Why the Transitional CbCR Safe Harbour is harder to apply than it looks

The three-test structure of Art. 9.1, the boundary conditions that catch most engines out, and why jurisdiction-level CbCR aggregation matters.

The Transitional CbCR Safe Harbour (Art. 9.1 of the OECD Pillar Two Model Rules) looks deceptively simple: take your Country-by-Country Report data, apply three tests, and you might be able to skip the full GloBE computation for a jurisdiction. In practice it is one of the most error-prone calculations in the Pillar Two framework.

The three tests

A jurisdiction passes the safe harbour if it satisfies at least one of:

De minimis — jurisdictional revenue below EUR 10 million and profit before tax below EUR 1 million. Both thresholds must be met simultaneously.
Simplified ETR — simplified covered taxes divided by profit before tax exceeds the applicable rate: 15% for FY 2024, 16% for FY 2025, 17% for 2026 onwards.
Routine profits — profit before tax does not exceed the substance-based income exclusion (SBIE) floor computed from CbCR payroll and tangible asset figures.

The grain problem

The most common implementation error is treating CbCR as entity-level data when it is jurisdictional. OECD CbCR Table 1 reports revenue, PBT, and tax accrued at the jurisdiction level — not the entity level. Before applying any of the three tests, you must aggregate all constituent entities in a jurisdiction into a single set of figures.

This matters for the de minimis test: a jurisdiction with four entities each generating EUR 3 million revenue will not pass the de minimis test (total EUR 12 million), even though each entity individually would. A naïve entity-by-entity loop will produce wrong results.

The "below" ambiguity

Art. 5.5 states the de minimis thresholds as "below EUR 10 million" and "below EUR 1 million". This means strictly less than — revenue of exactly EUR 10,000,000 fails the test. Many implementations use <= instead of <.

The simplified ETR numerator

The simplified ETR test uses simplified covered taxes — not income tax accrued from CbCR. The numerator is derived from the financial statements (current tax expense adjusted for certain items), not the CbCR tax accrued column. Using the CbCR tax accrued figure directly will produce incorrect results in jurisdictions where the two figures diverge.

Download the test pack

The Pillar2OS Test Pack v1 includes 25 safe harbour test cases covering all three tests, including the boundary conditions described above. Download it free.