### (21) article 11(1) , point (b)(ii) of regulation (eu) 2015/760 currently requires that qualifying portfolio undertakings , where those qualifying undertakings are admitted to trading on a regulated market or on a multilateral trading facility , have a market capitalisation of no more than eur 500 000 000. many listed companies with a low market capitalisation , however , have a limited liquidity which prevents eltif managers from building , within a reasonable time , a sufficient position in such listed companies , which narrows down the range of available investment targets. in order to provide eltifs with a better liquidity profile , the market capitalisation of the listed qualifying undertakings in which eltifs can invest should therefore be increased from maximum eur 500 000 000 to maximum eur 1 000 000 000. to avoid potential changes to the eligibility of such investments due to currency fluctuations or other factors , the determination of the market capitalisation threshold should only be made at the time of the initial investment. ### (21) article 11(1) , point (b)(ii) of regulation (eu) 2015/760 currently requires that qualifying portfolio undertakings , where those qualifying undertakings are admitted to trading on a regulated market or on a multilateral trading facility , have a market capitalisation of no more than eur 500 000 000. many listed companies with a low market capitalisation , however , have a limited liquidity which prevents eltif managers from building , within a reasonable time , a sufficient position in such listed companies , which narrows down the range of available investment targets. in order to provide eltifs with a better liquidity profile , the market capitalisation of the listed qualifying undertakings in which eltifs can invest should therefore be increased from maximum eur 500 000 000 to maximum eur 5 000 000 000. to avoid potential changes to the eligibility of such investments due to currency fluctuations or other factors , the determination of the market capitalisation threshold should only be made at the time of the initial investment.


### (21) article 11(1) , point (b)(ii) of regulation (eu) 2015/760 currently requires that qualifying portfolio undertakings , where those qualifying undertakings are admitted to trading on a regulated market or on a multilateral trading facility , have a market capitalisation of no more than eur 500 000 000. many listed companies with a low market capitalisation , however , have a limited liquidity which prevents eltif managers from building , within a reasonable time , a sufficient position in such listed companies , which narrows down the range of available investment targets. in order to provide eltifs with a better liquidity profile , the market capitalisation of the listed qualifying undertakings in which eltifs can invest should therefore be increased from maximum eur 500 000 000 to maximum eur 1 000 000 000. to avoid potential changes to the eligibility of such investments due to currency fluctuations or other factors , the determination of the market capitalisation threshold should only be made at the time of the initial investment. ### (21) article 11(1) , point (b)(ii) of regulation (eu) 2015/760 currently requires that qualifying portfolio undertakings , where those qualifying undertakings are admitted to trading on a regulated market or on a multilateral trading facility , have a market capitalisation of no more than eur 500 000 000. many listed companies with a low market capitalisation , however , have a limited liquidity which prevents eltif managers from building , within a reasonable time , a sufficient position in such listed companies , which narrows down the range of available investment targets. in order to provide eltifs with a better liquidity profile , the market capitalisation of the listed qualifying undertakings in which eltifs can invest should therefore be increased from maximum eur 500 000 000 to maximum eur 3 000 000 000. to avoid potential changes to the eligibility of such investments due to currency fluctuations or other factors , the determination of the market capitalisation threshold should only be made at the time of the initial investment.


### (25) leverage is frequently used to enable the day-to-day operation of an eltif and to carry out a specific investment strategy. moderate amounts of leverage can amplify returns , and , where controlled adequately , without incurring or exacerbating excessive risks. in addition , leverage can frequently be used by a variety of collective investment undertakings to gain additional efficiencies or operational results. since the borrowing of cash threshold is currently limited to 30% of the capital of the eltif , eltif managers may be unable to successfully pursue certain investment strategies , including in the case of investments in real assets , where using higher levels of leverage is an industry norm or is otherwise required to achieve attractive risk-adjusted returns. it is therefore appropriate to increase the flexibility of managers of eltifs to raise further capital during the life of the eltif. in view of the possible risks that leverage can entail , eltifs marketed to retail investors should be permitted to borrow cash amounting to up to 50 % of the value of the capital of the eltif. the 50 % threshold is appropriate given the overall borrowing of cash limits common for funds investing in real assets with a similar liquidity and redemption profile. as for eltifs marketed to professional investors , however , a higher leverage threshold should be permitted , because professional investors have a higher risk-tolerance than retail investors. the borrowing of cash threshold for eltifs that are marketed to professional investors only should therefore be extended to 100 % of the eltif capital. ### (25) leverage is frequently used to enable the day-to-day operation of an eltif and to carry out a specific investment strategy. moderate amounts of leverage can amplify returns , and , where controlled adequately , without incurring or exacerbating excessive risks. in addition , leverage can frequently be used by a variety of collective investment undertakings to gain additional efficiencies or operational results. since the borrowing of cash threshold is currently limited to 30% of the capital of the eltif , eltif managers may be unable to successfully pursue certain investment strategies , including in the case of investments in real assets , where using higher levels of leverage is an industry norm or is otherwise required to achieve attractive risk-adjusted returns. it is therefore appropriate to increase the flexibility of managers of eltifs to raise further capital during the life of the eltif. in view of the possible risks that leverage can entail , eltifs marketed to retail investors should be permitted to borrow cash amounting to up to 75 % of the net asset value of the eltif. the 75 % threshold is appropriate given the overall borrowing of cash limits common for funds investing in real assets with a similar liquidity and redemption profile. as for eltifs marketed to professional investors , however , a higher leverage threshold should be permitted , because professional investors have a higher risk-tolerance than retail investors. the borrowing of cash threshold for eltifs that are marketed to professional investors only should therefore be extended to 100 % of the eltif net asset value.


### (26) to provide eltifs with wider investment opportunities , eltifs should be able to borrow in the currency in which the manager of the eltif expects to acquire the asset. it is , however , necessary to mitigate the risk of currency mismatches and thus to limit the currency risk for the investment portfolio. eltifs should therefore either put in place adequate hedges of the currency exposure , or should borrow in another currency where foreign currency exposures do not bring about significant currency risks. ### (26) to provide eltifs with wider investment opportunities , eltifs should be able to borrow in the currency in which the manager of the eltif expects to acquire the asset. it is , however , necessary to mitigate the risk of currency mismatches and thus to limit the currency risk for the investment portfolio. eltifs should therefore appropriately hedge their currency exposure.


### (27) eltifs should be able to encumber their assets to implement their borrowing strategy. to address concerns about shadow banking activities , however , cash borrowed by eltifs should not be used to grant loans to qualifying portfolio undertakings. however , to increase the flexibility of eltifs in executing their borrowing strategy , the borrowing arrangements should not count as borrowing where that borrowing is fully covered by investors’ capital commitments. ### deleted


### (27) eltifs should be able to encumber their assets to implement their borrowing strategy. to address concerns about shadow banking activities , however , cash borrowed by eltifs should not be used to grant loans to qualifying portfolio undertakings. however , to increase the flexibility of eltifs in executing their borrowing strategy , the borrowing arrangements should not count as borrowing where that borrowing is fully covered by investors’ capital commitments. ### (27) eltifs should be able to encumber their assets to implement their borrowing strategy.


### (28) given the increase of the maximum thresholds for borrowing cash by eltifs and the removal of certain limitations on the borrowing of cash in foreign currencies , investors should have more comprehensive information on the borrowing strategy and limits employed by the eltif. it is therefore appropriate to require eltif managers to explicitly disclose in the prospectus of the eltif concerned the borrowing strategy and the borrowing limits and to provide information on how leverage will contribute to the eltif strategy and how currency and duration risks will be mitigated. ### (28) given the increase of the maximum thresholds for borrowing cash by eltifs and the removal of certain limitations on the borrowing of cash in foreign currencies , investors should have more comprehensive information on the borrowing strategy and limits employed by the eltif. it is therefore appropriate to require eltif managers to explicitly disclose in the prospectus of the eltif concerned the borrowing strategy and the borrowing limits and to provide an overview of how leverage will contribute to the eltif strategy and how currency and duration risks will be mitigated.


### (40) in order to give eltif managers sufficient time to adapt to the new requirements , including the requirements pertaining to the marketing of eltifs to investors , this regulation should start to apply six months after its entry into force , ### (40) in order to give eltif managers sufficient time to adapt to the new requirements , including the requirements pertaining to the marketing of eltifs to investors , this regulation should start to apply six months after its entry into force. as eltifs are long-term by nature , existing eltifs should be allowed to benefit from a grandfathering clause in order to safeguard predictability and trust.


