Short Title

Marginal note:Short title

1 This Act may be cited as the Global Minimum Tax Act.

PART 1Interpretation and Application

Interpretation

Marginal note:Definitions

• 2 (1) The following definitions apply in this Act.

  acceptable financial accounting standard

  acceptable financial accounting standard means

  • (a) Canadian generally accepted accounting principles (GAAP);

  • (b) IFRS; or

  • (c) the generally accepted accounting principles of

    • (i) Australia,

    • (ii) Brazil,

    • (iii) European Economic Area member states,

    • (iv) European Union member states,

    • (v) Hong Kong (Special Administrative Region of the People’s Republic of China),

    • (vi) Japan,

    • (vii) Mexico,

    • (viii) New Zealand,

    • (ix) People’s Republic of China,

    • (x) Republic of India,

    • (xi) Republic of Korea,

    • (xii) Singapore,

    • (xiii) Switzerland,

    • (xiv) United Kingdom, or

    • (xv) United States. (norme de comptabilité financière admissible)

  adjusted covered taxes

  adjusted covered taxes, of a constituent entity of an MNE group for a fiscal year, has the same meaning as in subsection 22(1). (impôts concernés ajustés)

  adjustment year

  adjustment year means a fiscal year in respect of which an adjustment is made to the GloBE income or loss or adjusted covered taxes, for the fiscal year, of a constituent entity of an MNE group or the jurisdictional adjusted covered taxes of an MNE group for the fiscal year because of the application of an ETR adjustment provision. (année d’ajustement)

  aggregate asset gain

  aggregate asset gain, in respect of an election under subsection 18(23), means the net gain in a fiscal year from the disposition of local tangible assets by all of the constituent entities of an MNE group that are located in a particular jurisdiction, excluding any gain or loss on a transfer of assets between group entities. (profit cumulé sur cession d’actifs)

  aggregate asset loss

  aggregate asset loss, in respect of an election under subsection 18(23), means the net loss in a fiscal year from the disposition of local tangible assets by all of the constituent entities of an MNE group that are located in a particular jurisdiction, excluding any gain or loss on a transfer of assets between group entities. (perte cumulée sur cession d’actifs)

  allocable share

  allocable share has the same meaning as in subsection 15(2). (part à répartir)

  allocated adjustment top-up amount

  allocated adjustment top-up amount has the same meaning as in subsection 30(5). (montant complémentaire d’ajustement attribué)

  ancillary international shipping activity

  ancillary international shipping activity has the same meaning as in subsection 19(11). (activité de transport maritime international accessoire)

  ancillary international shipping costs

  ancillary international shipping costs has the same meaning as in subsection 19(10). (coûts relatifs au transport maritime international accessoires)

  ancillary international shipping income

  ancillary international shipping income has the same meaning as in subsection 19(8). (revenu de transport maritime international accessoire)

  ancillary international shipping revenue

  ancillary international shipping revenue has the same meaning as in subsection 19(9). (recettes de transport maritime international accessoire)

  authorized financial accounting standard

  authorized financial accounting standard, in respect of an entity, means a set of generally acceptable accounting principles permitted by the body responsible for prescribing, establishing or accepting accounting standards for financial reporting purposes in the jurisdiction where the entity is located. (norme de comptabilité financière agréée)

  blended controlled foreign company tax regime

  blended controlled foreign company tax regime, of a particular jurisdiction, means a controlled foreign company tax regime under which

  • (a) the tax liability of an owner located in the particular jurisdiction is determined by reference to an aggregate of the income, losses and creditable taxes of other entities, located in one or more other jurisdictions, in which the owner holds an ownership interest;

  • (b) the lowest rate that, if it were the corporate tax rate applicable in the one or more jurisdictions in which the other entities are located, would result in the tax charge in those jurisdictions being sufficient to prevent a tax charge on the owner under the controlled foreign company tax regime in respect of the other entities for a fiscal year, is less than the minimum rate; and

  • (c) income of entities located in the particular jurisdiction is not taken into account. (régime fiscal intégré des sociétés étrangères contrôlées)

  consolidated financial statements

  consolidated financial statements, of an entity, means

  • (a) if the entity is not the ultimate parent entity of a group described in paragraph 10(2)(b), the financial statements of the entity prepared in accordance with an acceptable financial accounting standard, in which the assets, liabilities, income, expenses and cash flows of that entity and the entities in which it has a controlling interest are presented as those of a single economic unit;

  • (b) if the entity is the ultimate parent entity of a group described in paragraph 10(2)(b), the financial statements of the entity that are prepared in accordance with an acceptable financial accounting standard;

  • (c) if the entity has financial statements that would be described in paragraph (a) or (b) except that they are not prepared in accordance with an acceptable financial accounting standard, those financial statements, adjusted to prevent any material competitive distortions; and

  • (d) if the entity does not prepare financial statements described in any of paragraphs (a) to (c), the financial statements — in which the assets, liabilities, income, expenses and cash flows of that entity and other entities are presented as those of a single economic unit — that would have been prepared in accordance with an authorized financial accounting standard that is

    • (i) an acceptable financial accounting standard, or

    • (ii) a financial accounting standard that is adjusted to prevent any material competitive distortions. (états financiers consolidés)

  constituent entity

  constituent entity has the same meaning as in subsection 11(1). (entité constitutive)

  constituent entity-owner

  constituent entity-owner means a constituent entity that directly or indirectly holds an ownership interest in another constituent entity of the same MNE group. (entité détentrice de titres d’une entité constitutive)

  controlled foreign company tax regime

  controlled foreign company tax regime, of a particular jurisdiction, means a set of tax rules (other than an IIR) under which an entity (referred to in this definition as the “owner”) — that is located in the particular jurisdiction and that holds an ownership interest in another entity (referred to in this definition as the “controlled foreign company”) that is located in another jurisdiction — is subject to current taxation on its share of all or part of the income earned by the controlled foreign company, irrespective of whether that income is distributed on a current basis to the owner. (régime fiscal des sociétés étrangères contrôlées)

  controlling interest

  controlling interest means

  • (a) an ownership interest in an entity such that the interest holder

    • (i) is required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis in accordance with an acceptable financial accounting standard, or

    • (ii) would have been required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis if the interest holder had prepared consolidated financial statements; or

  • (b) the controlling interest that a main entity is deemed to hold in a permanent establishment under paragraph (2)(b). (participation conférant le contrôle)

  cooperative

  cooperative means an entity that 

  • (a) collectively markets or acquires goods or services on behalf of its members; and

  • (b) is subject to a tax regime in the jurisdiction in which it is located that is designed to ensure the tax neutrality of the cooperative in respect of the property or services of its members that are sold through the cooperative and property or services that are acquired by members through the cooperative. (coopérative)

  core international shipping activity

  core international shipping activity has the same meaning as in subsection 19(6). (activité de transport maritime international principale)

  core international shipping costs

  core international shipping costs has the same meaning as in subsection 19(5). (coûts relatifs au transport maritime international principal)

  core international shipping income

  core international shipping income has the same meaning as in subsection 19(3). (revenu de transport maritime international principal)

  core international shipping revenue

  core international shipping revenue has the same meaning as in subsection 19(4). (recettes de transport maritime international principal)

  corporation

  corporation includes an incorporated company, arrangement, association, organization or body. (société)

  covered taxes

  covered taxes has the same meaning as in subsection 23(1). (impôts concernés)

  deductible dividend

  deductible dividend, in respect of a constituent entity that is subject to a deductible dividend regime, means

  • (a) a distribution of profits, by the constituent entity to the holder of an ownership interest in the constituent entity, that is deductible from income for tax purposes of the constituent entity under the laws of the jurisdiction in which it is located; or

  • (b) a patronage dividend distributed to a member of a cooperative. (dividende déductible)

  deductible dividend regime

  deductible dividend regime means a tax regime that

  • (a) is designed to yield a single level of taxation, on the owners of an entity, through a deduction from the income of the entity for distributions of profits to the owners (which, for this purpose, are considered to include patronage dividends); or

  • (b) is applicable to cooperatives and exempts the cooperative from taxation. (régime des dividendes déductibles)

  deemed distribution tax

  deemed distribution tax has the same meaning as in subsection 37(2). (impôt sur les distributions présumées)

  deemed distribution tax recapture account

  deemed distribution tax recapture account means an account established and maintained in accordance with subsection 37(1). (compte de récupération de l’impôt sur les distributions présumées)

  departing constituent entity

  departing constituent entity, of an MNE group, means an entity that is a standard constituent entity of the MNE group located in a jurisdiction in a fiscal year in respect of which an election is made under subsection 37(1) and that has subsequently

  • (a) left the MNE group; or

  • (b) transferred substantially all of its assets to a recipient that is not, at the time of the transfer, a standard constituent entity of the MNE group located in the jurisdiction. (entité constitutive sortante)

  disallowed accrual

  disallowed accrual, of a constituent entity, means any movement in deferred tax expense recorded in the constituent entity’s financial accounts that relates to

