---
title: "FTE & PE Allocations"
description: "In the FTE & PE Allocations workspace, you can manage cross-border allocations of income or loss and taxes between a parent entity and its permanent establishment (PE) or a flow-through entity (FTE)."
source_url: https://support.lucanet.com/en/documentation/income-taxes/income-taxes/pillar-two/entity-data-collection/fte-pe-allocations
language: en
last_updated: 2026-05-01
---
# FTE & PE Allocations

## Overview

In the **FTE & PE Allocations** workspace, you can manage cross-border allocations of income or loss and taxes between a parent entity and its **permanent establishment** (**PE**) or a **flow-through entity** (**FTE**). The interface enables you to view both **Outgoing allocations** and **Incoming allocations**, providing flexibility in managing financial movements. It also supports supports adjustment types for **Substance-Based Income Exclusion (SBIE)** allocations as well as exporting allocation data as an Excel or pdf file for reporting and analysis. Additionally, the Pillar 2 module includes filtering and search functionalities to manage and organize data efficiently.

> **Note:** **Note**: The effect an allocation has on the **CE calculations** depends on the **adjustment type**:
>
> - Financial accounting net income or loss adjustments are considered in **INC-1.2** and **INC-1.3**.
> - Current taxes adjustments are considered in **CT-1.2** and **CT-1.3**.
> - Payroll Costs (SBIE) adjustments are considered in **CO-1A** and affect **CO-1**.
> - Tangible Assets (SBIE) adjustments are considered in **CO-2A** and affect **CO-2**.

## Navigation

The **FTE & PE Allocations** workspace can be found at **Pillar 2 | Entity Data Collection | FTE & PE Allocations**. The workspace is displayed as follows, for example:

!['FTE & PE Allocations' workspace](https://support.lucanet.com/assets/docs-images/income-taxes/income-taxes/pillar-two/entity-data-collection/fte-pe-allocations/_images/en/fte-pe-allocations-workspace.png)
'FTE & PE Allocations' workspace

> **Note:** **Note**: The effect an allocation has on the CE calculations depends on the adjustment type:
>
> - Financial accounting net income or loss adjustments are considered in fields **INC-1.2** and **INC-1.3**.
> - Current taxes adjustments are considered in fields **CT-1.2** and **CT-1.3**.

## Creating New Allocations

In addition to [importing](https://support.lucanet.com/en/documentation/income-taxes/income-taxes/pillar-two/cockpit/import.md) allocations, you also have the option to manually create new allocations. To create a new FTE or PE allocation:

1. Select a **period** from the **Applies to period** drop-down menu.

2. Select the **source CE** from the **Company** drop-down menu.

3. Click **Create**.

4. Select the following:
       - **Target CE**
       - An **adjustment type**:

         - Financial accounting net income or loss
         - Current taxes (FTE or PE)
         - Payroll costs
         - Tangible assets

5. Select the legal **basis for the adjustment**:

       - For a **financial accounting income or loss adjustment**:

         - Article 3.4 - Permanent establishment;
         - Article 3.5.3 - Other owners that are not group entities (flow-through);
         - Article 3.5.1 (a) - Permanent Establishment (flow-through);
         - Article 3.5.1 (b) CE-owner (flow-through).
       - For a **current taxes (FTE or PE) adjustment**:

         - Article 4.3.2 (a) - Permanent Establishment;
         - Article 4.3.2 (b) - Tax transparent entity;
         - Article 4.3.2 (d) - Hybrid entity;
         - Article 4.3.4 - Loss making permanent establishment.
       - For a **payroll cost adjustment**:

         - SBIE to PE - Addition to the Eligible Payroll Costs of the PE;
         - SBIE from FTE - Addition to the Eligible Payroll Costs of the CE-Owner.
       - For a **tangible asset adjustment**:

         - SBIE to PE - Addition to the Carrying value of relevant Eligible Tangible Assets of the PE;
         - SBIE from FTE - Addition to the Carrying value of relevant Eligible Tangible Assets of the CE-Owner.