### (40) in order to give eltif managers sufficient time to adapt to the new requirements , including the requirements pertaining to the marketing of eltifs to investors , this regulation should start to apply six months after its entry into force , ### (40) in order to give eltif managers sufficient time to adapt to the new requirements , including the requirements pertaining to the marketing of eltifs to investors , this regulation should start to apply twelve months after its entry into force ,


### (14a) ‘simple , transparent and standardised securitisation’ means a securitisation that complies with the conditions set out in article 18 of regulation (eu) 2017/2402 of the european parliament and of the council*1’; ### (14a) ‘securitisation’ means securitisation as defined in article 2 , point (1) , of regulation (eu) 2017/2402 of the european parliament and of the council*’;


### 3. the competent authorities of the eltifs shall , on a monthly basis , inform esma of authorisations granted or withdrawn pursuant to this regulation and of any changes to the information about an eltif that is set out in the central public register referred to in the second subparagraph. ### 3. the competent authorities of the eltifs shall , on a quarterly basis , inform esma of authorisations granted or withdrawn pursuant to this regulation and of any changes to the information about an eltif that is set out in the central public register referred to in the second subparagraph.


### up-to-date links to the eltif documentation , including to the rules or instruments of incorporation of the eltif , the annual reports , the prospectus and , where available , the key information document; ### deleted


### units or shares of one or several other eltifs , euvecas , eusefs , ucits and eu aifs managed by eu aifm provided that those eltifs , euvecas , eusefs¸ ucits and eu aifs invest in eligible investments as referred to in article 9(1) and (2) and have not themselves invested more than 10% of their assets in any other collective investment undertaking. ### units or shares of one or several other eltifs , euvecas , eusefs , ucits and aifs managed by eu aifm provided that those eltifs , euvecas , eusefs¸ ucits and aifs invest in eligible investments as referred to in article 9(1) and (2) and have not themselves invested more than 25% of their assets in any other collective investment undertaking.


### units or shares of one or several other eltifs , euvecas , eusefs , ucits and eu aifs managed by eu aifm provided that those eltifs , euvecas , eusefs¸ ucits and eu aifs invest in eligible investments as referred to in article 9(1) and (2) and have not themselves invested more than 10% of their assets in any other collective investment undertaking. ### units or shares of one or several other eltifs , euvecas , eusefs , ucits and eu aifs managed by eu aifm provided that those eltifs , euvecas , eusefs¸ ucits and eu aifs invest in eligible investments as referred to in article 9(1) and (2) and have not themselves invested more than 20% of their net asset value in any other collective investment undertaking.


### real assets with a value of at least eur 1 000 000 or its equivalent in the currency in which , and at the time when , the expenditure is incurred; ### deleted


### real assets with a value of at least eur 1 000 000 or its equivalent in the currency in which , and at the time when , the expenditure is incurred; ### real assets;


### simple , transparent and standardised securitisations where the underlying exposures correspond to one of the following categories: ### securitisations;


### assets listed in article 1 , points (a)(i) , (ii) or (iv) , of commission delegated regulation 2019/1851\*3; ### deleted


### (ii) assets listed in article 1 , points (a) ,(vii) and (viii) , of delegated regulation 2019/1851 , provided that the proceeds from the securitisation bonds are used for financing or refinancing long-term investments. ### deleted


### 2. where an eltif has invested in shares or units of other eltifs , euvecas , eusefs , ucits and eu aifs managed by eu aifms in accordance with paragraph 1 , point (d) , the assets of the respective eltif and other collective investment undertakings are to be combined for the purposes of determining the compliance with limits laid down in article 13 and article 16(1).’ ### 2. where an eltif has invested in shares or units of other eltifs , euvecas , eusefs , ucits and eu aifs managed by eu aifms in accordance with paragraph 1 , point (d) , of this article , the assets of the respective eltif and other collective investment undertakings are to be combined for the purposes of determining the compliance with limits laid down in article 13(3).


### (ii) is admitted to trading on a regulated market or on a multilateral trading facility and has a market capitalisation of no more than eur 1 000 000 000 at the time of the initial investment;; ### (ii) is admitted to trading on a regulated market or on a multilateral trading facility and has a market capitalisation of no more than eur 5 000 000 000 at the time of the initial investment;


### (ii) is admitted to trading on a regulated market or on a multilateral trading facility and has a market capitalisation of no more than eur 1 000 000 000 at the time of the initial investment;; ### (ii) is admitted to trading on a regulated market or on a multilateral trading facility and has a market capitalisation of no more than eur 3 000 000 000 at the time of the initial investment;;


### 1. an eltif shall invest at least 60 % of its capital in eligible investment assets. ### 1. an eltif shall invest at least 50 % of its net asset value in eligible investment assets.


### 1. an eltif shall invest at least 60 % of its capital in eligible investment assets. ### 1. an eltif shall invest at least 40% of its capital in eligible investment assets.


### 20 % of its capital in instruments issued by , or loans granted to , any single qualifying portfolio undertaking; ### 20 % of its net asset value in instruments issued by , or loans granted to , any single qualifying portfolio undertaking;


### 20 % of its capital in instruments issued by , or loans granted to , any single qualifying portfolio undertaking; ### 25 % of its capital in instruments issued by , or loans granted to , any single qualifying portfolio undertaking;


### 20 % of its capital directly or indirectly in a single real asset; ### 20 % of its net asset value directly or indirectly in a single real asset;


### 20 % of its capital directly or indirectly in a single real asset; ### 25 % of its capital directly or indirectly in a single real asset;


### 20 % of its capital in units or shares of any single eltif , euveca , eusef , ucits or eu aif managed by an eu aifm; ### 20 % of its net asset value in units or shares of any single eltif , euveca , eusef , ucits or eu aif managed by an eu aifm;


### 20 % of its capital in units or shares of any single eltif , euveca , eusef , ucits or eu aif managed by an eu aifm; ### 25 % of its capital in units or shares of any single eltif , euveca , eusef , ucits or eu aif managed by an eu aifm;


### 10 % of its capital in assets as referred to in article 9(1) , point (b) , where those assets have been issued by any single body. ### 10 % of its net asset value in assets as referred to in article 9(1) , point (b) , where those assets have been issued by any single body.


### 10 % of its capital in assets as referred to in article 9(1) , point (b) , where those assets have been issued by any single body. ### 25 % of its capital in assets as referred to in article 9(1) , point (b) , where those assets have been issued by any single body.


### 3. the aggregate value of units or shares of eltifs , euvecas , eusefs , ucits and of eu aifs managed by eu aifm in an eltif portfolio shall not exceed 40 % of the value of the capital of the eltif.; ### deleted


### 3. the aggregate value of units or shares of eltifs , euvecas , eusefs , ucits and of eu aifs managed by eu aifm in an eltif portfolio shall not exceed 40 % of the value of the capital of the eltif.; ### 3. deleted


### 3. the aggregate value of units or shares of eltifs , euvecas , eusefs , ucits and of eu aifs managed by eu aifm in an eltif portfolio shall not exceed 40 % of the value of the capital of the eltif.; ### 3. the aggregate value of units or shares of eltifs , euvecas , eusefs , ucits and of eu aifs managed by eu aifm in an eltif portfolio shall not exceed 100% of the value of the capital of the eltif.;


### 3a. the aggregate value of simple , transparent and standardised securitisations in an eltif portfolio shall not exceed 20% of the value of the capital of the eltif.; ### 3a. the aggregate value of securitisations in an eltif portfolio shall not exceed 20% of the net asset value of the eltif.;


### 3a. the aggregate value of simple , transparent and standardised securitisations in an eltif portfolio shall not exceed 20% of the value of the capital of the eltif.; ### 3a. the aggregate value of securitisations in an eltif portfolio shall not exceed 25% of the value of the capital of the eltif.;


### 4. the aggregate risk exposure to a counterparty of the eltif stemming from otc derivative transactions , repurchase agreements , or reverse repurchase agreements shall not exceed 10 % of the value of the capital of the eltif.; ### 4. the aggregate risk exposure to a counterparty of the eltif stemming from otc derivative transactions , repurchase agreements , or reverse repurchase agreements shall not exceed 10 % of the net asset value of the eltif.;


### it represents no more than 50 % of the value of the capital of the eltif , and no more than 100 % of the value of the capital of the eltif for eltifs marketed solely to professional investors; ### it represents no more than 75 % of the net asset value of the eltif , and no more than 100 % of the net asset value of the eltif for eltifs marketed solely to professional investors;


### it serves the purpose of making investments or providing liquidity , including to pay costs and expenses , except for loans as referred to in article 10 , point (c) , provided that the holdings in cash or cash equivalents of the eltif are not sufficient to make the investment concerned; ### it serves the purpose of making investments or providing liquidity , including to pay costs and expenses provided that the holdings in cash or cash equivalents of the eltif are not sufficient to make the investment concerned;