  • (a) an uncertain tax position; or

  • (b) a distribution from a group entity in respect of the constituent entity. (accumulation non admise)

  disposition recapture ratio

  disposition recapture ratio has the same meaning as in subsection 37(6). (ratio de récupération de disposition)

  disqualified refundable imputation tax

  disqualified refundable imputation tax means an amount of tax paid or accrued by a constituent entity (other than an amount of tax paid or accrued that is a qualified imputation tax) that is

  • (a) refundable to the beneficial owner of a dividend or similar distribution by the constituent entity;

  • (b) creditable against a tax liability (other than a tax liability in respect of the distribution) of the beneficial owner; or

  • (c) refundable to, or creditable against a tax liability of, the constituent entity, in respect of the distribution. (impôt d’imputation remboursable non admissible)

  domestic top-up amount

  domestic top-up amount has the same meaning as in subsection 52(1). (montant complémentaire national)

  dual-listed arrangement

  dual-listed arrangement means an arrangement entered into by the ultimate parent entities of two or more groups, under which

  • (a) all or substantially all the businesses of the groups are combined by contract alone;

  • (b) pursuant to contractual arrangements, the ultimate parent entities each make distributions (including dividends and distributions on a liquidation, if relevant) to their respective owners on the basis of a fixed ratio;

  • (c) the activities of the groups are managed as those of a single economic unit;

  • (d) the groups retain the separate legal identity they had before the arrangement was entered into;

  • (e) ownership interests of at least one of the ultimate parent entities are quoted, traded or transferred independently on a securities market that is not the same as the securities market on which the ownership interests of another of the ultimate parent entities are quoted, traded or transferred independently; and

  • (f) financial statements are prepared by one or more of the ultimate parent entities in which the assets, liabilities, income, expenses and cash flows of the groups’ entities are presented together as those of a single economic unit and those financial statements

    • (i) would be consolidated financial statements if the groups’ entities were included in a single group and the ultimate parent entity that prepared the financial statements were the ultimate parent entity of that group, and

    • (ii) are required by an applicable regulatory regime of a jurisdiction to be externally audited. (accord de double cotation)

  effective tax rate

  effective tax rate has the same meaning as in subsection 29(1). (taux effectif d’imposition)

  eligible distribution tax system

  eligible distribution tax system, of a jurisdiction, means a corporate income tax system that is applicable in the jurisdiction that

  • (a) generally imposes tax on the profits, or certain non-business expenses, of a corporation only when the corporation

    • (i) distributes those profits to its shareholders,

    • (ii) is deemed to distribute those profits to its shareholders, or

    • (iii) incurs those expenses;

  • (b) imposes tax at a rate greater than or equal to the minimum rate; and

  • (c) was in force on or before July 1, 2021. (régime admissible d’impôt sur les distributions)

  eligible employee

  eligible employee has the same meaning as in subsection 32(8). (employé admissible)

  eligible payroll costs

  eligible payroll costs has the same meaning as in subsection 32(2). (frais de personnel admissibles)

  eligible tangible asset

  eligible tangible asset has the same meaning as in subsection 32(14). (actif corporel admissible)

  eligible tangible asset amount

  eligible tangible asset amount has the same meaning as in subsection 32(9). (montant de l’actif corporel admissible)

  entity

  entity means a corporation, a partnership, a trust or any other arrangement, association, organization or body whether registered or unregistered for which separate financial accounts are prepared, but does not include a central, state or local government or its administration or agencies that carries out government functions. (entité)

  ETR adjustment provision

  ETR adjustment provision means paragraph 18(23)(c), subsection 25(6), paragraph 27(1)(b), subsection 27(4) or paragraph 37(4)(b) or (5)(b). (disposition d’ajustement du TEI)

  excess negative tax expense

  excess negative tax expense has the same meaning as in subsection 29(4). (charge d’impôt négative excédentaire)

  excess negative tax expense top-up amount

  excess negative tax expense top-up amount has the same meaning as in subsection 31(2). (montant complémentaire de la charge d’impôt négative excédentaire)

  excess profit

  excess profit has the same meaning as in subsection 30(4). (bénéfice excédentaire)

  excluded costs

  excluded costs has the same meaning as in subsection 32(3). (coûts exclus)

  excluded dividends

  excluded dividends means dividends or other distributions received or accrued by a constituent entity in respect of an ownership interest in an entity, other than

  • (a) a dividend or other distribution received or accrued in respect of

    • (i) an interest that is a short-term portfolio holding of the constituent entity on the earlier of

      • (A) the date of the distribution, and

      • (B) the date on which the constituent entity becomes entitled to the distribution, or

    • (ii) an ownership interest in an investment entity that is subject to an election under subsection 42(2); or

  • (b) a dividend or other distribution received or accrued

    • (i) to the extent that it can reasonably be considered to be interest or another amount in respect of a debt component of a financial instrument, or

    • (ii) if it is

      • (A) made by another group entity, and

      • (B) treated as an expense for the purposes of determining the financial accounting income of the other group entity. (dividendes exclus)

  excluded entity

  excluded entity has the same meaning as in subsection 13(1). (entité exclue)

  excluded equity gain or loss

  excluded equity gain or loss, of a constituent entity for a fiscal year, means the gain, profit or loss included in the financial accounting income of the constituent entity for the fiscal year arising from

  • (a) gains and losses from changes in the fair value of an ownership interest, or from the impairment of an ownership interest, except for an interest that is a portfolio holding at the end of the fiscal year;

  • (b) profit or loss in respect of an ownership interest included under the equity method of accounting; or

  • (c) gains and losses from a disposition of an ownership interest, except for a disposition of an interest that is a portfolio holding immediately before the disposition. (profit ou perte sur capitaux propres exclu)

  excluded taxes

  excluded taxes has the same meaning as in subsection 23(2). (impôts exclus)

  filing constituent entity

  filing constituent entity means

  • (a) in respect of a qualifying MNE group for a fiscal year, a constituent entity of the MNE group that is

    • (i) located in Canada and required to file a GIR with the Minister, in respect of the MNE group for the fiscal year, in accordance with subsection 60(1) or 60(2),

    • (ii) a designated local entity (as appointed under paragraph 60(3)(a)) for the fiscal year, or

    • (iii) a qualifying foreign filing entity, as defined in subsection 55(1), for the fiscal year; and

  • (b) in respect of an investment subgroup, joint venture group, minority-owned subgroup or minority-owned investment subgroup that is included in a qualifying MNE group for a fiscal year, the constituent entity that files the GIR in respect of the MNE group for the fiscal year. (entité constitutive déclarante)

  financial accounting income

  financial accounting income has the same meaning as in subsection 17(1). (résultat net comptable)

  financial accounting revenue

  financial accounting revenue has the same meaning as in subsection 33(3). (chiffre d’affaires comptable)

  fiscal year

  fiscal year, in respect of an MNE group, means

  • (a) if paragraph (d) of the definition consolidated financial statements in this subsection applies in respect of the ultimate parent entity, the calendar year; and

  • (b) in any other case, an accounting period for which the ultimate parent entity of an MNE group prepares its consolidated financial statements. (année financière)

  fiscally transparent

  fiscally transparent, in respect of an entity, means that under the laws of a jurisdiction, the income, expenditure, profit or loss of the entity is treated as if it were derived or incurred by the owner of the entity in proportion to the owner’s interest in the entity. (fiscalement transparent)

  five-year election

  five-year election means an election, in respect of a particular fiscal year, to which the following rules apply:

  • (a) the election applies to the particular fiscal year and, unless the election is revoked, each subsequent fiscal year;

  • (b) the election cannot be revoked before the fifth fiscal year following the particular fiscal year;

  • (c) if the election is revoked, no such election can subsequently be made until the fifth fiscal year following the revocation year; and

  • (d) the election or any revocation of the election, as the case may be, must be made in the GIR for the first fiscal year in respect of which the election or revocation, as the case may be, is to be effective. (choix pour cinq ans)

  flow-through entity

  flow-through entity means an entity to the extent it

  • (a) is fiscally transparent under the laws of the jurisdiction where it was created; and

  • (b) is not subject to a covered tax on its income or profit in another jurisdiction as a result of being tax resident in that jurisdiction. (entité intermédiaire)

  flow-through tax benefits

  flow-through tax benefits has the same meaning as in subsection 28(1). (avantages fiscaux intermédiaires)

  general government

  general government means the central administration, agencies whose operations are under its effective control, state and local governments and their respective administrations. (administration publique)

  GIR

  GIR means an information return that contains the information, and is disseminated, in accordance with the Tax Challenges Arising from the Digitalisation of the Economy — GloBE Information Return (Pillar Two) published by the OECD on July 13, 2023, as amended from time to time, and that is

  • (a) if required to be filed with the Minister by a constituent entity located in Canada under subsection 60(1) or 60(2) or subparagraph 60(3)(b)(i), the information return in prescribed form; and

  • (b) in any other case, a substantially similar information return that is required to be filed in a jurisdiction other than Canada. (DRG)

  GloBE Commentary

  GloBE Commentary means the commentary entitled Tax Challenges Arising from the Digitalisation of the Economy — Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two), published by the OECD on March 14, 2022, as amended from time to time. (commentaires GloBE)