6. Enter the amount:
       - For **income/loss** or **current taxes** adjustments: Enter the amount for the **addition to the covered taxes of the other constituent entity** in the local currency of the source CE.
       - For **payroll cost** adjustments: Enter the **payroll cost amount to allocate** in the local currency of the source CE.
       - For **tangible asset** adjustments: Enter the **tangible asset value to allocate** in the local currency of the source CE.

7. Click **Save**.
![Example for creation of allocation](https://support.lucanet.com/assets/docs-images/income-taxes/income-taxes/pillar-two/entity-data-collection/fte-pe-allocations/_images/en/example-fte-pe-allocations.png)
Example for creation of allocation

## Editing Existing Allocations

To edit an existing tax allocation:

1. Select a **period** from the **Applies to period** dropdown menu.

2. Select the **source CE** from the **Company** dropdown menu.

3. Click the **edit** button (the little pencil) next to the allocation.

4. Select an **adjustment type**:

       - Financial accounting net income or loss;
       - Current taxes (FTE or PE);
       - Payroll costs;
       - Tangible assets.

5. Select the legal **basis for the adjustment**:

       - For a **financial accounting income or loss adjustment**:

         - Article 3.4 - Permanent establishment;
         - Article 3.5.3 - Other owners that are not group entities (flow-through);
         - Article 3.5.1 (a) - Permanent Establishment (flow-through);
         - Article 3.5.1 (b) CE-owner (flow-through).
       - For a **current taxes (FTE or PE) adjustment**:

         - Article 4.3.2 (a) - Permanent Establishment;
         - Article 4.3.2 (b) - Tax transparent entity;
         - Article 4.3.2 (d) - Hybrid entity;
         - Article 4.3.4 - Loss making permanent establishment.
       - For a **payroll cost** adjustment:

         - SBIE to PE - Addition to the Eligible Payroll Costs of the PE;
         - SBIE from FTE - Addition to the Eligible Payroll Costs of the CE-Owner.
       - For a **tangible asset** adjustment:

         - SBIE to PE - Addition to the Carrying value of relevant Eligible Tangible Assets of the PE;
         - SBIE from FTE - Addition to the Carrying value of relevant Eligible Tangible Assets of the CE-Owner.

6. Enter the amount:
       - For **income/loss** or **current taxes** adjustments: Enter the amount for the **addition to the covered taxes of the other constituent entity** in the local currency of the source CE.
       - For **payroll cost** adjustments: Enter the **payroll cost amount to allocate** in the local currency of the source CE.
       - For **tangible asset** adjustments: Enter the **tangible asset value to allocate** in the local currency of the source CE.

7. Click **Save**.
> **Note:** **Notes**:
>
> - Optionally, you can upload supporting documents as an **attachment** to the allocation or add a **description**, e.g. a comment that explains divergences from prior years.
> - Allocations use the local currency of the source CE.
> - The **Incoming allocations** tab is purely informational. Entering new allocations or editing existing allocations must be done outgoing from the source CE.

## Notes on SBIE Allocations

The **Payroll Costs** and **Tangible Assets** adjustment types are used specifically for Substance-Based Income Exclusion (SBIE) calculations. These allocations allow you to properly attribute SBIE substance factors between constituent entities in complex structures involving **permanent establishments** and **flow-through entities**.

Use **Payroll Costs** allocations when:

- Employees are formally employed by one constituent entity but perform work that should be attributed to another entity (typically a permanent establishment)
- A flow-through entity has payroll costs that should be attributed to the CE-Owner for SBIE purposes
- You need to adjust eligible payroll costs for SBIE calculation compliance

Use **Tangible Assets** allocations when:

- Tangible assets are owned by one constituent entity but used by another consitutent entity (typically a permanent establishment)
- A flow-through entity owns tangible assets that should be attributed to the CE-Owner for SBIE purposes
- You need to adjust the carrying value of eligible tangible assets for SBIE calculation compliance