### 2. the manager of the eltif shall specify in the prospectus of the eltif whether or not the eltif intends to borrow cash as part of the eltif’s investment strategy and shall provide a detailed presentation of the eltif borrowing strategy and limits. in particular , the manager of the eltif shall indicate how borrowing will help implement the eltif strategy and mitigate borrowing , currency and duration risks.; ### 2. the manager of the eltif shall specify in the prospectus of the eltif whether or not the eltif intends to borrow cash as part of the eltif’s investment strategy and shall provide a high-level presentation of the eltif borrowing strategy and limits. in particular , the manager of the eltif shall indicate how borrowing will help implement the eltif strategy and mitigate borrowing , currency and duration risks.;


### 9. the manager of an eltif marketed to retail investors shall establish appropriate procedures and arrangements to deal with retail investor complaints , which shall allow retail investors to file complaints in the official language or one of the official languages of their member state.; ### 9. the manager of an eltif marketed to retail investors shall establish appropriate procedures and arrangements to deal with retail investor complaints , which shall allow retail investors to file complaints in the official language or one of the official languages of their member state or in english.;


### 1. no later than [date of the entry into force + 5 years] , the commission shall start a review of the application of this regulation. the review shall analyse , in particular: ### 1. no later than [date of the entry into force + 6 years] , the commission shall present a review report of the application of this regulation. the report may be accompanies by legislative proposal if appropriate. the review shall analyse , in particular:


### the impact of the application of the minimum thresholds of eligible investment assets laid down in article 13(1) on asset diversification; ### the impact of the application of the minimum thresholds of eligible investment assets laid down in article 13(1) on asset diversification and risk-adjusted returns;


### it shall apply from [entry into force + 6 months]. ### it shall apply from [entry into force + 6 months]. eltifs established before … [the date of entry into force of this regulation] shall have the right to opt out from the application of the requirements set out in this amending regulation.


### it shall apply from [entry into force + 6 months]. ### it shall apply from [entry into force + 12 months].


### (2) in a continued effort to put an end to tax practices of mnes which allow them to shift profits to jurisdictions where they are subject to no or very low taxation , the oecd has further developed a set of international tax rules to ensure that mnes pay a fair share of tax wherever they operate. this major reform aims to put a floor on competition over corporate income tax rates through the establishment of a global minimum level of taxation. by removing a substantial part of the advantages of shifting profits to jurisdictions with no or very low taxation , the global minimum tax reform will level the playing field for businesses worldwide and allow jurisdictions to better protect their tax bases. ### (2) in a continued effort to put an end to tax practices of mnes which allow them to shift profits to jurisdictions where they are subject to no or very low taxation , the oecd has further developed a set of international tax rules to ensure that mnes pay a fair share of tax wherever they operate. this major reform aims to put a floor on competition over corporate income tax rates through the establishment of a global minimum level of taxation , and not eliminate tax competition overall. by removing a substantial part of the advantages of shifting profits to jurisdictions with no or very low taxation , the global minimum tax reform will level the playing field for businesses worldwide and allow jurisdictions to better protect their tax bases.


### (3) this political objective has been translated into the global anti-base erosion model rules (globe model rules) approved on 14 december 2021 by the oecd/g20 inclusive framework on beps to which member states have committed. in the council conclusions of 7 december 20218 , the council reiterated its firm support of the global minimum tax reform and committed to a swift implementation of the agreement by means of union legislation. in this context , it is essential that member states effectively implement their commitment to achieve a global minimum level of taxation. ### (3) this political objective has been translated into the global anti-base erosion model rules (globe model rules) approved on 14 december 2021 by the oecd/g20 inclusive framework on beps to which member states have committed. in the council conclusions of 7 december 20218 , the council reiterated its firm support of the global minimum tax reform and committed to a swift implementation of the agreement by means of union legislation. in this context , it is essential that member states effectively implement their commitment to achieve a global minimum level of taxation. it is furthermore essential to avoid deviations on substantive matters from the oecd agreement , to confirm the eu support for the compromise negotiated under the oecd umbrella.


### (3) this political objective has been translated into the global anti-base erosion model rules (globe model rules) approved on 14 december 2021 by the oecd/g20 inclusive framework on beps to which member states have committed. in the council conclusions of 7 december 20218 , the council reiterated its firm support of the global minimum tax reform and committed to a swift implementation of the agreement by means of union legislation. in this context , it is essential that member states effectively implement their commitment to achieve a global minimum level of taxation. ### (3) this political objective has been translated into the global anti-base erosion model rules (globe model rules) approved on 14 december 2021 by the oecd/g20 inclusive framework on beps to which member states have committed. in the council conclusions of 7 december 20218 , the council reiterated its firm support of the global minimum tax reform and committed to a swift implementation of the agreement by means of union legislation. in this context , it is essential that member states effectively implement their commitment to achieve a global minimum level of taxation , in order to ensure a fair tax competition in the international framework.


### (4) in a union of closely integrated economies , it is crucial that the global minimum tax reform is implemented in a sufficiently coherent and coordinated fashion. considering the scale , detail and technicalities of those new international tax rules , only a common union framework would prevent a fragmentation of the internal market in the implementation of them. moreover , a common framework , designed to be compatible with the fundamental freedoms guaranteed by the treaty , would provide taxpayers with legal certainty when implementing the rules. ### (4) in a union of closely integrated economies , it is crucial that the global minimum tax reform is implemented in a sufficiently coherent and coordinated fashion. considering the scale , detail and technicalities of those new international tax rules , only a common union framework would prevent a fragmentation of the internal market in the implementation of them. moreover , a common framework , designed to be compatible with the fundamental freedoms guaranteed by the treaty , would provide taxpayers with legal certainty when implementing the rules. it is , therefore , essential to guarantee that member states apply these provisions in an effective way and that the corporate taxation systems , after the necessary changes , can remain stable and certain , providing companies and taxpayers with certainty and long-term perspetives to promote investment , growth and jobs creation.


### (5) it is necessary to lay down rules in order to establish an efficient and coherent framework for the global minimum level of taxation at union level. the framework creates a system of two interlocked rules , together referred to as the globe rules , through which an additional amount of tax called a top-up tax should be collected each time that the effective tax rate (etr) of an mne in a given jurisdiction is below the 15 %. in such case , the jurisdiction is considered to be low-taxed. those two rules are called the income inclusion rule (iir) and the undertaxed payment rule (utpr). under this system , the parent entity of an mne located in a member state has the obligation to apply the iir to its share of top-up tax relating to any entity of the group that is low-taxed , whether this is located within or outside the union. the utpr should act as a backstop to the iir through a reallocation of any residual amount of top-up tax in cases where not the entire amount of top-up tax relating to low-taxed entities could be collected by parent entities through the application of the iir. ### (5) it is necessary to lay down rules in order to establish an efficient and coherent framework for the global minimum level of taxation at union level. the framework creates a system of two interlocked rules , together referred to as the globe rules , through which an additional amount of tax called a top-up tax should be collected each time that the effective tax rate (etr) of an mne in a given jurisdiction is below the 15 %. in such case , the jurisdiction is considered to be low-taxed. those two rules are called the income inclusion rule (iir) and the undertaxed payment rule (utpr). under this system , the parent entity of an mne located in a member state has the obligation to apply the iir to its share of top-up tax relating to any entity of the group that is low-taxed , whether this is located within or outside the union. the utpr should act as a backstop to the iir through a reallocation of any residual amount of top-up tax in cases where not the entire amount of top-up tax relating to low-taxed entities could be collected by parent entities through the application of the iir. in order to honour the oecd agreement , the european union should transpose it faithfully and should not attempt to materially go beyond it.


### (5) it is necessary to lay down rules in order to establish an efficient and coherent framework for the global minimum level of taxation at union level. the framework creates a system of two interlocked rules , together referred to as the globe rules , through which an additional amount of tax called a top-up tax should be collected each time that the effective tax rate (etr) of an mne in a given jurisdiction is below the 15 %. in such case , the jurisdiction is considered to be low-taxed. those two rules are called the income inclusion rule (iir) and the undertaxed payment rule (utpr). under this system , the parent entity of an mne located in a member state has the obligation to apply the iir to its share of top-up tax relating to any entity of the group that is low-taxed , whether this is located within or outside the union. the utpr should act as a backstop to the iir through a reallocation of any residual amount of top-up tax in cases where not the entire amount of top-up tax relating to low-taxed entities could be collected by parent entities through the application of the iir. ### (5) it is necessary to lay down rules in order to establish an efficient and coherent framework for the global minimum level of taxation at union level , with full respect to the oecd agreement. the framework creates a system of two interlocked rules , together referred to as the globe rules , through which an additional amount of tax called a top-up tax should be collected each time that the effective tax rate (etr) of an mne in a given jurisdiction is below the 15 %. in such case , the jurisdiction is considered to be low-taxed. those two rules are called the income inclusion rule (iir) and the undertaxed payment rule (utpr). under this system , the parent entity of an mne located in a member state has the obligation to apply the iir to its share of top-up tax relating to any entity of the group that is low-taxed , whether this is located within or outside the union. the utpr should act as a backstop to the iir through a reallocation of any residual amount of top-up tax in cases where not the entire amount of top-up tax relating to low-taxed entities could be collected by parent entities through the application of the iir.