  GloBE income

  GloBE income, of a constituent entity for a fiscal year, means the positive amount, if any, of the constituent entity’s GloBE income or loss for the fiscal year. (revenu GloBE)

  GloBE income or loss

  GloBE income or loss has the meaning assigned in section 16. (résultat net GloBE)

  GloBE loss

  GloBE loss, of a constituent entity for a fiscal year, means the absolute value of the negative amount, if any, of the constituent entity’s GloBE income or loss for the fiscal year. (perte GloBE)

  GloBE Model Rules

  GloBE Model Rules means the model rules set out in the document entitled Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two) published by the OECD on December 20, 2021. (règles GloBE)

  GloBE reorganization

  GloBE reorganization means a transformation or transfer of assets and liabilities such as in a merger, demerger, liquidation or similar transaction, if

  • (a) it is the case that

    • (i) if no consideration is provided for the transfer, the issuance of an equity interest as consideration for the transfer would have no economic significance because the transaction does not result in a change in the beneficial ownership of an entity, and

    • (ii) in any other case, the consideration for the transfer consists, in whole or in significant part, of

      • (A) if the transaction is a liquidation, the cancellation of equity interests of the entity that is the subject of the liquidation, and

      • (B) in any other case, equity interests issued by the transferee or an entity that is connected with the transferee;

  • (b) the transferor’s gain or loss on the transfer is not subject, in whole or in part, to an income or profits tax in any jurisdiction; and

  • (c) for the purpose of determining the transferee’s income or profits that are subject to an income or profits tax of the jurisdiction in which it is located, the transferee is required under the laws of that jurisdiction to use the transferor’s tax basis in respect of the transferred assets, adjusted to reflect any non-qualifying gain or loss in respect of the transfer. (réorganisation GloBE)

  GloBE transition year

  GloBE transition year, of an MNE group in respect of a jurisdiction, means the first fiscal year in which

  • (a) a constituent entity of, or joint venture entity in respect of, the MNE group that is located in the jurisdiction is subject to a qualified IIR or qualified UTPR; and

  • (b) subsection 33(1) or 47(2), section 45 or an equivalent provision under another qualified IIR or qualified UTPR does not apply for the jurisdiction. (année de transition GloBE)

  governmental entity

  governmental entity means an entity, if

  • (a) it is part of or wholly owned by a government (including any political subdivision or local authority of the government);

  • (b) its principal purpose is

    • (i) to fulfill a government function, or

    • (ii) to manage or invest the government’s assets through the making and holding of investments, asset management and related investment activities for the government’s assets;

  • (c) it does not carry on a trade or business;

  • (d) it is accountable to the government on its overall performance and provides annual information reporting to the government;

  • (e) its assets vest in the government upon dissolution; and

  • (f) if it distributes net earnings, the net earnings are distributed solely to the government with no portion of its net earnings inuring to the benefit of any private person. (entité gouvernementale)

  group

  group has the same meaning as in subsection 10(2). (groupe)

  group entity

  group entity, in respect of another entity or a group, means an entity that is a member of the same group. (entité du groupe)

  high-tax counterparty

  high-tax counterparty means a constituent entity of an MNE group that is located in a jurisdiction that

  • (a) is not a low-tax jurisdiction; or

  • (b) would not be a low-tax jurisdiction if the effective tax rate of the MNE group for the jurisdiction were determined without regard to any income or expense recorded by an entity in respect of an intragroup financing arrangement. (contrepartie à imposition élevée)

  hybrid entity

  hybrid entity, in relation to an owner, means an entity that is

  • (a) not fiscally transparent in the jurisdiction where it is located; and

  • (b) fiscally transparent in the jurisdiction where the owner is located. (entité hybride)

  IFRS

  IFRS means International Financial Reporting Standards. (IFRS)

  IIR

  IIR means a law of a jurisdiction that may reasonably be considered to have been enacted with the intention of implementing, in whole or in part, Articles 2.1 to 2.3 of the GloBE Model Rules. (RDIR)

  included revaluation method gain or loss

  included revaluation method gain or loss, of a constituent entity for a fiscal year, means the net gain or loss, before covered taxes, for the fiscal year in respect of all property, plant and equipment that arises under an accounting method or practice that

  • (a) periodically adjusts the carrying value of such property, plant and equipment to its fair value;

  • (b) records the changes in value in other comprehensive income; and

  • (c) does not subsequently report the gains or losses recorded in other comprehensive income through profit and loss. (profit ou perte inclus au titre de la méthode de réévaluation)

  inclusion ratio

  inclusion ratio has the same meaning as in subsection 15(3). (ratio d’inclusion)

  Inclusive Framework

  Inclusive Framework means the jurisdictions of the OECD and Group of 20 (G20) Inclusive Framework on Base Erosion and Profit Shifting. (Cadre inclusif)

  insurance investment entity

  insurance investment entity means a particular entity, other than an investment fund or real estate investment vehicle,

  • (a) that would be

    • (i) an investment fund if the definition investment fund in this subsection were read without reference to subparagraph (a)(i) and paragraphs (c) and (d) of that definition, or

    • (ii) a real estate investment vehicle if the definition real estate investment vehicle in this subsection were read without reference to subparagraph (b)(ii) of that definition;

  • (b) that is primarily designed or established to generate investment income or gains to offset, or protect against an event or outcome that gives rise to, liabilities or losses associated with insurance or annuity contracts; and

  • (c) in which each ownership interest is held by one or more entities each of which

    • (i) is a group entity in respect of the particular entity, and

    • (ii) is subject to a regulatory regime, in the jurisdiction in which it is established or managed, that is specific to entities engaged in the business of negotiating and entering into contracts of insurance or annuity or in activities ancillary to that business. (entité d’investissement d’assurance)

  intermediate parent entity

  intermediate parent entity means a constituent entity of an MNE group (other than an ultimate parent entity, partially-owned parent entity, permanent establishment, investment entity or insurance investment entity) that holds, directly or indirectly, an ownership interest in another constituent entity of the MNE group. (entité mère intermédiaire)

  international organization

  international organization means any intergovernmental or supranational organization, or an entity that acts for, is part of or is wholly owned by that organization, if

  • (a) the organization is comprised primarily of governments;

  • (b) it has in effect a headquarters agreement or substantially similar agreement, such as arrangements for privileges or immunities in respect of its offices or establishments, with the jurisdiction in which it is established; and

  • (c) law or its governing documents prevent its income inuring to the benefit of private persons. (organisation internationale)

  international shipping

  international shipping means the transportation of passengers or cargo by ship in international traffic. (transport maritime international)

  international traffic

  international traffic means any transport by ship, except when the ship is operated solely between places within a single jurisdiction. (trafic international)

  intragroup financing arrangement

  intragroup financing arrangement means any arrangement between two or more group entities of an MNE group under which a high-tax counterparty directly or indirectly provides credit to or otherwise makes an investment in a low-tax entity. (accord de financement intragroupe)

  investment entity

  investment entity, for a fiscal year, means

  • (a) an entity that is an investment fund for all or substantially all of the fiscal year;

  • (b) an entity that is a real estate investment vehicle for all or substantially all of the fiscal year;

  • (c) a particular entity, if

    • (i) for all or substantially all of the fiscal year ownership interests in the particular entity having a fair market value equal to at least 95% of the fair market value of all ownership interests in the particular entity are held directly, or indirectly through one or more other entities that are investment funds or real estate investment vehicles, by one or more entities that are investment funds or real estate investment vehicles, and

    • (ii) all or substantially all the activities of the particular entity during the fiscal year consist of holding assets or investing funds for the benefit of any of the investment funds or real estate investment vehicles referred to in subparagraph (i); or

  • (d) a particular entity, if

    • (i) for all or substantially all of the fiscal year ownership interests in the particular entity having a fair market value equal to at least 85% of the fair market value of all ownership interests in the particular entity are held directly, or indirectly through one or more other entities that are investment funds or real estate investment vehicles, by one or more entities that are investment funds or real estate investment vehicles, and

    • (ii) all or substantially all the financial accounting income of the particular entity is comprised of excluded dividends or excluded equity gains or losses. (entité d’investissement)

  investment fund

  investment fund means an entity

  • (a) that is primarily designed or established to

    • (i) pool assets (which may be financial or non-financial) from a number of investors, at least some of which are not connected, and

    • (ii) generate investment income or gains, or protect against a specific or general event or outcome;

  • (b) that invests in accordance with a defined investment policy;

  • (c) that allows investors to reduce transaction, research and analytical costs or to spread risk collectively;

  • (d) the investors in which have a right to the assets of the entity, or income earned on those assets, based on the respective contributions made by those investors;

  • (e) that is, or whose management is, subject to a regulatory regime (which may include appropriate anti-money laundering and investor protection regulations) in the jurisdiction in which the entity is established or managed; and

  • (f) that is managed by investment management professionals on behalf of its investors. (fonds de placement)

  joint venture

  joint venture, in respect of a particular MNE group (other than a group composed exclusively of excluded entities), means a particular entity

