Routine Profits Test
Educational guide to the Transitional CbCR Safe Harbour Routine Profits Test — substance carve-outs, year-specific rates, formula, and a fictional worked example.
Definition
The Routine Profits Test is a Transitional CbCR Safe Harbour pathway that generally asks whether a jurisdiction’s profit before tax is at or below a substance-based amount derived from eligible payroll and tangible asset carve-outs. Those carve-out percentages follow the Substance-Based Income Exclusion schedule in GloBE Model Rules Article 5.3 as reflected in Mirentra’s shared taxConstants.
For fiscal years beginning in 2026, Mirentra’s rules pack uses payroll carve-out 9.4% and tangible asset carve-out 7.4%. For FY2024 the corresponding rates are 9.8% and 7.8%. Rates decline over the schedule toward 5%; always confirm the year and eligibility definitions in primary sources.
Purpose
The purpose is to treat jurisdictions whose profit does not exceed a simplified substance return as potentially qualifying for transitional Safe Harbour relief via this pathway. It connects Safe Harbour screening to the same payroll and tangible-asset substance idea used inside full GloBE SBIE, while remaining a simplified transitional comparison against profit before tax.
Inputs
Typical inputs: eligible payroll costs; eligible tangible assets; and profit or loss before income tax. Eligibility is definitional — not every accounting payroll line or fixed-asset balance qualifies. Groups should map HR and fixed-asset data to Inclusive Framework concepts before relying on a pass.
Formula
Payroll carve-out = eligible payroll costs × payroll carve-out percentage for the fiscal year.
Tangible asset carve-out = eligible tangible assets × tangible asset carve-out percentage for the fiscal year.
Substance-based amount (SBIE-style) = payroll carve-out + tangible asset carve-out.
Orientation pass condition used in Mirentra’s calculator: profit before tax ≤ substance-based amount. Where profit before tax is negative, many operational models (including Mirentra’s orientation) treat the comparison as satisfied — confirm precise guidance wording.
Fictional worked example (FY2026)
Fictional Jurisdiction D, FY2026. Eligible payroll costs €50,000,000; eligible tangible assets €80,000,000; profit before tax €9,500,000.
Payroll carve-out = 50,000,000 × 9.4% = €4,700,000. Asset carve-out = 80,000,000 × 7.4% = €5,920,000. Substance-based amount = 4,700,000 + 5,920,000 = €10,620,000.
Comparison: 9,500,000 ≤ 10,620,000 → Routine Profits PASS. If profit before tax were €12,000,000, the same substance amount would yield FAIL for this pathway.
Same substance bases in FY2024 would use 9.8% / 7.8%: payroll carve-out €4,900,000; asset carve-out €6,240,000; substance-based amount €11,140,000 — illustrating why fiscal-year percentage selection must be reviewed explicitly.
Review notes
Review notes often flag: wrong fiscal-year percentage; inclusion of ineligible intangibles or inventory in “tangible assets”; payroll that is not eligible under guidance; and confusion between Safe Harbour Routine Profits and full GloBE SBIE inside a top-up computation. Keep a clear audit trail of percentage source and input extracts.
Product link
Illustrate Routine Profits arithmetic in the Safe Harbour Calculator (/tools/pillar-two-safe-harbour-calculator) or explore substance concepts alongside other tests from /platform. Results remain informational.
Primary sources and source-review date
Primary official sources: Safe Harbours and Penalty Relief (December 2022 PDF); GloBE Model Rules (Art. 5.3 framing); Consolidated Commentary (2026, DOI 10.1787/4377e89f-en); Administrative Guidance (December 2023 PDF). Source-review date: 2026-09-07.