### (6) it is necessary to implement the globe model rules agreed by the member states in a way that it remains as close as possible to the global agreement. this directive closely follows the content and structure of the globe model rules. to ensure compatibility with primary union law , and more precisely with the freedom of establishment , the rules of this directive should apply to entities resident in a member state as well as non-resident entities of a parent entity located in that member state. this directive should also apply to very large-scale , purely domestic groups. in this way , the legal framework would be designed to avoid any risk of discrimination between cross-border and domestic situations. all entities , including the parent entity that applies the iir , which are located in a member state that is low-taxed , would be subject to the top-up tax. equally , constituent entities of the same parent entity that are located in another member state , which is low-taxed , would be subject to the top-up tax. ### (6) it is necessary to implement the globe model rules agreed by the member states in a way that it remains as close as possible to the global agreement. this directive closely follows the content and structure of the globe model rules. to ensure compatibility with primary union law , and more precisely with the freedom of establishment , the rules of this directive should apply to entities resident in a member state as well as non-resident entities of a parent entity located in that member state.


### (6) it is necessary to implement the globe model rules agreed by the member states in a way that it remains as close as possible to the global agreement. this directive closely follows the content and structure of the globe model rules. to ensure compatibility with primary union law , and more precisely with the freedom of establishment , the rules of this directive should apply to entities resident in a member state as well as non-resident entities of a parent entity located in that member state. this directive should also apply to very large-scale , purely domestic groups. in this way , the legal framework would be designed to avoid any risk of discrimination between cross-border and domestic situations. all entities , including the parent entity that applies the iir , which are located in a member state that is low-taxed , would be subject to the top-up tax. equally , constituent entities of the same parent entity that are located in another member state , which is low-taxed , would be subject to the top-up tax. ### (6) it is necessary to implement the globe model rules agreed by the member states in a way that it remains as close as possible to the global agreement. the success of the agreement will depend entirely on a transparent and consistent implementation within the union and globally. this directive closely follows the content and structure of the globe model rules. to ensure compatibility with primary union law , and more precisely with the freedom of establishment , the rules of this directive should apply to entities resident in a member state as well as non-resident entities of a parent entity located in that member state. this directive should also apply to very large-scale , purely domestic groups. in this way , the legal framework would be designed to avoid any risk of discrimination between cross-border and domestic situations. all entities , including the parent entity that applies the iir , which are located in a member state that is low-taxed , would be subject to the top-up tax. equally , constituent entities of the same parent entity that are located in another member state , which is low-taxed , would be subject to the top-up tax.


### (7) while it is necessary to ensure that tax avoidance practices are discouraged , adverse impacts on smaller mnes in the internal market should be avoided. for this purpose , this directive should only apply to entities located in the union that are members of mne groups or large-scale domestic groups that meet the annual threshold of at least eur 750 000 000 of consolidated revenue. this threshold would be consistent with the threshold of existing international tax rules such as the country-by-country reporting rules9 . entities within the scope of this directive are referred to as constituent entities. certain entities should be excluded from the scope based on their particular purpose and status. excluded entities would be those that are not profit-driven and perform activities in the general interest and which are , for these reasons , not likely to be subject to tax in the member state in which they are located. in order to protect those specific interests , it is necessary to exclude from the scope of the directive governmental entities , international organisations , non-profit organisations and pension funds from the scope of this directive. investment funds and real estate investment vehicles should also be excluded from the scope when they are at the top of the ownership chain , since , for those so-called flow-through entities , the income earned is taxed at the level of the owners. ### (7) while it is necessary to ensure that tax avoidance practices are discouraged , adverse impacts on smaller mnes in the internal market should be avoided. for this purpose , this directive should only apply to entities located in the union that are members of mne groups or large-scale domestic groups that meet the annual threshold of at least eur 750 000 000 of consolidated revenue. this threshold would be consistent with the threshold of existing international tax rules such as the country-by-country reporting rules9 . the european commission should monitor if and how member states are applying the globe model rules to smaller entities , and take appropriate measures , should the implementation be in conflict with the principles of the eu law or where it undermines internal market coherence. entities within the scope of this directive are referred to as constituent entities. certain entities should be excluded from the scope based on their particular purpose and status. excluded entities would be those that are not profit-driven and perform activities in the general interest and which are , for these reasons , not likely to be subject to tax in the member state in which they are located. in order to protect those specific interests , it is necessary to exclude from the scope of the directive governmental entities , international organisations , non-profit organisations and pension funds from the scope of this directive. investment funds and real estate investment vehicles should also be excluded from the scope when they are at the top of the ownership chain , since , for those so-called flow-through entities , the income earned is taxed at the level of the owners.


### (7) while it is necessary to ensure that tax avoidance practices are discouraged , adverse impacts on smaller mnes in the internal market should be avoided. for this purpose , this directive should only apply to entities located in the union that are members of mne groups or large-scale domestic groups that meet the annual threshold of at least eur 750 000 000 of consolidated revenue. this threshold would be consistent with the threshold of existing international tax rules such as the country-by-country reporting rules9 . entities within the scope of this directive are referred to as constituent entities. certain entities should be excluded from the scope based on their particular purpose and status. excluded entities would be those that are not profit-driven and perform activities in the general interest and which are , for these reasons , not likely to be subject to tax in the member state in which they are located. in order to protect those specific interests , it is necessary to exclude from the scope of the directive governmental entities , international organisations , non-profit organisations and pension funds from the scope of this directive. investment funds and real estate investment vehicles should also be excluded from the scope when they are at the top of the ownership chain , since , for those so-called flow-through entities , the income earned is taxed at the level of the owners. ### (7) while it is necessary to ensure that tax avoidance practices are discouraged , adverse impacts on smaller mnes in the internal market should be avoided. for this purpose , this directive should only apply to entities located in the union that are members of mne groups or large-scale domestic groups that meet the annual threshold of at least eur 750 000 000 of consolidated revenue. this threshold would be consistent with the threshold of existing international tax rules such as the country-by-country reporting rules9and should therefore be respected by all member states. entities within the scope of this directive are referred to as constituent entities. certain entities should be excluded from the scope based on their particular purpose and status. excluded entities would be those that are not profit-driven and perform activities in the general interest and which are , for these reasons , not likely to be subject to tax in the member state in which they are located. in order to protect those specific interests , it is necessary to exclude from the scope of the directive governmental entities , international organisations , non-profit organisations and pension funds from the scope of this directive. investment funds and real estate investment vehicles should also be excluded from the scope when they are at the top of the ownership chain , since , for those so-called flow-through entities , the income earned is taxed at the level of the owners.


### (12) the etr of an mne group in each jurisdiction where it carries out activities or of a large-scale domestic group should be compared to the agreed minimum tax rate of 15 % in order to determine whether the mne group or large-scale domestic group is liable to pay a top-up tax and consequently should apply the iir or the utpr. the minimum tax rate of 15 % agreed by the oecd/g20 inclusive framework on beps reflects a balance amongst corporate tax rates worldwide. in cases where the etr of an mne group falls below the minimum tax rate in a given jurisdiction , the top-up tax should be allocated to the entities in the mne group that are liable to pay the tax in accordance with the application of the iir and the utpr , in order to comply with the globally agreed minimum effective rate of 15 %. in cases where the etr of a large-scale domestic group falls below the minimum tax rate , the upe at the top of the large-scale domestic group should apply the iir in respect of its low-taxed constituent entities , in order to ensure that such group is liable to pay tax at an effective minimum rate of 15 %. ### (12) the etr of an mne group in each jurisdiction where it carries out activities or of a large-scale domestic group should be compared to the agreed minimum tax rate of 15 % in order to determine whether the mne group or large-scale domestic group is liable to pay a top-up tax and consequently should apply the iir or the utpr. the minimum tax rate of 15 % agreed by the oecd/g20 inclusive framework on beps reflects a balanced compromise amongst corporate tax rates worldwide. in cases where the etr of an mne group falls below the minimum tax rate in a given jurisdiction , the top-up tax should be allocated to the entities in the mne group that are liable to pay the tax in accordance with the application of the iir and the utpr , in order to comply with the globally agreed minimum effective rate of 15 %. in cases where the etr of a large-scale domestic group falls below the minimum tax rate , the upe at the top of the large-scale domestic group should apply the iir in respect of its low-taxed constituent entities , in order to ensure that such group is liable to pay tax at an effective minimum rate of 15 %.