  • (a) whose financial results are reported under the equity method in the consolidated financial statements of the ultimate parent entity of the particular MNE group;

  • (b) of which at least 50% of the ownership interests are held, directly or indirectly, by the ultimate parent entity of the particular MNE group; and

  • (c) that is not

    • (i) the ultimate parent entity of an MNE group, a constituent entity of which, or joint venture in respect of which, is subject to a qualified IIR or qualified UTPR,

    • (ii) an excluded entity described in paragraph 13(1)(a),

    • (iii) an entity, if

      • (A) all ownership interests in that entity held by group entities in respect of the particular MNE group are held directly by excluded entities described in paragraph 13(1)(a), and

      • (B) one of the following conditions is met:

        • (I) the entity operates exclusively or almost exclusively to hold assets or invest funds for the benefit of its investors,

        • (II) the entity carries out activities that are ancillary to those carried out by any of those group entities, or

        • (III) all or substantially all of the financial accounting income of the entity is excluded dividends or excluded equity gains, or

    • (iv) a joint venture subsidiary of another joint venture. (coentreprise)

  joint venture entity

  joint venture entity, of a joint venture group, means the joint venture or a joint venture subsidiary of the group. (entité d’une coentreprise)

  joint venture group

  joint venture group means a joint venture and its joint venture subsidiaries, if any. (groupe d’une coentreprise)

  joint venture subsidiary

  joint venture subsidiary, of a joint venture, means an entity (other than the joint venture or an excluded entity) the assets, liabilities, income, expenses and cash flows of which would, because of ownership or control, be included in the consolidated financial statements of the joint venture if the references to “ultimate parent entity” in the definition consolidated financial statements in this subsection were read as references to the “joint venture”. (filiale d’une coentreprise)

  jurisdictional adjusted covered taxes

  jurisdictional adjusted covered taxes has the same meaning as in subsection 29(3). (impôts concernés ajustés juridictionnels)

  jurisdictional excess negative tax expense top-up amount

  jurisdictional excess negative tax expense top-up amount has the same meaning as in subsection 31(4). (montant complémentaire de la charge d’impôt négative excédentaire juridictionnel)

  jurisdictional GloBE income or loss

  jurisdictional GloBE income or loss has the same meaning as in subsection 33(4). (résultat net GloBE juridictionnel)

  jurisdictional GloBE revenue

  jurisdictional GloBE revenue has the same meaning as in subsection 33(2). (chiffre d’affaires GloBE juridictionnel)

  jurisdictional top-up amount

  jurisdictional top-up amount has the same meaning as in subsection 30(2). (montant complémentaire juridictionnel)

  local tangible asset

  local tangible asset, in respect of a constituent entity, means real or immovable property situated in the same jurisdiction as the jurisdiction where the constituent entity is located. (actif corporel local)

  local taxation year

  local taxation year of an entity means the period for which the accounts of the entity have been ordinarily made up for the purpose of computing the entity’s income for tax purposes in the jurisdiction in which the entity is located. (année d’imposition locale)

  look-back period

  look-back period, in respect of an election under subsection 18(23), means the election year and the four fiscal years immediately preceding the election year. (période antérieure concernée)

  loss year

  loss year, in respect of a jurisdiction for which the filing constituent entity of an MNE group has made an election under subsection 18(23), means a fiscal year in the look-back period for which a constituent entity of the MNE group that is located in that jurisdiction has a net asset loss and the total amount of net asset losses of all constituent entities of the MNE group that are located in that jurisdiction exceeds the total amount of their net asset gains. (année de perte)

  low-tax entity

  low-tax entity means a constituent entity of an MNE group that is located in

  • (a) a low-tax jurisdiction; or

  • (b) a jurisdiction that would be a low-tax jurisdiction if the effective tax rate of the MNE group for the jurisdiction were determined without regard to any income or expense recorded by an entity in respect of an intragroup financing arrangement. (entité à faible imposition)

  low-tax jurisdiction

  low-tax jurisdiction, in respect of an MNE group for a fiscal year, means a jurisdiction where the MNE group has net GloBE income and the effective tax rate of the MNE group for the jurisdiction for that fiscal year is lower than the minimum rate. (juridiction à faible imposition)

  main entity

  main entity, in respect of a permanent establishment, means the entity that includes the financial accounting income of the permanent establishment in its financial statements. (entité principale)

  marketable price floor

  marketable price floor, in respect of the transfer of a tax credit, means 80% of the net present value of the tax credit, where the net present value is determined based on the yield to maturity on a debt instrument with equal or similar maturity — limited to a maximum of five-year maturity — issued by the government that granted the tax credit in the same fiscal year as the tax credit is transferred or, if it is not transferred, the origination year. (prix plancher commercialisable)

  marketable transferable tax credit

  marketable transferable tax credit means all or a portion of a tax credit (other than a qualified refundable tax credit) if

  • (a) in respect of an originator,

    • (i) the tax credit, or portion of the tax credit, is transferable to an unrelated purchaser in the origination year, or within 15 months of the end of the origination year, under the laws of the jurisdiction granting the tax credit, and

    • (ii) one of the following conditions is met:

      • (A) the tax credit, or portion of the tax credit, is transferred to an unrelated purchaser within 15 months of the end of the origination year at a price that equals or exceeds the marketable price floor, or

      • (B) if the tax credit, or portion of the tax credit, is not transferred, or is transferred to a person that is not an unrelated purchaser, similar tax credits are traded between persons and unrelated purchasers within 15 months of the end of the origination year at a price that equals or exceeds the marketable price floor; and

  • (b) in respect of a particular unrelated purchaser,

    • (i) the tax credit, or portion of the tax credit, is transferable from the particular unrelated purchaser to another unrelated purchaser in the fiscal year in which the tax credit, or portion of the tax credit, is purchased by the particular unrelated purchaser under the laws of the jurisdiction granting the tax credit, and

    • (ii) the tax credit, or portion of the tax credit, is acquired by the particular unrelated purchaser at a price that equals or exceeds the marketable price floor. (crédit d’impôt transférable commercialisable)

  material competitive distortion

  material competitive distortion, in respect of consolidated financial statements, means an application of a specific principle or procedure, under the set of generally accepted accounting principles used in preparing the consolidated financial statements, that results in an aggregate variation greater than €75 million in a fiscal year as compared to the amounts that would have been determined by applying the corresponding IFRS principle or procedure.  (distorsion importante créant un avantage concurrentiel)

  minimum rate

  minimum rate means 15%. (taux minimum)

  Minister

  Minister means the Minister of National Revenue. (ministre)

  minority-owned constituent entity

  minority-owned constituent entity means a constituent entity of an MNE group if the ultimate parent entity of the MNE group holds, directly or indirectly, 30% or less of the ownership interests in the constituent entity. (entité constitutive à détention minoritaire)

  minority-owned parent entity

  minority-owned parent entity means a particular minority-owned constituent entity that holds, directly or indirectly, the controlling interest in another minority-owned constituent entity unless the controlling interest of the particular minority-owned constituent entity is held, directly or indirectly, by another minority-owned constituent entity. (entité mère à détention minoritaire)

  minority-owned subgroup

  minority-owned subgroup means 

  • (a) a minority-owned parent entity and its minority-owned subsidiaries; or

  • (b) a minority-owned constituent entity that is not a minority-owned parent entity or a minority-owned subsidiary. (sous-groupe à détention minoritaire)

  minority-owned subsidiary

  minority-owned subsidiary means a minority-owned constituent entity the controlling interest in which is held, directly or indirectly, by a minority-owned parent entity. (filiale à détention minoritaire)

  MNE group

  MNE group has the same meaning as in subsection 10(1). (groupe d’EMN)

  multi-parented MNE group

  multi-parented MNE group means two or more groups, if

  • (a) the ultimate parent entities of the groups are party to a stapled structure or dual-listed arrangement; and

  • (b) at least one entity or permanent establishment included in any of the groups — or at least one entity, or permanent establishment in respect of a main entity, that would be included in any of the groups if all the ownership interests in that entity or main entity held by group entities of the groups were held by a single group entity of one of the groups — is not located in the jurisdiction in which any other entity or permanent establishment included in any of the groups is located. (groupe d’EMN à entités mères multiples)

  mutual insurance company

  mutual insurance company means a regulated insurance company that does not have share capital and is owned exclusively by its policyholders. (compagnie d’assurance mutuelle)

  negative tax expense constituent entity

  negative tax expense constituent entity has the same meaning as in subsection 31(3). (entité constitutive avec charge d’impôt négative)

  net asset gain

  net asset gain, of a constituent entity for a fiscal year, in respect of an election under subsection 18(23), means the net gain from the disposition of local tangible assets by the constituent entity located in the jurisdiction for which the election was made, excluding the gain or loss on a transfer of assets to another group entity. (profit net sur cession d’actifs)

  net asset loss

  net asset loss, of a constituent entity for a fiscal year, in respect of an election under subsection 18(23), means the net loss from the disposition of local tangible assets by the constituent entity in the fiscal year (excluding the gain or loss on a transfer of assets to another group entity), less the total of all amounts, if any, allocated to the constituent entity under a previous election under that subsection. (perte nette sur cession d’actifs)

  net GloBE income

  net GloBE income has the same meaning as in subsection 29(2). (revenu GloBE net)

  net GloBE loss

  net GloBE loss, of an MNE group for a jurisdiction for a fiscal year, means the absolute value of the negative amount, if any, that would be determined, in the absence of section 8, by the formula

