Multinational Top-up Tax and Domestic Top-up Tax

MTT11040 - Scope: Revenue threshold test: Meaning of 'revenue'

Revenue is not defined in the legislation for the purposes of the revenue threshold test. This page sets out further guidance on the meaning of revenue for that purpose. 

Revenue for the revenue threshold test is taken from the ultimate parent’s consolidated statement of profit and loss, and is determined in line with the financial accounting standard on which those financial statements are based. Different financial accounting standards may have different requirements on how revenue is presented, and therefore this may not be presented as a single line in the consolidated statement of profit and loss. If different types of revenue are presented separately in the consolidated statement of profit and loss, they will be aggregated for the purposes of the revenue threshold.

Items within a group’s ordinary activities

Revenue, for the purposes of the revenue threshold test, focuses on a group’s ordinary activities. Ordinary activities may be described by other terms, for example, core activities or main business activities. It includes income from the inflow of economic benefits arising from delivering or producing goods, rendering services or other activities that constitute the group’s ordinary activities. It is determined in line with the relevant accounting standard in the consolidated financial statements which may allow netting for discounts, allowances and returns, but cost of sales and operating expenses cannot be deducted from revenue.

Revenue for this purpose includes all net gains from investments (whether realised or unrealised) that are part of the group’s ordinary activities and which are reflected in the group’s consolidated statement of profit and loss.

Items outside a group’s ordinary activities

In addition, certain other items outside a group’s ordinary activities are to be included in revenue. These are:

• net gains from investments (whether realised or unrealised) reflected in the statement of profit and loss, and
• income and gains presented separately as extraordinary activities or non-recurring items.

Net gains from investments are net gains from assets that generate a return individually and largely independently of the group’s other resources.

Net gains from investments in this context does not include:

• investments in associates, joint ventures and unconsolidated subsidiaries, or
• cash and cash equivalents.

Gross losses on investments

Where the group’s consolidated statement of profit and loss presents gross gains and gross losses separately, the group can reduce revenues, but only to the extent of the gross gains from investments. This means that if a group makes an overall loss on these investments, this cannot be deducted from other revenues.

For example, if a group has gross gains from investments of €10m and gross losses from investments of €15m, the losses can reduce the gross gains to nil, but the remaining €5m loss cannot be used to reduce other revenues.

Insurance businesses

For guidance on the meaning of revenue in respect of insurance businesses, see MTT45410.

Financial services institutions

For financial services institutions (e.g. banks), the consolidated financial statements may sometimes present both gross and net figures for items of revenue (e.g. for fees, commission, and interest) with the net figure presented as ‘total revenue’ or ‘total income’.

For the purposes of the revenue threshold test, it is the gross figures which constitute revenue.

Items included in revenue for which treatment may be net

For the purposes of the revenue threshold test, revenue should be taken on a gross basis. However, sometimes transactions which would be considered revenue for the revenue threshold test may not be presented on a gross basis in the statement of profit or loss, but instead on a net basis only, in accordance with the group’s financial accounting standard.

For example, the gain on an interest rate swap may be recorded on a net basis in the consolidated statement of profit and loss. In such a case, the group can include the net amount when determining its revenue.

Example 1

MNE Group A is a bank. In its consolidated profit and loss statement, it reports interest income as well as fee income (all of which constitute inflows generated from its ordinary activities).

The interest income and fee income are both presented gross and net in the consolidated profit and loss statement.

Net trading income relates to gains and losses on trading assets and liabilities.

Other revenue relates to net gains from sale of debt investments, dividends from equity investments and foreign exchange.

Group A consolidated statement of profit and loss	31 December 2024 (€m)
Interest income	550
Interest expense	(150)
Net interest income	400
Fee income	160
Fee expense	(60)
Net fee income	100
Net trading income	50
Net income from other financial instruments at FVTPL	70
Other revenue	40
Total revenue	660

For the purposes of the revenue threshold test, revenue totals €870m which consists of:

• interest income - €550m
• fee income - €160m
• net trading income - €50m
• net income from other financial instruments at FVTPL - €70m
• other revenue - €40m

Example 2

MNE Group B is made up of manufacturing companies that make cars. It generates ancillary interest income (holding cash at bank) which is outside its ordinary activities.

Group B consolidated statement of profit and loss	31 December 2024 (€m)
Manufacturing income	800
Cost of sales	(550)
Gross profit	250
Interest income	6

For the purposes of the revenue threshold test, revenue is the manufacturing income of €800m.

Example 3

MNE Group C operates in the hospitality sector. It generates revenue from hotel chains and receives income from its investments in associates which is outside the group’s ordinary activities.

Group C consolidated statement of profit and loss	31 December 2024 (€m)
Revenue from hotels	690
Cost of sales	(480)
Gross profit	210
Income (loss) from associates	3

For the purposes of the revenue threshold test, revenue is the sales revenues of €690m.

Example 4

MNE Group D is a manufacturing company that makes garden furniture.

The business is successful and it uses cash generated to buy a property for capital appreciation.