### (14) to ensure a proportionate approach , this exercise should take into consideration certain specific situations in which beps risks are reduced. therefore , the directive should include a substance carve-out based on the costs associated with employees and the value of tangible assets in a given jurisdiction. this would allow to address , to a certain extent , situations where an mne group or a large-scale domestic group carries out economic activities which require material presence in a low-taxed jurisdiction as in such case beps practices would be unlikely to flourish. the specific case of mne groups that are at the first stages of their international activity should also be considered in order not to discourage the development of cross-border activities for mne groups that benefit from low taxation in their domestic jurisdiction where they are predominantly operating. thus , the low-taxed domestic activities of such groups should be excluded from the application of the rules for a transitional period of five years , and provided that the mne group does not have constituent entities in more than six other jurisdictions. in order to ensure equal treatment for large-scale domestic groups , the income from the activities of such groups should also be excluded for a transitional period of five years. ### (14) to ensure a proportionate approach , this exercise should take into consideration certain specific situations in which beps risks are reduced. therefore , the directive should include a substance carve-out based on the costs associated with employees and the value of tangible assets in a given jurisdiction. this would allow to address , to a certain extent , situations where an mne group or a large-scale domestic group carries out economic activities which require material presence in a low-taxed jurisdiction as in such case beps practices would be unlikely to flourish. the specific case of mne groups that are at the first stages of their international activity should also be considered in order not to discourage the development of cross-border activities for mne groups that benefit from low taxation in their domestic jurisdiction where they are predominantly operating. thus , the low-taxed domestic activities of such groups should be excluded from the application of the rules for a transitional period of six years , and provided that the mne group does not have constituent entities in more than eight other jurisdictions. in order to ensure equal treatment for large-scale domestic groups , the income from the activities of such groups should also be excluded for a transitional period of six years.


### (14) to ensure a proportionate approach , this exercise should take into consideration certain specific situations in which beps risks are reduced. therefore , the directive should include a substance carve-out based on the costs associated with employees and the value of tangible assets in a given jurisdiction. this would allow to address , to a certain extent , situations where an mne group or a large-scale domestic group carries out economic activities which require material presence in a low-taxed jurisdiction as in such case beps practices would be unlikely to flourish. the specific case of mne groups that are at the first stages of their international activity should also be considered in order not to discourage the development of cross-border activities for mne groups that benefit from low taxation in their domestic jurisdiction where they are predominantly operating. thus , the low-taxed domestic activities of such groups should be excluded from the application of the rules for a transitional period of five years , and provided that the mne group does not have constituent entities in more than six other jurisdictions. in order to ensure equal treatment for large-scale domestic groups , the income from the activities of such groups should also be excluded for a transitional period of five years. ### (14) to ensure a proportionate approach , this exercise should take into consideration certain specific situations in which beps risks are reduced. therefore , the directive should include a substance carve-out based on the costs associated with employees and the value of tangible assets in a given jurisdiction. this would allow to address , to a certain extent , situations where an mne group or a large-scale domestic group carries out economic activities which require material presence in a low-taxed jurisdiction as in such case beps practices would be unlikely to flourish. the specific case of mne groups that are at the first stages of their international activity should also be considered in order not to discourage the development of cross-border activities for mne groups that benefit from low taxation in their domestic jurisdiction where they are predominantly operating. thus , the low-taxed domestic activities of such groups should be excluded from the application of the rules for a transitional period of no longer than five years , and provided that the mne group does not have constituent entities in more than six other jurisdictions. in order to ensure equal treatment for large-scale domestic groups , the income from the activities of such groups should also be excluded for a transitional period of no longer than five years.


### (20) the effectiveness and fairness of the global minimum tax reform heavily relies on its worldwide implementation. it will thus be vital that all major trading partners of the union apply either a qualified iir or an equivalent set of rules on minimum taxation. in this context , and in support of legal certainty and efficiency of the global minimum tax rules , it is important to further delineate the conditions under which the rules implemented in a third country jurisdiction which will not transpose the rules of the global agreement can be granted equivalence to a qualified iir. to this end , this directive should provide for an assessment , by the commission , of the equivalence criteria based on certain parameters together with a listing of third country jurisdictions that meet the equivalence criteria. this list would be modified , through a delegated act , following any subsequent assessment of the legal framework implemented by a third country jurisdiction in its domestic law. ### (20) the effectiveness and fairness of the global minimum tax reform heavily relies on its worldwide implementation. it will thus be vital that all major trading partners of the union apply either a qualified iir or an equivalent set of rules on minimum taxation. in this context , and in support of legal certainty and efficiency of the global minimum tax rules , it is important to further delineate the conditions under which the rules implemented in a third country jurisdiction which will not transpose the rules of the global agreement can be granted equivalence to a qualified iir. to this end , this directive should provide for an assessment , by the commission , of the equivalence criteria based on certain parameters together with a listing of third country jurisdictions that meet the equivalence criteria in a timely manner. this list would be modified , through a delegated act , following any subsequent assessment of the legal framework implemented by a third country jurisdiction in its domestic law.


### (22) the rules for the application of the utpr should apply as of 1 january 2024 to allow third country jurisdictions to apply the iir in the first phase of the implementation of the globe model rules. ### (22) the rules for the application of the utpr should apply as of 1 january 2025 to allow third country jurisdictions to apply the iir in the first phase of the implementation of the globe model rules.


### 1. this directive shall apply to constituent entities located in the union that are members of an mne group or a large-scale domestic group which has an annual revenue of eur 750 000 000 or more in its consolidated financial statements in at least two of the last four consecutive fiscal years. ### 1. this directive shall apply to constituent entities located in the union that are members of an mne group which has an annual revenue of eur 750 000 000 or more in its consolidated financial statements in at least two of the last four consecutive fiscal years.


### (12) ‘minimum tax rate’ means fifteen percent (15 %); ### (12) ‘minimum tax rate’ means fifteen percent (15 %) as defined in the oecd agreement;


### (12) ‘minimum tax rate’ means fifteen percent (15 %); ### (12) ‘minimum tax rate’ means fifteen percent (15 % hereinafter);


### a refundable tax credit designed in such a way that it is payable as a cash payment or a cash equivalent to a constituent entity within four years from the date when the constituent entity is entitled to receive the refundable tax credit under the laws of the jurisdiction granting the credit; or ### a refundable tax credit designed in such a way that it is payable as a cash payment or a cash equivalent to a constituent entity within five years from the date when the constituent entity is entitled to receive the refundable tax credit under the laws of the jurisdiction granting the credit; or


### if the tax credit is refundable in part , the portion of the refundable tax credit that is payable as a cash payment or a cash equivalent to a constituent entity within four years from the date when the constituent entity is entitled to receive the partial refundable tax credit; ### if the tax credit is refundable in part , the portion of the refundable tax credit that is payable as a cash payment or a cash equivalent to a constituent entity within five years from the date when the constituent entity is entitled to receive the partial refundable tax credit;


### 1. a constituent entity other than a flow-through entity shall be deemed to be located in the jurisdiction where it is considered as resident for tax purposes based on its place of management , place of creation or similar criteria. ### 1. a constituent entity other than a flow-through entity shall be deemed to be located in the jurisdiction where it is considered as resident for tax purposes based on its place of management , its place of creation or similar criteria that must be systematically coherent with this directive and the globe rules.


### 3. where the amount of qualified domestic top-up tax taken into consideration in the computation of the jurisdictional top-up tax in accordance with article 26 for a fiscal year has not been fully paid within the three following fiscal years , the amount of domestic top-up tax that was not paid shall be added to the jurisdictional top-up tax computed in accordance with article 26(3). ### 3. where the amount of qualified domestic top-up tax taken into consideration in the computation of the jurisdictional top-up tax in accordance with article 26 for a fiscal year has not been fully paid within the five following fiscal years , the amount of domestic top-up tax that was not paid shall be added to the jurisdictional top-up tax computed in accordance with article 26(3).


### taxes accrued in the financial accounts of a constituent entity with respect to its income or profits , or its share of the income or profits of a constituent entity in which it owns an ownership interest; ### taxes recorded in the financial accounts of a constituent entity with respect to its income or profits , or its share of the income or profits of a constituent entity in which it owns an ownership interest;


### 7. a deferred tax liability that is not paid or reversed within the five subsequent fiscal years shall be recaptured to the extent it was taken into account in the total deferred tax adjustment amount of a constituent entity. ### 7. a deferred tax liability that is not paid or reversed within the six subsequent fiscal years shall be recaptured to the extent it was taken into account in the total deferred tax adjustment amount of a constituent entity.