  A − B

  where

  A

  is the total of all amounts each of which is the GloBE income for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction; and

  B

  is the total of all amounts each of which is the GloBE loss for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction. (perte GloBE nette)

  net income or loss from international shipping

  net income or loss from international shipping has the same meaning as in subsection 19(2). (résultat net de transport maritime international)

  non-marketable transferable tax credit

  non-marketable transferable tax credit means all or a portion of a tax credit (other than a qualified refundable tax credit) that

  • (a) in respect of an originator, is not a marketable transferable tax credit but that is transferable in whole or in part; and

  • (b) in respect of a purchaser, is not a marketable transferable tax credit. (crédit d’impôt transférable non commercialisable)

  non-profit organization

  non-profit organization means an entity, if

  • (a) the entity is established and operated in the jurisdiction where it is located

    • (i) exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational or other similar purposes, or

    • (ii) as a professional organization, business league, chamber of commerce, labour organization, agricultural or horticultural organization, civic league or an organization operated exclusively for the promotion of social welfare;

  • (b) substantially all of the income of the entity from the activities referred to in paragraph (a) is exempt from income tax in the jurisdiction where the entity is located;

  • (c) the entity has no shareholders or members that have a proprietary or beneficial interest in its income or assets;

  • (d) the income or assets of the entity may not be distributed to, or applied for the benefit of, a private person or non-charitable entity other than

    • (i) pursuant to the conduct of the entity’s charitable activities,

    • (ii) as payment of reasonable compensation for services rendered or for the use of property or capital, or

    • (iii) as payment representing the fair market value of property that the entity has purchased;

  • (e) on termination, liquidation or dissolution of the entity, all of the entity’s assets must be distributed or revert to a non-profit organization or to the government (including any governmental entity) of the jurisdiction where it is located or any political subdivision thereof; and

  • (f) the entity does not carry on a trade or business that is not directly related to the purposes for which it was established. (organisation à but non lucratif)

  non-qualifying gain or loss

  non-qualifying gain or loss means the lesser of

  • (a) the portion of any gain or loss, arising in respect of a transfer of assets and liabilities in connection with a GloBE reorganization, that is subject to income or profits tax in the jurisdiction where the transferor is located; and

  • (b) the portion of the gain or loss that is reflected in the financial accounts. (profit ou perte non admissible)

  OECD

  OECD means the Organisation for Economic Co-operation and Development. (OCDE)

  OECD Model Tax Convention

  OECD Model Tax Convention means the Model Tax Convention on Income and on Capital: Condensed Version 2017, published by the OECD on December 18, 2017, as amended from time to time. (Modèle de Convention fiscale de l’OCDE)

  origination year

  origination year means the fiscal year in which the originator of a tax credit satisfies the eligibility criteria for the tax credit under the laws of the jurisdiction granting the tax credit. (année de création)

  originator

  originator means the person that engages in the activities that generate a tax credit. (initiateur)

  other comprehensive income

  other comprehensive income, in respect of a constituent entity, means items of income and expense that are recognized outside of the profit or loss account in the financial statements used in determining the entity’s GloBE income or loss. (autres éléments du résultat global)

  owner

  owner means an entity that directly or indirectly holds an ownership interest in another entity. (détenteur)

  ownership interest

  ownership interest means an interest that an entity or person holds in a particular entity

  • (a) in the case of a direct interest, that

    • (i) carries rights to the profits, capital or reserves of the particular entity or the particular entity’s permanent establishment, and

    • (ii) would, in the absence of any requirement to consolidate the assets, liabilities, income, expenses and cash flows of the particular entity in the consolidated financial statements, be accounted for as equity in those statements; or

  • (b) in the case of an indirect interest, through a chain of direct ownership interests. (titre de participation)

  partially-owned parent entity

  partially-owned parent entity means a constituent entity of an MNE group (other than an ultimate parent entity, permanent establishment, investment entity or insurance investment entity)

  • (a) that holds, directly or indirectly, an ownership interest in another constituent entity of the MNE group; and

  • (b) in which more than 20% of the ownership interests, determined having regard only to the ownership interests that carry rights to profits, are held, directly or indirectly, by persons or entities that are not constituent entities of the MNE group. (entité mère partiellement détenue)

  passive income

  passive income means income that is included in computing a constituent entity’s GloBE income or loss and that is

  • (a) a dividend or dividend equivalent;

  • (b) interest or an interest equivalent;

  • (c) rent;

  • (d) a royalty;

  • (e) an annuity; or

  • (f) a net gain from property of a type that produces income described in any of paragraphs (a) to (e). (revenu passif)

  patronage dividend

  patronage dividend means a distribution by a cooperative to its members. (ristourne)

  pension fund

  pension fund means

  • (a) an entity that is established and operated in a jurisdiction exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals, if

    • (i) the entity is regulated as such by that jurisdiction or one of its political subdivisions or local authorities, or

    • (ii) those benefits are secured or otherwise protected by national regulations and funded by a pool of assets held through a fiduciary arrangement or trust to secure the fulfilment of the corresponding pension obligations against a case of insolvency of the entity or the MNE group of which the entity is a member; or

  • (b) a pension services entity. (fonds de pension)

  pension services entity

  pension services entity means an entity that is established and operated exclusively or almost exclusively

  • (a) to invest funds for the benefit of entities described in paragraph (a) of the definition pension fund in this subsection; or

  • (b) to carry out activities that are ancillary to the regulated activities carried out by an entity described in that paragraph that is a member of the same group. (entité de services de fonds de pension)

  permanent establishment

  permanent establishment means a place of business, including a deemed place of business,

  • (a) that is situated in a jurisdiction and treated as a permanent establishment in accordance with an applicable tax treaty in force, provided that the jurisdiction taxes the income attributable to it in accordance with a provision similar to Article 7 of the OECD Model Tax Convention;

  • (b) if there is no applicable tax treaty in force, in respect of which a jurisdiction taxes the income attributable to that place of business under its domestic law on a net basis similar to the manner in which it taxes its own tax residents;

  • (c) if a jurisdiction has no corporate income tax system, that is situated in that jurisdiction and that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention, provided that the jurisdiction would have had the right to tax the income attributable to it in accordance with Article 7 of that model convention; or

  • (d) that is not already described in paragraphs (a) to (c) and through which operations are conducted outside the jurisdiction where the entity that would be the main entity, if the place of business were a permanent establishment, is located, provided that that jurisdiction exempts the income attributable to the operations conducted through the place of business. (établissement stable)

  person

  person includes a corporation, partnership or trust. (personne)

  portfolio holding

  portfolio holding, at any time in a fiscal year, means ownership interests in an entity that are held at that time by a constituent entity, either alone or together with other group entities, and that carry rights to less than 10% of the profits, capital, reserves or voting rights of that entity. (titres de portefeuille)

  prescribed

  prescribed means

  • (a) in the case of a form, the information to be given on a form or the manner of filing a form, authorized by the Minister;

  • (b) in the case of the manner of making or filing an election, authorized by the Minister; and

  • (c) in any other case, prescribed by regulation or determined in accordance with rules prescribed by regulation. (prescrit)

  QDMTT transition year

  QDMTT transition year, of an MNE group in respect of a jurisdiction, means the first fiscal year in which

  • (a) a constituent entity of, or joint venture entity in respect of, the MNE group that is located in the jurisdiction is subject to a qualified domestic minimum top-up tax; and

  • (b) subsection 33(1), 47(2) or 53(3), section 45 or an equivalent provision under the laws of the jurisdiction does not apply for the jurisdiction. (année de transition ICMNA)

  qualified ancillary international shipping income

  qualified ancillary international shipping income has the same meaning as in subsection 19(7). (revenu de transport maritime international accessoire admissible)

  qualified debt release amount

  qualified debt release amount, for a fiscal year, of a constituent entity that is a debtor, means an amount in respect of a debt release to the extent that

  • (a) the debt release is pursuant to a statutory insolvency or bankruptcy proceeding

    • (i) that is supervised by a court or other judicial body in the jurisdiction in which the debtor is located, or

    • (ii) under which an independent insolvency administrator is appointed;

  • (b) the following conditions are met:

    • (i) the debt release arises pursuant to an arrangement with one or more creditors that are not connected with the debtor (each referred to in this definition as a “third-party creditor”),

    • (ii) it is reasonable to consider that, in the absence of the release of debts owed to one or more third-party creditors under the arrangement, the debtor would be insolvent within 12 months of the date of the release, and

    • (iii) the debtor provides an independent expert opinion attesting that the condition in subparagraph (ii) is met; or

