Reconceptualizing “Ancillary” under the GloBE Rules: A Comparative Approach to the Treatment of Non-Profit Organizations

The efficacy of the OECD’s Pillar Two regime rests on a presumption of definitional uniformity – a presumption that unravels at the boundaries of the charitable sector. While article 1.5.2 excludes charity-owned subsidiaries from the Global Minimum Tax provided their activities remain “ancillary” to the parent’s public benefit purpose, the GloBE Rules leave this linchpin concept undefined. This interpretive silence has effectively delegated the definition to divergent domestic doctrines, resulting in severe horizontal inequity where functionally identical entities face disparate tax liabilities. Drawing on a comparative analysis anchored in Australian, Canadian and UK charity law, and informed by illustrative examples from selected civil law jurisdictions, this article maps the collision between permissive “means-end” reasoning (exemplified by Australian jurisprudence) and restrictive “activity-based” tests (prevalent in Canada and the United Kingdom). It argues that, without a supranational definition, the exclusion becomes a lottery of local legal idiosyncrasies rather than a reflection of economic substance. To restore normative coherence, the article proposes a substance-based “in-furtherance” standard for the OECD Commentary – one that prioritizes the destination of surplus over the form of commercial activity. This framework reconciles the integrity of domestic public-benefit regimes with the anti-avoidance objectives of the global minimum tax.