### research and development expenses; ### expenses for research and development;


### at the election of the filing constituent entity , a decrease in covered taxes which is immaterial may be treated as an adjustment to covered taxes in the fiscal year in which the adjustment is made. an immaterial decrease in covered taxes shall be a decrease of less than eur 1 000 000 in the adjusted covered taxes determined for the jurisdiction for the fiscal year. ### at the election of the filing constituent entity , a decrease in covered taxes which is immaterial may be treated as an adjustment to covered taxes in the fiscal year in which the adjustment is made. an immaterial decrease in covered taxes shall be a decrease of less than eur 2 500 000 in the adjusted covered taxes determined for the jurisdiction for the fiscal year.


### 3. the payroll carve-out of a constituent entity located in a jurisdiction shall be equal to 5 % of its eligible payroll costs of eligible employees who perform activities for the mne group in such jurisdiction , with the exception of eligible payroll costs that are: ### 3. the payroll carve-out of a constituent entity located in a jurisdiction shall be equal to 10 % of its eligible payroll costs of eligible employees who perform activities for the mne group in such jurisdiction , with the exception of eligible payroll costs that are:


### 5. the outstanding balance , if any , of the deemed distribution tax recapture account at the end of the fourth fiscal year after such account was established , shall be treated as a reduction to the adjusted covered taxes in accordance with article 28(1) for the fiscal year in which such account was established. ### 5. the outstanding balance , if any , of the deemed distribution tax recapture account at the end of the fifth fiscal year after such account was established , shall be treated as a reduction to the adjusted covered taxes in accordance with article 28(1) for the fiscal year in which such account was established.


### 1. at the election of the filing constituent entity , a constituent entity-owner of an investment entity may apply a taxable distribution method with respect to its ownership interest in the investment entity , provided that the constituent entity-owner is not an investment entity and can be reasonably expected to be subject to tax on distributions from the investment entity at a tax rate that equals or exceeds the minimum tax rate. ### 1. at the election of the filing constituent entity , a constituent entity-owner of an investment entity or an insurance investment entity may apply a taxable distribution method with respect to its ownership interest in the investment entity , provided that the constituent entity-owner is not an investment entity and can be reasonably expected to be subject to tax on distributions from the investment entity at a tax rate that equals or exceeds the minimum tax rate.


### 2. a constituent entity that does not comply with the requirement to file a top-up tax information return pursuant to article 42 for a tax year within the prescribed deadline or makes a false declaration shall be charged an administrative pecuniary penalty amounting to 5 % of its turnover in the relevant fiscal year. this penalty shall only apply after the constituent entity has not provided the top-up tax information return pursuant to article 42 , following any reminder issued , within a period of 6 months. ### 2. a constituent entity that does not comply with the requirement to file a top-up tax information return pursuant to article 42 for a tax year within the prescribed deadline or makes a false declaration shall be charged an administrative pecuniary penalty amounting to 2 ,5 % of its turnover in the relevant fiscal year. this penalty shall only apply after the constituent entity has not provided the top-up tax information return pursuant to article 42 , following any reminder issued , within a period of 6 months.


### 2. a constituent entity that does not comply with the requirement to file a top-up tax information return pursuant to article 42 for a tax year within the prescribed deadline or makes a false declaration shall be charged an administrative pecuniary penalty amounting to 5 % of its turnover in the relevant fiscal year. this penalty shall only apply after the constituent entity has not provided the top-up tax information return pursuant to article 42 , following any reminder issued , within a period of 6 months. ### 2. a constituent entity that does not comply with the requirement to file a top-up tax information return pursuant to article 42 for a tax year within the prescribed deadline or makes a false declaration shall be charged an administrative pecuniary penalty amounting to 5 % of its turnover in the relevant fiscal year. this penalty shall only apply after the constituent entity has not provided the top-up tax information return pursuant to article 42 , following any reminder issued , within a period of 6 months. national tax authorities can provide , under request from the constituent entity , presented until the end of the 6 months period , a grace period of no more than 2 months to file the top-up tax information return , when justified.


### article 46 ### deleted


### 1. the top-up tax due by an ultimate parent entity located in a member state in accordance with article 5(2) shall be reduced to zero in the first five years of the initial phase of the international activity of the mne group notwithstanding the requirements laid down in chapter v. ### 1. the top-up tax due by an ultimate parent entity located in a member state in accordance with article 5(2) shall be reduced to zero in the first six years of the initial phase of the international activity of the mne group notwithstanding the requirements laid down in chapter v.


### 2. where the ultimate parent entity of an mne group is located in a third country jurisdiction , the top-up tax due by a constituent entity located in a member state in accordance with article 13(2) shall be reduced to zero in the first five years of the initial phase of the international activity of that mne group notwithstanding the requirements laid down in chapter v. ### 2. where the ultimate parent entity of an mne group is located in a third country jurisdiction , the top-up tax due by a constituent entity located in a member state in accordance with article 13(2) shall be reduced to zero in the first six years of the initial phase of the international activity of that mne group notwithstanding the requirements laid down in chapter v.


### it has constituent entities in no more than six jurisdictions; and ### it has constituent entities in no more than eight jurisdictions; and


### the sum of the net book value of the tangible assets of all the constituent entities of the mne group other than the constituent entities located in the reference jurisdiction does not exceed eur 50 000 000. ### the sum of the net book value of the tangible assets of all the constituent entities of the mne group other than the constituent entities located in the reference jurisdiction does not exceed eur 75 000 000.


### 4. the period of five fiscal years referred to in paragraphs 1 and 2 shall start from the beginning of the fiscal year in which the mne group falls within the scope of this directive for the first time. ### 4. the period of six fiscal years referred to in paragraphs 1 and 2 shall start from the beginning of the fiscal year in which the mne group falls within the scope of this directive for the first time.


### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 1 shall start on 1 january 2023. ### for mne groups that are within the scope of this directive when it enters into force , the six-year period referred to in paragraph 1 shall start on 1 january 2025.


### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 1 shall start on 1 january 2023. ### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 1 shall start on 1 january 2024.


### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 2 shall start on 1 january 2024. ### for mne groups that are within the scope of this directive when it enters into force , the six-year period referred to in paragraph 2 shall start on 1 january 2026.


### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 2 shall start on 1 january 2024. ### for mne groups that are within the scope of this directive when it enters into force , the five-year period referred to in paragraph 2 shall start on 1 january 2025.


### 1. the top-up tax due by an ultimate parent entity located in a member state in accordance with article 49 shall be reduced to zero in the first five fiscal years , starting from the first day of the fiscal year in which the large-scale domestic group falls within the scope of this directive for the first time. ### 1. the top-up tax due by an ultimate parent entity located in a member state in accordance with article 49 shall be reduced to zero in the first six fiscal years , starting from the first day of the fiscal year in which the large-scale domestic group falls within the scope of this directive for the first time.


### 2. for large-scale domestic groups that are in scope of this directive when it enters into force , the five-year period abovementioned shall start on 1 january 2023. ### 2. for large-scale domestic groups that are in scope of this directive when it enters into force , the six-year period abovementioned shall start on 1 january 2025.


### 2. for large-scale domestic groups that are in scope of this directive when it enters into force , the five-year period abovementioned shall start on 1 january 2023. ### 2. for large-scale domestic groups that are in scope of this directive when it enters into force , the five-year period abovementioned shall start on 1 january 2024.


### the european parliament shall be informed of the adoption of delegated acts by the commission , of any objection formulated to them , and of the revocation of a delegation of powers by the council. ### the european parliament shall be informed of the adoption of delegated acts by the commission , of any objection formulated to them , and of the revocation of a delegation of powers by the council in a timely manner.


### member states shall bring into force the laws , regulations and administrative provisions necessary to comply with this directive by 31 december 2022. ### member states shall bring into force the laws , regulations and administrative provisions necessary to comply with this directive by 31 december 2024.


### member states shall bring into force the laws , regulations and administrative provisions necessary to comply with this directive by 31 december 2022. ### member states shall bring into force the laws , regulations and administrative provisions necessary to comply with this directive by 31 december 2023.


### they shall apply those provisions from 1 january 2023. ### they shall apply those provisions from 1 january 2025.


### they shall apply those provisions from 1 january 2023. ### they shall apply those provisions from 1 january 2024.


### however , they shall apply the provisions necessary to comply with articles 11 , 12 and 13 from 1 january 2024. ### deleted


### a stand-alone institution in the eu and , for the purposes of complying with the obligations of this regulation on the basis of its consolidated situation in accordance with part one , title ii , chapter 2 , an eu parent institution , an eu parent financial holding company and an eu parent mixed financial holding company shall calculate the total risk exposure amount as follows: ### institutions shall calculate the total risk exposure amount as follows:


### for the purposes set out in points (i) and (ii) , the total risk exposure amount shall be calculated in accordance with paragraph 6: ### deleted


### for the purposes set out in points (i) and (ii) , the total risk exposure amount shall be calculated in accordance with paragraph 6: ### by way of derogation from point (a) , a member state may decide that the total risk exposure amount shall be the un-floored total risk exposure amount , calculated in accordance with paragraph 4 , for institutions in its jurisdiction which are part of a group with a parent institution in this member state , provided that this parent institution or , in the case of groups composed of a central body and permanently affiliated institutions , the whole as constituted by the central body together with its affiliated institutions calculates its total risk exposure amount in accordance with point (a) on a consolidated basis.