  • (c) if neither paragraph (a) nor (b) applies,

    • (i) the amount is in respect of a debt owed to a third-party creditor,

    • (ii) the debtor’s liabilities exceed the fair market value of its assets, determined immediately before the debt release, and

    • (iii) the amount does not exceed the least of

      • (A) if, as a result of the debt release, the debtor’s assets are greater than or equal to its liabilities, the debtor’s liabilities less the fair market value of its assets, determined immediately before the debt release,

      • (B) if any amount included, as a result of the debt release, in computing net income or loss is offset by a corresponding reduction in deferred tax assets, the reduction in the debtor’s deferred tax assets resulting from the debt release, and

      • (C) the amount included, as a result of the debt release, in computing net income or loss. (montant de la libération de la dette admissible)

  qualified domestic minimum top-up tax

  qualified domestic minimum top-up tax, for a fiscal year, means a law of a jurisdiction that has the status of a qualified domestic minimum top-up tax (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework and published on the OECD’s website. (impôt complémentaire minimum national admissible)

  qualified flow-through ownership interest

  qualified flow-through ownership interest has the same meaning as in subsection 28(1). (titre de participation intermédiaire admissible)

  qualified IIR

  qualified IIR, for a fiscal year, means an IIR that has qualified status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework and published on the OECD’s website. (RDIR admissible)

  qualified imputation tax

  qualified imputation tax means an amount of covered taxes, paid or accrued by a constituent entity, that is

  • (a) imposed under the laws of a jurisdiction (referred to in this definition as the “subject jurisdiction”); and

  • (b) refundable to, or creditable against the tax liability of, the beneficial owner of a dividend or similar distribution by the constituent entity (or by the main entity in respect of the constituent entity, if the constituent entity is a permanent establishment), if

    • (i) the amount is refundable or creditable under

      • (A) subsection 126(1) or (2) of the Income Tax Act, or

      • (B) a provision of the laws of another jurisdiction that is substantially similar to one of those subsections, or

    • (ii) the beneficial owner is

      • (A) subject to tax on a current basis, in respect of the dividend or similar distribution, under the laws of the subject jurisdiction at a nominal rate that is greater than or equal to the minimum rate,

      • (B) an individual who is

        • (I) resident for income tax purposes in the subject jurisdiction, and

        • (II) subject to tax, in respect of the dividend or similar distribution as ordinary income, under the laws of the subject jurisdiction,

      • (C) a governmental entity or international organization,

      • (D) an investment entity (other than a group entity in respect of the constituent entity) that is created and regulated in the subject jurisdiction,

      • (E) a non-profit organization or pension fund that is created and managed in the subject jurisdiction, or

      • (F) a life insurance company that is located in the subject jurisdiction to the extent that the dividend or similar distribution is

        • (I) received in connection with a business that is substantially similar to that of a pension fund, and

        • (II) subject to tax, under the laws of the subject jurisdiction, in a manner that is substantially similar to the manner in which a pension fund is, under the laws of the subject jurisdiction, subject to tax in respect of a dividend or similar distribution. (impôt d’imputation admissible)

  qualified refundable tax credit

  qualified refundable tax credit means a refundable tax credit (other than any amount of tax creditable or refundable pursuant to a qualified imputation tax or a disqualified refundable imputation tax) to the extent that it is designed to be payable or available as cash or cash equivalents within four years from when a constituent entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting the credit. (crédit d’impôt remboursable admissible)

  qualified UTPR

  qualified UTPR, for a fiscal year, means a UTPR that has qualified status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework and published on the OECD’s website. (RPII admissible)

  qualifying MNE group

  qualifying MNE group has the same meaning as in subsection 9(1). (groupe d’EMN admissible)

  qualifying non-profit subsidiary

  qualifying non-profit subsidiary, for a fiscal year, means an entity in respect of an MNE group if

  • (a) the entity is wholly owned by one or more entities that are non-profit organizations; and

  • (b) the revenue of the MNE group for the fiscal year, determined without reference to the revenues of any group entities that are non-profit organizations and of any group entities that would, in the absence of this definition, be described in paragraph 13(1)(b) or (c), is less than

    • (i) the revenue threshold of the MNE group for the fiscal year, and

    • (ii) 25% of the revenue of the MNE group for the fiscal year. (filiale à but non lucratif admissible)

  qualifying tier one capital

  qualifying tier one capital means an instrument issued by a constituent entity pursuant to regulatory requirements applicable to the banking or insurance sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features that are designed to aid loss absorbency in the event of a financial crisis. (fonds propres de catégorie 1 admissibles)

  real estate investment vehicle

  real estate investment vehicle means an entity

  • (a) the taxation of which achieves a single level of taxation either in its hands or the hands of its interest holders (with at most one year of deferral); and

  • (b) that

    • (i) holds predominantly immovable property, and

    • (ii) is itself widely held. (véhicule d’investissement immobilier)

  recapture account loss carry-forward

  recapture account loss carry-forward has the same meaning as in subsection 37(3). (report des pertes du compte de récupération)

  recapture exception accrual

  recapture exception accrual means a tax expense accrued in the financial accounts of a constituent entity that is attributable to changes in associated deferred tax liabilities in respect of

  • (a) cost recovery allowance on a tangible asset;

  • (b) the cost of a licence or similar arrangement from a government for the use of immovable property or the exploitation of natural resources that entails significant investment in tangible assets;

  • (c) research and development expenses;

  • (d) decommissioning and remediation expenses;

  • (e) fair value accounting on unrealized net gains;

  • (f) foreign currency exchange net gains;

  • (g) insurance reserves and insurance policy deferred acquisition costs;

  • (h) a gain that is

    • (i) from the sale of tangible property located in the jurisdiction in which the constituent entity is located, and

    • (ii) re-invested in tangible property located in the jurisdiction; and

  • (i) an additional amount accrued as a result of accounting principle changes with respect to an item described in any of paragraphs (a) to (h). (charge d’impôt non soumise à récupération)

  regulation

  regulation means a regulation made under this Act. (règlement)

  relevant parent entity

  relevant parent entity has the same meaning as in subsection 14(3). (entité mère pertinente)

  revenue threshold

  revenue threshold has the same meaning as in subsection 9(2). (seuil de chiffre d’affaires)

  reverse hybrid entity

  reverse hybrid entity means a flow-through entity, if

  • (a) in relation to an owner that holds a direct ownership interest in the flow-through entity, the flow-through entity is not fiscally transparent; or

  • (b) in relation to an owner that holds an indirect ownership interest in the flow-through entity,

    • (i) the flow-through entity is not fiscally transparent, and

    • (ii) each entity through which that owner holds its indirect ownership interest is fiscally transparent. (entité hybride inversée)

  revocation year

  revocation year, in respect of a five-year election or an election under section 26, means the first fiscal year for which the election is no longer in effect because it has been revoked. (année de révocation)

  short-term portfolio holding

  short-term portfolio holding, of a constituent entity that receives or accrues dividends or other distributions, at any time in a fiscal year, means a portfolio holding that has been economically held by the constituent entity for less than one year at the date of the distribution. (titre de portefeuille à court terme)

  standard constituent entity

  standard constituent entity has the same meaning as in subsection 11(3). (entité constitutive type)

  stapled structure

  stapled structure means an arrangement entered into by the ultimate parent entities of two or more groups under which

  • (a) not less than 50% of the ownership interests in each ultimate parent entity are (by reason of the form of ownership, restrictions on transfer or any other terms or conditions) combined with not less than 50% of the ownership interests in each other ultimate parent entity and cannot be transferred or traded other than in that combined form;

  • (b) if the combined ownership interests of the ultimate parent entities are listed on a securities market, they are quoted at a single price; and

  • (c) financial statements are prepared by one of the ultimate parent entities in which the assets, liabilities, income, expenses and cash flows of all the entities of all the groups are presented together as those of a single economic unit, and those financial statements

    • (i) would be consolidated financial statements if the entities of all the groups were included in a single group and the ultimate parent entity that prepared the financial statements was the ultimate parent entity of that group, and

    • (ii) are required by an applicable regulatory regime of a jurisdiction to be externally audited. (structure indissociable)

  stateless constituent entity

  stateless constituent entity means a constituent entity of an MNE group that is either

  • (a) a stateless entity under paragraph 5(2)(b); or

  • (b) a stateless permanent establishment under paragraph 5(3)(d). (entité constitutive apatride)

  substance-based income exclusion amount

  substance-based income exclusion amount has the same meaning as in subsection 32(1). (montant de l’exclusion de revenus fondée sur la substance)

  substitute loss carry-forward recapture amount

  substitute loss carry-forward recapture amount, of a constituent entity that is located in a particular jurisdiction, means an amount if

  • (a) the amount would be a tax loss or a portion of a tax loss (referred to in this definition as the “consumed domestic loss”) of the constituent entity if the consumed domestic loss were not offset against another amount — in respect of the income of another entity (referred to in this definition as the “controlled foreign company”) that is located in a jurisdiction other than the particular jurisdiction and in which the constituent entity holds, directly or indirectly, an ownership interest — that is included, under the controlled foreign company tax regime of the particular jurisdiction, in computing the constituent entity’s taxable income in the particular jurisdiction; and

