Substance-Based Income Exclusion
Educational guide to Substance-Based Income Exclusion (SBIE) — payroll and tangible asset carve-outs, year-specific rates, and how SBIE relates to the Routine Profits Test.
Definition
Substance-Based Income Exclusion (SBIE) is a GloBE Model Rules concept (Article 5.3 framing) that reduces the income amount exposed to top-up tax by recognizing a routine return associated with eligible payroll costs and eligible tangible assets in the jurisdiction.
Carve-out percentages decline by fiscal year in the Model Rules schedule. Mirentra’s shared taxConstants encode, among other years: FY2024 payroll 9.8% and tangible assets 7.8%; FY2026 payroll 9.4% and tangible assets 7.4%. The schedule continues stepping down toward 5% in later years — confirm the exact year in primary sources before use.
Purpose
SBIE exists so that top-up tax focuses on excess profit above a substance-linked routine return, rather than treating all GloBE Income as equally exposed. In the Transitional CbCR Safe Harbour Routine Profits Test, similar carve-out percentages appear in a simplified comparison against profit before tax. Full GloBE SBIE applies inside the GloBE top-up computation itself.
Inputs
Typical inputs are eligible payroll costs and the guidance-defined carrying values (or other bases) of eligible tangible assets located in the jurisdiction, multiplied by the applicable carve-out percentages for the fiscal year. Eligibility definitions, asset categories, and excluded items are technical and frequently challenged on review.
Formula
Payroll carve-out = eligible payroll costs × payroll carve-out % for the fiscal year.
Tangible asset carve-out = eligible tangible assets × tangible asset carve-out % for the fiscal year.
SBIE = payroll carve-out + tangible asset carve-out.
In full GloBE analyses, SBIE reduces Excess Profit used in top-up calculations. In Routine Profits Safe Harbour testing, profit before tax is compared to the substance-based amount built with the same percentage schedule orientation.
Fictional worked example
Fictional Jurisdiction F. Eligible payroll €50,000,000; eligible tangible assets €80,000,000.
FY2026: payroll carve-out 50,000,000 × 9.4% = €4,700,000; asset carve-out 80,000,000 × 7.4% = €5,920,000; SBIE = €10,620,000.
FY2024 with identical bases: payroll carve-out 50,000,000 × 9.8% = €4,900,000; asset carve-out 80,000,000 × 7.8% = €6,240,000; SBIE = €11,140,000. The year-driven percentage change is material and must be locked to the fiscal year under analysis.
Review notes
Misclassified substance inputs are a frequent finding: treating all PPE as eligible, mixing group vs jurisdictional payroll, using the wrong year’s percentage, or equating Safe Harbour Routine Profits outcomes with completed GloBE SBIE inside a top-up model. Keep eligibility memos with each calculation pack.
Product link
See Routine Profits illustrations in the Safe Harbour Calculator (/tools/pillar-two-safe-harbour-calculator) and related Knowledge Center articles. Platform organization of substance inputs and review notes is available via /platform.
Primary sources and source-review date
Primary official sources: GloBE Model Rules PDF (Art. 5.3); Consolidated Commentary (2026, DOI 10.1787/4377e89f-en); Administrative Guidance (December 2023 PDF); Safe Harbours December 2022 PDF for Routine Profits pathway context. Source-review date: 2026-09-07.