### for the purposes of complying with the obligations of this regulation on an individual basis , the total risk exposure amount of an institution which is neither a stand-alone institution in the eu nor a stand-alone subsidiary institution in a member state shall be the un-floored total risk exposure amount calculated in accordance with paragraph 4. ### deleted


### for the purposes of complying with the obligations of this regulation on an individual basis , the total risk exposure amount of an institution which is neither a stand-alone institution in the eu nor a stand-alone subsidiary institution in a member state shall be the un-floored total risk exposure amount calculated in accordance with paragraph 4. ### for the purposes of complying with the obligations of this regulation in any case other than the cases referred to in point (a) of this paragraph , the total risk exposure amount shall be the un-floored total risk exposure amount calculated in accordance with paragraph 4.


### 6. the total risk exposure amount of an entity ‘i’ for the purposes set out in paragraph 3 , point (b) , shall be calculated as follows: ### deleted


### listed equities; ### listed equities , unless those equities are strategic holdings with an intended holding period of six years or longer; or the equities were not listed at the time of purchase;


### for the purposes of point (i) , an institution shall split the embedded option from its own liability or from the other instrument in the non-trading book that relate to credit or equity risk and shall assign , the own liability or the other instrument to the trading or to the non-trading book , as appropriate , in accordance with this article. ### for the purposes of point (i) , an institution shall split the embedded option from its own liability or from the other instrument in the non-trading book that relate to credit or equity risk. it shall assign the embedded option to the trading book and shall leave the own liability or the other instrument in the non-trading book.


### 4. for contractual arrangements offered by an institution , but not yet accepted by the client , that would become commitments if accepted by the client , and contractual arrangements that would qualify as commitments but meet the conditions for not being treated as commitments , the percentage applicable to that type of contractual arrangement shall be that provided for in accordance with paragraph 2. ### deleted


### 2. exposures with an original maturity of three months or less for which a credit assessment by a nominated ecai is available and exposures which arise from the movement of goods across national borders with an original maturity of six months or less and for which a credit assessment by a nominated ecai is available , shall be assigned a risk weight in accordance with table 4 which corresponds to the credit assessment of the ecai in accordance with article 136. ### 2. exposures with a residual maturity of three months or less for which a credit assessment by a nominated ecai is available and exposures which arise from the movement of goods across national borders trade finance exposures as referred to article 4(1) , point (80) with an residual maturity of one year or less and for which a credit assessment by a nominated ecai is available , shall be assigned a risk weight in accordance with table 4 which corresponds to the credit assessment of the ecai in accordance with article 136.


### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu , the combined buffer requirement defined in article 128 , point (6) , of directive 2013/36/eu and any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital or own funds; ### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in articles 458(2)(d)(i) , 458(2)(d)(vi) and 459(a) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu , the combined buffer requirement defined in article 128 , point (6) , of directive 2013/36/eu or any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are applicable to that institution and are to be met by common equity tier 1 capital , tier 1 capital or own funds , as applicable , or where exposures to a financial institution shall be treated as exposures to an institution according to article 119(5) , any comparable prudential requirements.


### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu , the combined buffer requirement defined in article 128 , point (6) , of directive 2013/36/eu and any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital or own funds; ### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in articles 458(2)(d)(i) , 458(2)(d)(vi) and 459(a) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu , the combined buffer requirement defined in article 128 , point (6) , of directive 2013/36/eu or any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital or own funds , or where exposures to a financial institution shall be treated as exposures to an institution according to article 119(5) , any comparable prudential requirements corresponding to grade a;


### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in articles 458 and 459 , the specific own funds requirements referred to in article 104a of directive 2013/36/eu and any equivalent or additional local supervisory or regulatory requirements insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital and own funds; ### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in articles 458(2)(d)(i) , 458(2)(d)(vi) and 459(a) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu , the combined buffer requirement defined in article 128 , point (6) , of directive 2013/36/eu or any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are applicable to that institution and are to be met by common equity tier 1 capital , tier 1 capital or own funds , as applicable , or where exposures to a financial institution shall be treated as exposures to an institution according to article 119(5) , any comparable prudential requirements.


### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in articles 458 and 459 , the specific own funds requirements referred to in article 104a of directive 2013/36/eu and any equivalent or additional local supervisory or regulatory requirements insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital and own funds; ### (ii) the institution meets or exceeds the requirement laid down in article 92(1) , the requirements referred to in article 459(a) , the specific own funds requirements referred to in article 104a of directive 2013/36/eu or any equivalent or additional local supervisory or regulatory requirements in third countries , insofar as those requirements are published and are to be met by common equity tier 1 capital , tier 1 capital or own funds , or where exposures to a financial institution shall be treated as exposures to an institution according to article 119(5) , any comparable prudential requirements corresponding to grade b;


### the exposure has an original maturity of three months or less; ### the exposure has a residual maturity of three months or less;


### (ii) the exposure has an original maturity of six months or less and arises from the movement of goods across national borders. ### (ii) the exposure has a residual maturity of one year or less and is a trade finance exposure as referred to in article 4(1) , point (80).


### where the purpose of a specialised lending exposure is to finance the acquisition of physical assets , including ships , aircraft , satellites , railcars , and fleets , and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender by one or several third parties (‘object finance exposures’) , institutions shall apply the following risk weights: ### where the purpose of a specialised lending exposure is to finance the acquisition of physical assets , including ships , aircraft , satellites , railcars , and fleets , and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender (‘object finance exposures’) , institutions shall apply a risk weight of 100%.


### where the purpose of a specialised lending exposure is to finance the acquisition of physical assets , including ships , aircraft , satellites , railcars , and fleets , and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender by one or several third parties (‘object finance exposures’) , institutions shall apply the following risk weights: ### where the purpose of a specialised lending exposure is to finance the acquisition of physical assets , including ships , aircraft , satellites , railcars , and fleets , and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender by one or several third parties (‘object finance exposures’) , institutions shall apply a risk weight of 100%:


### 80 % where the exposure is deemed to be high quality when taking into account all of the following criteria: ### deleted


### 80 % where the exposure is deemed to be high quality when taking into account all of the following criteria: ### 60 % where the exposure is deemed to be high quality when taking into account all of the following criteria:


### 80 % where the exposure is deemed to be high quality when taking into account all of the following criteria: ### 75 % where the exposure is deemed to be high quality when taking into account all of the following criteria:


### (ii) 100 % where the exposure is not deemed to be high quality as referred to in point (i); ### deleted


### where the purpose of a specialised lending exposure is to finance a project for the development or acquisition of large , complex and expensive installations , including power plants , chemical processing plants , mines , transportation infrastructure , environment , and telecommunications infrastructure , and the income to be generated by the project is the money generated by the contracts for the output of the installation obtained from one or several parties which are not under management control of the sponsor (‘project finance exposures’) , institutions shall apply the following risk weights: ### where the purpose of a specialised lending exposure is to finance a single project , either in the form of construction of a new capital installation or refinancing of an existing installation , with or without improvements , in particular projects for the development or acquisition of large , complex and expensive installations , including power plants , chemical processing plants , mines , transportation infrastructure , environment , and telecommunications infrastructure , and the income to be generated by the financed project serves both as the primary source of repayment and as security for the loan (‘project finance exposures’) , institutions shall apply the following risk weights:


### (ii) provided that the adjustment to own funds requirements for credit risk referred to in article 501a is not applied , 80 % where the project to which the exposure is related is in the operational phase and the exposure meets all of the following criteria: ### (ii) 80 % where the project to which the exposure is related is in the operational phase and the exposure meets all of the following criteria:


### — the obligor has sufficient reserve funds fully funded in cash , or other financial arrangements , with highly rated guarantors to cover the contingency funding and working capital requirements over the lifetime of the project being financed; ### — the obligor has sufficient reserve funds fully funded in cash , or other financial arrangements to cover the contingency funding and working capital requirements over the lifetime of the project being financed;


### — the obligor generates cash flows that are predictable and cover all future loan repayments; ### — the income generated by the financed project is availability-based or subject to a rate-of-return regulation or take-or-pay contract; for this purpose "availability-based" means that , once construction is completed , the obligor is entitled , as long as contract conditions are fulfilled , to payments from its contractual counterparties which cover operating and maintenance costs , debt service costs and equity returns as the obligor operates the project , and these payments are not subject to swings in demand , such as traffic levels , and are adjusted typically only for lack of performance or lack of availability of the asset to the public;


