The effective tax rate will be established per jurisdiction by dividing taxes paid by the entities in the jurisdiction by their income. If the effective tax rate for the entities in a particular jurisdiction is below the 15% minimum, then the rules are triggered and the group must pay a top-up tax to bring its rate up to 15% (referred to as the income inclusion rule).
The calculations will be made by the ultimate parent entity of the group unless the group assigns another entity.
Where the parent company is situated outside the EU in a low-tax country which does not apply equivalent rules, the undertaxed payments rule will allocate any residual amount of top-up tax to group entities in the EU. The amount of top-up tax that an EU member state will collect from the entities of the group in its territory will be determined by a formula based on employees and assets.