  • (b) the income tax laws of the particular jurisdiction allow the consumed domestic loss to be recaptured by the constituent entity in subsequent taxation years, by recharacterizing amounts of income of the constituent entity from sources in the particular jurisdiction as amounts in respect of income of the controlled foreign company that are included, under the controlled foreign company tax regime of the particular jurisdiction, in computing the constituent entity’s taxable income in the particular jurisdiction or as amounts of income from another foreign source. (montant de récupération du report de pertes de remplacement)

  substitute loss carry-forward tax credit

  substitute loss carry-forward tax credit, of a constituent entity that is located in a particular jurisdiction, means a tax credit, or any portion of a tax credit, of the constituent entity that

  • (a) arises under the income tax laws of the particular jurisdiction in respect of tax paid to the government of a jurisdiction other than the particular jurisdiction by another entity (referred to in this definition as the “controlled foreign company”) that is located in a jurisdiction other than the particular jurisdiction, in which the constituent entity holds, directly or indirectly, an ownership interest, on income (referred to in this definition as the “attributed controlled foreign company income”) of the controlled foreign company that is included under the controlled foreign company tax regime of the particular jurisdiction for the purposes of determining the constituent entity’s taxable income in the particular jurisdiction;

  • (b) is not allowed to be used in the particular taxation year in which it arises solely because the income tax laws of the particular jurisdiction require, in determining the constituent entity’s taxable income, that an amount that would be a tax loss of the constituent entity in the absence of the attributed controlled foreign company income in the particular taxation year be offset against the attributed controlled foreign company income in priority to the tax credit, or portion of the tax credit, being used to reduce or eliminate any covered taxes for which the constituent entity would otherwise be liable in respect of the attributed controlled foreign company income under the income tax laws of the particular jurisdiction; and

  • (c) is, under the income tax laws of the particular jurisdiction, allowed to be used by the constituent entity, in a taxation year following the particular taxation year, to reduce or eliminate any covered taxes for which the constituent entity would otherwise be liable under the income tax laws of the particular jurisdiction in respect of income that is included in computing the constituent entity’s GloBE income or loss. (crédit d’impôt pour report de pertes de remplacement)

  tax

  tax means a compulsory unrequited payment to general government. (impôt)

  tax transparent entity

  tax transparent entity, in relation to an owner, means a flow-through entity to the extent that the flow-through entity is fiscally transparent under the laws of the jurisdiction in which the owner is located. (entité fiscalement transparente)

  tax transparent structure

  tax transparent structure means a chain of entities through which a particular entity holds an ownership interest, if the entities are

  • (a) flow-through entities; and

  • (b) fiscally transparent in relation to the particular entity. (structure fiscalement transparente)

  tax treaty

  tax treaty means an agreement for the avoidance of double taxation with respect to taxes on income and on capital. (convention fiscale)

  top-up amount

  top-up amount has the same meaning as in subsection 30(1). (montant complémentaire)

  top-up percentage

  top-up percentage has the same meaning as in subsection 30(3). (pourcentage complémentaire)

  total deferred tax adjustment amount

  total deferred tax adjustment amount has the same meaning as in subsection 25(1). (montant total de l’ajustement pour impôts différés)

  transitional special allocation year

  transitional special allocation year, of an MNE group, means any fiscal year beginning on or before December 31, 2025 and ending on or before June 30, 2027. (année de répartition spéciale transitoire)

  ultimate parent entity

  ultimate parent entity has the same meaning as in subsection 12(1). (entité mère ultime)

  unclaimed accrual

  unclaimed accrual, of a constituent entity of an MNE group for a fiscal year, means an increase in a deferred tax liability recorded in the financial accounts of the constituent entity for the fiscal year if

  • (a) the increase is not expected to reverse on or before the last day of the fifth fiscal year following the fiscal year; and

  • (b) the filing constituent entity of the MNE group elects to not include the increase in determining the constituent entity’s total deferred tax adjustment amount for the fiscal year. (accumulation non réclamée)

  unrelated purchaser

  unrelated purchaser, in respect of the transfer of a tax credit by a person, means another person that acquires the tax credit unless

  • (a) based on all the relevant facts and circumstances, one person has control of the other or both persons are under the control of the same person or persons;

  • (b) one of the persons owns directly or indirectly,

    • (i) if the other person is a corporation, shares of the capital stock of the corporation that

      • (A) give their holder at least 50% of the votes of the shareholders of the corporation, and

      • (B) have a fair market value of at least 50% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation, and

    • (ii) in any other case, at least 50% of the beneficial interest in the other person; or

  • (c) a third person owns, directly or indirectly, in respect of each of the other persons

    • (i) if one or both of those other persons are corporations, shares of the capital stock of each such corporation that

      • (A) give their holder at least 50% of the votes of the shareholders of the corporation, and

      • (B) have a fair market value of at least 50% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation, and

    • (ii) if one or both of those persons are not corporations, at least 50% of the beneficial interest in each such person. (acheteur non lié)

  UTPR

  UTPR means a law of a jurisdiction that may reasonably be considered to have been enacted with the intention of implementing, in whole or in part, Articles 2.4 to 2.6 of the GloBE Model Rules. (RPII)

• Marginal note:Interpretation — permanent establishment

  (2) In applying the provisions of this Act in respect of a constituent entity that is a permanent establishment of a main entity or that is the main entity,

  • (a) a reference to a “constituent entity” is to be interpreted as a reference to the permanent establishment or the main entity, as the context requires; and

  • (b) the main entity is deemed to hold a controlling interest in the permanent establishment.

• Marginal note:Interpretation — flow-through entity

  (3) In applying the provisions of this Act in respect of a constituent entity that is a flow-through entity or that is an owner in respect of the flow-through entity, a reference to a “constituent entity” is to be interpreted as a reference to the owner or the flow-through entity, as the context requires.

• Marginal note:Interpretation — financial accounts

  (4) A reference to financial accounts or to financial statements is to be interpreted as a reference to the accounts or statements (which may in some circumstances be hypothetical) that are the basis for determining the financial accounting income of a constituent entity.

• Marginal note:Interpretation — connected

  (5) A person or entity is “connected” with another person or entity if they are “closely related” within the meaning of that term in Article 5(8) of the OECD Model Tax Convention.

• Marginal note:Interpretation — trusts

  (6) A reference to a trust includes an estate, and a reference to a trustee includes any legal representative of a trust having ownership or control of the trust property of that trust.

• Marginal note:Interpretation — subject to qualified IIR, etc.

  (7) A constituent entity of, or joint venture entity in respect of, an MNE group (referred to in this subsection as the “subject entity”) is considered to be subject to

  • (a) a qualified IIR or qualified UTPR if a constituent entity of the MNE group (or person liable on behalf of a constituent entity) would, if the subject entity had a top-up amount (or equivalent) greater than nil, be subject to tax under the qualified IIR or the qualified UTPR, as the case may be, in respect of that top-up amount (or equivalent); and

  • (b) a qualified domestic minimum top-up tax (including, for greater certainty, the one implemented in Part 3) if a constituent entity of, or joint venture entity in respect of, the MNE group (or person liable on behalf of a constituent entity or joint venture entity) would, if the subject entity had a domestic top-up amount (or equivalent) greater than nil, be subject to tax under the qualified domestic minimum top-up tax in respect of that domestic top-up amount (or equivalent).

• Marginal note:Deemed flow-through entity and tax transparent entity

  (8) A constituent entity that is not subject to covered taxes as a result of being tax resident in any jurisdiction and is not subject to a qualified domestic minimum top-up tax is deemed to be a flow-through entity and a tax transparent entity, to the extent that

  • (a) it is fiscally transparent under the laws of the jurisdiction where its owners are located;

  • (b) it does not have a place of business in the jurisdiction where it was created; and

  • (c) its income, expenditure, profit or loss is not attributable to a permanent establishment.

• Marginal note:Interpretation — election

  (9) A reference to an election or a revocation of an election for a fiscal year, or to the filing constituent entity of an MNE group electing or revoking an election for a fiscal year, is to be interpreted as a reference to an election or a revocation made in the GIR of the MNE group for the fiscal year.

Marginal note:Interpretation

• 3 (1) This Part, Part 2 and relevant provisions of Part 5 implement the GloBE Model Rules, the GloBE Commentary and the administrative guidance in respect of the GloBE Model Rules approved by the Inclusive Framework and published by the OECD from time to time and, unless the context otherwise requires, these Parts and provisions are to be interpreted consistently with those sources, as amended from time to time.

• Marginal note:Designation of additional interpretive guidance

  (2) The Governor in Council may from time to time by regulation designate additional sources in respect of which the interpretation of this Act should be consistent.

Marginal note:Binding on His Majesty

4 This Act is binding on His Majesty in right of Canada or a province.

Marginal note:Location of entities

• 5 (1) Subject to subsection 6(1), an entity, other than a flow-through entity, is located

  • (a) in a jurisdiction if the entity is tax resident in that jurisdiction based on its place of management or creation, or based on similar criteria; and

  • (b) in any other case, in the jurisdiction where it was created.