In the year ended 31 December 2024, it sells the property for a profit of €50m.

Group D consolidated statement of profit and loss	31 December 2024 (€m)
Revenue from sales	700
Cost of sales	(420)
Gross profit	280
Selling and distribution costs	(7)
Administrative expenses	(10)
Operating profit	263
Finance costs	(5)
Gain on sale of investment property	50
Profit before tax	308

For the purposes of the revenue threshold test, revenue is the revenue from sales, and the gain on the sale of the investment property, totalling €750m (€700m + €50m).

Example 5

MNE Group E consists of manufacturing companies which make and sell electronic goods to customers.

Other income consists of fair value gains on equity investments which are outside ordinary activities and are not investments in associates or joint ventures.

Group E consolidated statement of profit and loss	31 December 2024 (€)
Revenue from sales	720
Cost of sales	(500)
Gross profit	220
Selling and distribution costs	(8)
Administrative expenses	(9)
Operating profit	203
Finance costs	7
Other income	3
Profit before tax	213

For the purposes of the revenue threshold test, revenue is the revenue from sales and other income, totalling €723m (€720m + €3m). 

Example 6

MNE Group F operates in the insurance sector. Group F is a multi-line insurer offering in life and non-life insurance products.

It does not have any unit-linked investment contracts. (For specific guidance on these, please see MTT45410.)

Other income consists of profit on disposal of property, plant, and equipment.

Group F consolidated statement of profit and loss	31 December 2024 (€m)
Insurance revenue	1,080
Insurance services expenses	(860)
Net expenses from reinsurance contracts	(25)
Insurance service result	195
Interest revenue calculated using the effective interest method	165
Other investment revenue	420
Investment return (subtotal)	585
Net finance expenses from insurance contracts	(440)
Net finance income from reinsurance contracts	8
Net financial result	153
Revenue from investment management services	10
Other income	2
Other operating expenses	(120)
Profit before tax	240

For the purposes of the revenue threshold test, revenue totals €1,675m which consists of:

• insurance revenue - €1,080
• investment return - €585m
• revenue from investment management services - €10m

Example 7

MNE Group G is a general insurance group. Investment income is within the course of the group’s ordinary activities and includes income from financial assets (including interest), income from associated undertakings, land and buildings and net gains on the realisation of investments.

Group G consolidated profit and loss account Technical account – General business	31 December 2024 (€m)
Gross premiums written	882
Outward reinsurance premiums	(90)
Change in the gross provision for unearned premiums	(24)
Change in the provision for unearned premiums, reinsurers’ share	(5)
Earned premiums, net of reinsurance	763
Allocated investment return transferred from the non-technical account	126
Total technical income	889
Total technical charges	(439)
Balance on the general business technical account	450

Group G consolidated profit and loss account Non-technical account	31 December 2024 (€m)
Balance on the general business technical account	450
Investment income	156
Unrealised gains on investments	8
Investment expenses and charges	(2)
Allocated investment return transferred to the general business technical account	(126)
Other income	2
Other charges	(1)
Profit on ordinary activities before tax	487

For the purposes of the revenue threshold test, revenue totals €1,022m which consists of:

• Gross premiums written of €882, less unearned premiums of €24m
• Investment income - €156m
• Unrealised gains on investments - €8m

Investment management charges/expenses cannot be reflected in revenue for the revenue threshold test. While this example discloses these charges/expenses on the face of the non-technical account, if the investment income on the face of the profit and loss account is net of the investment management charges, the notes may need to be used to obtain the necessary figures to add back these charges to get to the investment income figure.

Example 8

MNE Group H is a life insurance group.

Investment income is within the course of the group’s ordinary activities and includes income from financial assets (including interest), income from associated undertakings, land and buildings and net gains on the realisation of investments.

It does not have any unit-linked investment contracts. (For specific guidance on these, please see MTT45410.)

Group H consolidated profit and loss account Technical account – Long-term business	31 December 2024 (€m)
Gross premiums written	730
Outward reinsurance premium	(32)
Earned premiums, net of reinsurance	698
Investment income	632
Unrealised gains on investments	344
Total	1,674
Total technical charges	(1,574)
Balance on long-term business technical account	100

Group H consolidated profit and loss account Non-technical account	31 December 2024 (€m)
Balance on long-term business technical account	100
Investment income	100
Investment expenses and charges	(55)
Unrealised losses on investments	(20)
Other income	5
Other charges	(4)
Profit on ordinary activities before tax	126

For the purposes of the revenue threshold test, revenue totals €1,786m, which consists of:

• Gross premiums written of €730m
• Investment income on technical account - €632m
• Unrealised gains on investments on technical account - €344m
• Investment income on non-technical account - €100m
• Unrealised losses on investments on non-technical account - (€20m)

Investment management charges/expenses cannot be taken into the Pillar 2 revenue threshold. While this example discloses these charges/expenses on the face of the non-technical account, if the investment income on the face of the profit and loss account is net of the investment management charges, the notes may need to be used to obtain the necessary figures to add back these charges to get to the investment income figure.