurisdiction is a foreign jurisdiction (not the parent’s own)
UTPR — the Undeducted Profits Tax Rule	The source jurisdictions (the other jurisdictions with the group’s undertakings, other than the parent’s)	The backstop: where the IIR does not reach the top-up (the low-tax jurisdiction is not captured by the parent’s IIR — e.g. the parent is in a jurisdiction without an IIR, or the structure excludes it), the source jurisdictions charge the top-up, apportioned among them per the model rules’ allocation (the jurisdiction’s share of the group’s payroll/assets — the substance-weighted allocation)	The UTPR enacting jurisdictions, where the IIR has not charged the top-up — the UTPR is the residual mechanism, the backstop of the backstops
QDMTT — the Qualified Domestic Minimum Top-up Tax	The low-tax jurisdiction itself	The jurisdiction levies its own top-up on its own undertakings’ sub-15% profit — the domestic minimum top-up, at the jurisdiction’s rate, on the jurisdiction’s top-up base	The low-tax jurisdiction has enacted the QDMTT — the QDMTT takes the top-up home, before the IIR/UTPR reach it (the QDMTT has priority over the IIR/UTPR for the jurisdiction’s own undertakings, where enacted)

The design logic: the top-up tax is charged exactly once, by the mechanism with priority — the QDMTT (the jurisdiction’s own, where enacted) first, then the IIR (the parent’s, for the foreign jurisdictions), then the UTPR (the source jurisdictions’ backstop). The priority prevents the double charging of the same top-up (the QDMTT paid, the IIR not stacking on it) and ensures the charging (the UTPR catching what the others miss).

The priority order, worked

For a sub-15% jurisdiction J, with the top-up tax T:

1. J has enacted a QDMTT?  →  J charges T (the QDMTT) — done; the IIR/UTPR do not stack
2. No QDMTT — the parent's jurisdiction has enacted the IIR, and J is a
   foreign jurisdiction to it?  →  the parent charges T (the IIR) — done; the UTPR does not stack
3. Neither — a UTPR-enacting source jurisdiction exists?  →  the source
   jurisdictions charge T, apportioned (the UTPR) — the backstop

The group’s map is therefore, per sub-15% jurisdiction: which mechanism charges it — and the map is the Pillar Two for TP teams working document, per jurisdiction, per year, per the enacting jurisdictions’ laws.

The allocation mechanics

The IIR’s allocation

The IIR’s inclusion is the parent jurisdiction’s tax base addition: the top- up amount for each sub-15% foreign jurisdiction, included in the parent’s computation, with the credit for the covered taxes already paid in the low-tax jurisdiction (the parent’s tax on the top-up, at the parent’s rate, less the credit — the net additional tax is the parent’s rate gap on the top-up amount). The IIR’s detail: the parent’s jurisdiction’s rate applies to the top-up amount (not the low-tax jurisdiction’s), and the credit is for the tax paid in the low-tax jurisdiction — the worked example in the GloBE rules guide shows the parent-side computation.

The IIR’s scope edge: the IIR reaches the foreign sub-15% jurisdictions — the parent’s own jurisdiction’s sub-15% profit is not the IIR’s (that is the QDMTT’s, where the parent’s jurisdiction enacts one). The structure’s reading: the parent in a high-tax jurisdiction (the India parent, the 25% rate) with the low-tax foreign holding — the IIR is the charging mechanism, the parent’s jurisdiction includes the holding’s top-up.

The UTPR’s allocation

The UTPR’s apportionment is the substance-weighted allocation among the source jurisdictions: each UTPR-enacting source jurisdiction’s share of the top-up is its share of the group’s qualified payroll and qualified tangible assets (the SBIE inputs — the substance measure) across the UTPR- enacting source jurisdictions. The worked allocation:

Source jurisdiction (UTPR-enacting)	Qualified payroll	Qualified tangible assets	Substance share
S1	60	30	60% (of the UTPR sources’ substance)
S2	40	15	40%
Top-up to allocate (the J top-up not charged by the QDMTT/IIR)			10

S1 charges 6 (60% × 10), S2 charges 4 (40% × 10) — the backstop, apportioned by the substance the source jurisdictions hold. The UTPR’s timing: the UTPR applies from the year after the first GloBE year (the FY2025 computation, for the groups whose first year is FY2024) — the one-year lag is the UTPR’s distinctive feature (the backstop that arrives a year late, by design).

The QDMTT’s priority

The QDMTT’s enactment is the low-tax jurisdiction’s decision to take the top-up home — and the effect on the group: the top-up is charged in the low-tax jurisdiction (the jurisdiction’s rate, the jurisdiction’s collection), and the IIR/UTPR do not stack on it (the QDMTT’s credit — the parent’s IIR computation credits the QDMTT paid, so the group’s total top-up is the QDMTT, not the QDMTT plus the IIR). The group’s position: the QDMTT enactment map (which low-tax jurisdictions have enacted, from which year) is the charging map’s first input.

The worked allocation: the group’s three jurisdictions

A group: the parent in P (25%, IIR-enacting), the low-tax holding in J (5%, no QDMTT), the source undertaking in S (25%, UTPR-enacting, the substance holder):

• J’s top-up (from the worked computation): 10 — the 5% ETR on the 100 of profit, no SBIE.
• The mechanism: J has no QDMTT → the parent P has enacted the IIR, and J is a foreign jurisdiction to P → the IIR charges it: P includes the 10 in its base, credits the 5 paid in J, and charges P’s rate on the top-up (the net additional tax at P’s rate).
• The UTPR: does not engage — the IIR has charged the top-up; the backstop stands down. (Where P had not enacted the IIR, S would have charged the 10 under the UTPR — the substance-weighted share, S being the only UTPR source, the full 10.)

The group’s map: J’s top-up, charged by P’s IIR — and the group’s compliance is P-side (the IIR inclusion in P’s return) with the J data (J’s ACI, J’s covered taxes, the credit) as the input. The Pillar Two for TP teams guide is the jurisdiction-by-jurisdiction version of this map, with the data checklist that feeds it.

The group’s working questions

1. Per sub-15% jurisdiction: which mechanism charges the top-up? — the QDMTT-enactment map, the IIR-enactment map (the parent’s), the UTPR- enactment map (the sources’) — the priority order applied, per jurisdiction, per year.
2. The parent-side computation (where the IIR charges): the IIR inclusion in the parent’s return, the credit for the covered taxes, the net additional tax — the parent’s tax team’s computation, on the group’s data.
3. The QDMTT credit (where the QDMTT charges): the QDMTT paid, credited in the IIR/UTPR computation (where they would otherwise stack) — the credit’s documentation, the QDMTT payment evidence.
4. The UTPR allocation (where the UTPR charges): the substance shares (the payroll, the tangible assets, per source jurisdiction), the apportionment, the source-side charging — the multi-jurisdiction coordination the backstop requires.
5. The data — the ACI, the covered taxes, the SBIE inputs, per jurisdiction, reconciled to the filings and the financials — the data checklist that feeds every one of the above.

See also

• Pillar Two explained
• GloBE rules — the computation
• ETR and SBIE
• Pillar Two for TP teams