The Substance-Based Income Exclusion (SBIE) under Art. 5.3–5.4 of the Pillar Two Model Rules carves out a portion of a constituent entity's GloBE income from the top-up tax base. The carve-out is calculated using payroll costs and the net book value of tangible assets — but the rates applied to those figures decline each year.
The rate schedule
| Fiscal Year | Payroll Rate | Tangible Asset Rate |
|---|---|---|
| 2024 | 9.8% | 7.8% |
| 2025 | 8.2% | 6.8% |
| 2026 | 6.6% | 5.8% |
| 2027 | 5.4% | 5.6% |
| 2028 | 5.3% | 5.4% |
| 2029 | 5.2% | 5.3% |
| 2030 | 5.1% | 5.2% |
| 2031 | 5.0% | 5.1% |
| 2032 | 5.0% | 5.0% |
| 2033+ | 5.0% | 5.0% |
What counts as payroll
Payroll costs include wages, salaries, and employment taxes paid to employees who perform activities for the constituent entity. Outsourced and seconded workers may qualify if the costs are borne by the entity. The key exclusion is payroll attributable to capitalised development costs — these may need to be stripped out.
What counts as tangible assets
The tangible asset base uses the net book value (after depreciation), averaged over the opening and closing balance. It includes property, plant and equipment, natural resources, and rights to use tangible assets under operating leases — but not financial assets, intangibles, or right-of-use assets under certain lease structures.
Impact on top-up tax
In substance-rich jurisdictions (manufacturing, logistics), a large SBIE carve-out can eliminate the top-up tax base entirely. In IP-holding or finance entities with minimal payroll and tangible assets, the SBIE will be negligible and the full excess profit is subject to top-up tax.
Download the Sample GloBE Data Pack to see the SBIE calculation applied to 25 entities across 10 jurisdictions.