### — the contractual arrangements effectively protect the lending institution against losses resulting from the termination of the project; ### — the main counterparty or other counterparties which meet the eligibility criteria for the main counterparty effectively protect the lending institution against losses resulting from the termination of the project;


### — equity is pledged to the lending institution such that they are able to take control of the obligor entity upon default; ### — the lending institution is able to take control of the obligor entity in case of a default event;


### the exposure is either of the following: ### the total exposure value aggregated across all exposures to the obligor or group of connected clients , including any exposure in default but excluding exposures secured by residential property up to the property value , shall not , to the knowledge of the institution , which shall take reasonable steps to confirm the situation , exceed eur 1 million;


### an exposure to one or more natural persons; ### deleted


### an exposure to one or more natural persons; ### an exposure to one or a group of natural persons;


### (ii) an exposure to an sme within the meaning of article 5 , point (8) , where the total amount owed to the institution , its parent undertakings and its subsidiaries , by the obligor or group of connected clients , including any exposure in default but excluding exposures secured by residential property up to the property value shall not , to the knowledge of the institution , which shall take reasonable steps to confirm the situation , exceed eur 1 million; ### deleted


### (ii) an exposure to an sme within the meaning of article 5 , point (8) , where the total amount owed to the institution , its parent undertakings and its subsidiaries , by the obligor or group of connected clients , including any exposure in default but excluding exposures secured by residential property up to the property value shall not , to the knowledge of the institution , which shall take reasonable steps to confirm the situation , exceed eur 1 million; ### (ii) an exposure to an sme within the meaning of article 5 , point (8) of this regulation , where the total amount owed to the institution , its parent undertakings and its subsidiaries , by the obligor or group of connected clients , including any exposure in default but excluding exposures secured by residential property up to the property value shall not , to the knowledge of the institution , which shall take reasonable steps to confirm the situation , exceed eur 1 million;


### 4. by way of derogation from paragraph 3 , exposures due to loans granted by an institution to pensioners or employees with a permanent contract against the unconditional transfer of part of the borrower’s pension or salary to that institution shall be assigned a risk weight of 35 % , provided that all the following conditions are met: ### deleted


### 1. exposures to natural persons assigned to any of the exposures classes laid down in point (h) or (i) of article 112 , the risk weight assigned in accordance with chapter 2 shall be multiplied by a factor of 1 ,5 , whereby the resulting risk weight shall not be higher than 150 % , where the following conditions are met. ### 1. where the following conditions are met for an exposure to a natural person or natural persons which is assigned to any of the exposures classes laid down in point (h) or , if it is secured by residential immovable property , which is assigned to the exposure class laid down in (i) of article 112 , the risk weight assigned to that exposure in accordance with chapter 2 shall be multiplied by a factor of 1 ,5 , whereby the resulting risk weight shall not be higher than 150 %.


### where the exposure is secured by a residential property , the exposure shall not qualify as an ipre exposure and shall be treated in accordance with article 125(1) where the exposure meets any of the following conditions: ### where the exposure is secured by a residential property , the exposure shall not qualify as an ipre exposure and shall be treated in accordance with article 125(1) where the exposure meets any of the following conditions (i-iva):


### the immovable property securing the exposure is the obligor’s primary residence , either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within an immovable property; ### the exposure is to an individual and secured by a residential property , and which is in line with environmentally sustainable economy , either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within an immovable property;


### the immovable property securing the exposure is the obligor’s primary residence , either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within an immovable property; ### the exposure is to an individual and secured by a residential property , either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within an immovable property;


### where the exposure is secured by residential property and the exposure does not meet any of the conditions laid down in point (a) , points (i) to (iv) , the exposure shall be treated in accordance with article 125(2); ### where the exposure is secured by residential property and is an ipre exposure or the exposure does not meet any of the conditions laid down in point (a) , points (i) to (v) , the exposure shall be treated in accordance with article 125(2);


### 3. in order to be eligible for the treatment laid down in paragraph 2 , an exposure secured by an immovable property shall fulfil all of the following conditions: ### 3. in order to be eligible for the treatment laid down in article 125(1) , point (a) , or article 126(1) , point (a) , an exposure secured by an immovable property shall fulfil all of the following conditions:


### — a central government , regional government or local authority or a public sector entity , exposures to which are treated in accordance with articles 115(2) and 116(4) , respectively , has the legal powers and ability to ensure that the property under construction will be finished within a reasonable time frame and is required to or has committed in a legally binding manner to do so where the construction would otherwise not be finished within a reasonable time frame; ### — a central government , regional government or local authority or a public sector entity , exposures to which are treated in accordance with articles 115(2) and 116(4) , respectively , has the legal powers and ability to ensure that the property under construction will be finished within a reasonable time frame and is required to or has committed in a legally binding manner to do so where the construction would otherwise not be finished within a reasonable time frame. equivalently , there are legal provisions in place to ensure that the property under construction will be finished within a reasonable time frame.;


### for the purposes of the second subparagraph of this paragraph , the authority designated in accordance with paragraph 6 may increase the risk weights laid down in article 125(1) , point (a) , or article 126(1) , point (a). the authority shall not increase those to more than 150 %. ### deleted


### 1. an exposure secured by a residential property that complies with any of the conditions laid down in article 124(2) , point (a) , points (i) to (iv) , shall be treated as follows: ### 1. an exposure secured by a residential property that complies with the definition of a non ipre-exposure or with any of the conditions laid down in article 124(2) , point (a) , points (i) to (iv a) , shall be treated as follows:


### the part of the exposure up to 55 % of the property value remaining after any senior or pari passu ranking liens not held by the institution have been deducted shall be assigned a risk weight of 20 %. ### the part of the exposure up to 55 % of the property value remaining after any senior or pari passu ranking liens not held by the institution have been deducted shall be assigned a risk weight of 20 %.


### institutions shall have in place sound , effective and comprehensive strategies and processes to assess and maintain on an ongoing basis the amounts , types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed in the short , medium and long term time horizon , including environmental , social and governance risks.’;” ### institutions shall have in place sound , effective and comprehensive strategies and processes to assess and maintain on an ongoing basis the amounts , types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed in the short , medium and long term time horizon , ’;”


### effective processes to identify , manage , monitor and report the risks they are or might be exposed to in the short , medium and long term time horizon , including environmental , social and governance risks; ### effective processes to identify , manage , monitor and report the risks they are or might be exposed to in the short , medium and long term time horizon;


### 1. member states shall ensure that the management body approves and at least every two years reviews the strategies and policies for taking up , managing , monitoring and mitigating the risks the institution is or might be exposed to , including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle , and those resulting from the current , short , medium and long-term impacts of environmental , social and governance factors.; ### 1. member states shall ensure that the management body approves and at least every two years reviews the strategies and policies for taking up , managing , monitoring and mitigating the risks the institution is or might be exposed to , including those posed by the macroeconomic environment in which it operates and those in relation to the status of the business cycle.


### in paragraph 2 the following subparagraph is added: ### deleted


### member states shall ensure that the management body develops specific plans and quantifiable targets to monitor and address the risks arising in the short , medium and long-term from the misalignment of the business model and strategy of the institutions , with the relevant union policy objectives or broader transition trends towards a sustainable economy in relation to environmental , social and governance factors.; ### member states shall ensure that the management body develops specific plans and quantifiable targets to monitor and address the risks arising in the short , medium and long-term from the misalignment of the business model and strategy of the institutions , with the relevant union policy objectives in relation to environmental , social and governance factors.;


### (17) a new article 87a is inserted: ### deleted


### 4. competent authorities shall assess and monitor developments of institutions’ practices concerning their environmental , social and governance strategy and risk management , including the plans to be prepared in accordance with article 76 , as well as the progress made and the risks to adapt their business models to the relevant policy objectives of the union or broader transition trends towards a sustainable economy , taking into account sustainability related product offering , transition finance policies , related loan origination policies , and environmental , social and governance related targets and limits. ### 4. competent authorities shall assess and monitor developments of institutions’ practices concerning their environmental , social and governance strategy and risk management , including the plans to be prepared in accordance with article 76 , as well as the progress made and the risks to adapt their business models to the relevant policy objectives of the union , taking into account sustainability related product offering , transition finance policies , related loan origination policies , and environmental , social and governance related targets and limits.


### the content of plans to be prepared in accordance with article 76 , which shall include specific timelines and intermediate quantifiable targets and milestones , in order to address the risks from misalignment of the business model and strategy of institutions with the relevant policy objectives of the union , or broader transition trends towards a sustainable economy in relation to environmental , social and governance factors; ### the content of plans to be prepared in accordance with article 76 , which shall include specific timelines and intermediate quantifiable targets and milestones , in order to address the risks from misalignment of the business model and strategy of institutions with the relevant policy objectives of the union , in relation to environmental , social and governance factors;