CbCR Safe Harbour: three tests, one decision per jurisdiction

The Transitional CbCR Safe Harbour (TCSH) lets you close out a jurisdiction without a full GloBE calculation - provided that jurisdiction passes at least one of three tests. You don’t need to pass all of them. The working logic is straightforward: start with the easiest test to clear, and move on only if needed.

Test 1: De minimis (revenue and profit)

A jurisdiction drops out of the GloBE calculation if both conditions are met:

Revenue of all constituent entities in the jurisdiction below EUR 10 million
Profit before tax below EUR 1 million

Data comes from a qualified CbCR. This is the quickest test to check - pull the revenue and profit columns from your CbCR jurisdiction table. For small presences (1-2 entities, low activity) this is usually sufficient.

Aggregation note: all entities in the jurisdiction count together, including transparent entities allocated to that jurisdiction. Missing any entity corrupts the result.

Test 2: Simplified ETR Test

Calculate the simplified ETR as Simplified Covered Taxes divided by profit before tax from CbCR. Thresholds:

FY2023: ETR ≥ 15%
FY2024: ETR ≥ 16%
FY2025: ETR ≥ 17%

If a jurisdiction didn’t pass de minimis but the CbCR ETR is clearly above the threshold, this test usually closes it quickly. The critical issue is what counts as Simplified Covered Taxes. The scope is narrower than Covered Taxes under a full GloBE calculation: dividends withholding taxes, most return-to-provision adjustments, and deferred taxes outside standard items are excluded.

Inconsistent treatment of Simplified Covered Taxes across jurisdictions is the most common source of errors here.

Test 3: Routine Profits Test

If the first two tests didn’t work, check whether profit before tax is less than or equal to the Substance-Based Income Exclusion (SBIE) calculated on a simplified basis. SBIE is the sum of:

5% of qualified payroll costs
5% of qualified net book value of tangible assets

If profit doesn’t exceed SBIE, the top-up tax is zero and the jurisdiction is closed. This test is particularly effective for jurisdictions with meaningful substance (manufacturing, warehouses, shared service centres) where SBIE absorbs most of the profit.

Asset base trap: the decision between PPA and standalone asset values (without acquisition step-up) must be made once and applied consistently across the group.

Sequencing in practice

There’s no required order, but operationally it pays to run them like this:

Filter jurisdictions through de minimis first - it’s fast and typically eliminates 30-50% of items.
Run the simplified ETR on the remainder - you need this data for GIR anyway.
Apply the routine profits test only where ETR doesn’t close it - payroll and asset data may need separate collection.

Expiry

TCSH applies to FY2023, FY2024, and FY2025. For FY2026 the option lapses (except for jurisdictions that obtain Qualified Status). Groups that haven’t run a full GloBE calculation under the safe harbour umbrella need data and process infrastructure in place before FY2026 closes.

Bottom line. TCSH is not an analytical shortcut - it’s a per-jurisdiction decision based on specific CbCR numbers. The logic of the three tests is simple; the problem is always in the data you feed into them.

Educational content only; not tax advice. Thresholds and rules require verification against local implementation.