• Marginal note:Location of flow-though entities

  (2) A flow-through entity

  • (a) is located in the jurisdiction where it was created, if

    • (i) the flow-through entity is the ultimate parent entity of an MNE group, or

    • (ii) the flow-through entity

      • (A) is an entity described in paragraph 14(3)(c), and

      • (B) has a direct or indirect ownership interest in at least one constituent entity of the MNE group that

        • (I) has a top-up amount, and

        • (II) is not located in the jurisdiction where the flow-through entity was created; and

  • (b) in any other case, is a stateless entity.

• Marginal note:Location of permanent establishments

  (3) In determining the jurisdiction where a permanent establishment is located,

  • (a) if the permanent establishment is described in paragraph (a) of the definition permanent establishment in subsection 2(1), it is located in the jurisdiction where it is treated as a permanent establishment and is taxed under the applicable tax treaty;

  • (b) if the permanent establishment is described in paragraph (b) of that definition, it is located in the jurisdiction where it is subject to net basis taxation based on its business presence;

  • (c) if the permanent establishment is described in paragraph (c) of that definition, it is located in the jurisdiction where it is situated; and

  • (d) if the permanent establishment is described in paragraph (d) of that definition, it is a stateless permanent establishment.

• Marginal note:Stateless entity — notional jurisdiction

  (4) A stateless entity or stateless permanent establishment is deemed to be located in a notional jurisdiction in which no other entity or permanent establishment is located.

• Marginal note:Change of location

  (5) If an entity’s location changes during a fiscal year, it is deemed to be located, for the fiscal year, in the jurisdiction where it was located at the beginning of that fiscal year.

Marginal note:Dual-located entity — tie-breaker rule

• 6 (1) If a constituent entity would, in the absence of this section, be located in more than one jurisdiction for a fiscal year under subsection 5(1), the following rules apply:

  • (a) if the jurisdictions are party to a tax treaty that is in force and the constituent entity is deemed to be resident in only one of the jurisdictions for purposes of the treaty, the entity is located in that jurisdiction for the fiscal year; and

  • (b) in any other case,

    • (i) if the constituent entity has, for the fiscal year, a greater amount of covered taxes (determined without reference to any taxes under a controlled foreign company tax regime) in one of the jurisdictions than in the other jurisdictions, the constituent entity is located in that jurisdiction for the fiscal year,

    • (ii) if subparagraph (i) does not apply and the constituent entity has a greater substance-based income exclusion amount for one of the jurisdictions than for the other jurisdictions, the constituent entity is located in that jurisdiction for the fiscal year, and

    • (iii) if subparagraphs (i) and (ii) do not apply, the constituent entity is, for the fiscal year,

      • (A) if it is an ultimate parent entity of an MNE group, located in the jurisdiction where it was created, and

      • (B) in any other case, a stateless entity.

• Marginal note:Substance-based income exclusion amount

  (2) For the purposes of subparagraph (1)(b)(ii), a constituent entity’s substance-based income exclusion amount for a jurisdiction for a fiscal year is

  • (a) if a substance-based income exclusion amount is calculated for the jurisdiction for the fiscal year, the amount that would be determined for that constituent entity under subsection 32(1) if the constituent entity were the only constituent entity that is located in that jurisdiction and if the reference to “standard constituent entity” in that subsection were read as a reference to “constituent entity”; and

  • (b) in any other case, nil.

• Marginal note:Dual-located entity — deeming rule

  (3) If a constituent entity that would, in the absence of subsection (1), be located in more than one jurisdiction (each referred to in this subsection as a “relevant jurisdiction”), is located in only one of those jurisdictions (referred to in this subsection as the “location jurisdiction”) because of subsection (1) and is not subject to tax under a qualified IIR in the location jurisdiction,

  • (a) where Canada is a relevant jurisdiction (but is not the location jurisdiction) and Canada is not restricted from taxing the constituent entity under Part 2 because of an applicable tax treaty, the entity is deemed to be located in Canada for the purposes of clause 14(1)(b)(i)(B) and subparagraph 14(3)(a)(i); and

  • (b) where Canada is not a relevant jurisdiction, and the constituent entity is subject to tax in a relevant jurisdiction under a qualified IIR because of a provision under the laws of that relevant jurisdiction that is equivalent in effect to paragraph (a), the entity is deemed to be located in that relevant jurisdiction for the purposes of subsection 14(3).

Application

Marginal note:Currency conversion — GloBE calculations

• 7 (1) Subject to subsection (2), if an amount that is relevant to the determination of the top-up amount, or of any amount or result relevant to the determination of the top-up amount, of a constituent entity of an MNE group for a fiscal year is denominated in a currency other than the reporting currency of the consolidated financial statements of the ultimate parent entity of the MNE group and is not converted to that reporting currency in the course of preparing the consolidated financial statements, that amount is to be converted to that reporting currency using the foreign currency translation principles of the financial accounting standard that would have been used to convert the amount to the reporting currency if that conversion were undertaken in the course of preparing the consolidated financial statements.

• Marginal note:Euro-denominated thresholds

  (2) For the purposes of determining if any materiality or other threshold in this Act that is denominated in the currency of the European Monetary Union is satisfied or exceeded by an amount in respect of a group, entity or jurisdiction for a particular fiscal year, if the amount is denominated in another currency, the amount is to be converted from that currency to the currency of the European Monetary Union using the average of the daily rates of exchange, in respect of the two currencies for the month of December included in the fiscal year immediately preceding the particular fiscal year, as quoted by

  • (a) the European Central Bank;

  • (b) the Bank of Canada, if the European Central Bank does not quote a daily rate of exchange in respect of the two currencies; or

  • (c) another source that is acceptable to the Minister, if neither the European Central Bank nor the Bank of Canada quote a daily rate of exchange in respect of the two currencies.

• Marginal note:If subsections (1) and (2) do not apply

  (3) Except as specifically otherwise provided, if an amount is relevant to a determination or computation that is required for the purposes of this Act in respect of an entity included in an MNE group or in respect of the MNE group for a fiscal year

  • (a) the currency in which that amount is to be denominated for use in the determination or computation is the reporting currency of the consolidated financial statements of the ultimate parent entity of the MNE group; and

  • (b) if that amount is not denominated in the reporting currency, it is to be converted, for use in the determination or computation, to the reporting currency using the average for the fiscal year of the daily rates of exchange quoted by the Bank of Canada or, if there is no daily rate quoted by the Bank of Canada for a particular day, a daily rate of exchange acceptable to the Minister, in respect of the two currencies.

Marginal note:Negative amounts

8 Except as specifically otherwise provided, if an amount or a number is required under this Act to be determined or calculated by or in accordance with an algebraic formula and the amount or number determined or calculated would, but for this section, be a negative amount or number, it is deemed to be nil.

Scope

Marginal note:Definition of qualifying MNE group

• 9 (1) A qualifying MNE group for a particular fiscal year means an MNE group that meets the following conditions:

  • (a) revenue reported in the consolidated financial statements of the ultimate parent entity of the MNE group is equal to or greater than the revenue threshold of the MNE group in at least two of the four fiscal years immediately preceding the particular fiscal year; and

  • (b) the MNE group is not composed exclusively of excluded entities for the particular fiscal year.

• Marginal note:Definition of revenue threshold

  (2) The revenue threshold of an MNE group for a fiscal year means the amount determined by the formula

  A × B ÷ 365

  where

  A

  is €750 million; and

  B

  is the number of days in the fiscal year.

• Marginal note:Revenue — pre-merger years

  (3) For the purposes of the definition qualifying MNE group in subsection (1) and subsection (4), if an MNE group is formed as a result of a merger in a particular fiscal year between a group, or an entity that is not included in a group immediately before the merger (referred to in this subsection as an “ungrouped entity”), and one or more other groups or ungrouped entities, then for any fiscal year preceding the particular fiscal year (referred to in this subsection as the “preceding year”)

  • (a) all amounts that are the revenue or a portion of the revenue reported in the consolidated financial statements of the ultimate parent entity of any of those groups or in the financial statements of any of those ungrouped entities, as the case may be, and that correspond to any period included in the preceding year (with the revenue apportioned between periods, if necessary, on a just and reasonable basis) are to be aggregated; and

  • (b) the aggregate amount determined under paragraph (a) is deemed to be the revenue reported in the consolidated financial statements of the ultimate parent entity of the MNE group for the preceding year.

• Marginal note:Qualifying MNE group — demerger

  (4) If there is a demerger of an MNE group that was a qualifying MNE group in the fiscal year immediately preceding the fiscal year in which the demerger occurs and any of the groups resulting from the demerger is an MNE group (referred to in this subsection as a “demerged MNE group”), the condition in paragraph (a) of the definition qualifying MNE group in subsection (1) is deemed to be satisfied in respect of the demerged MNE group for

  • (a) the first fiscal year of the demerged MNE group ending after the demerger occurs (referred to in this paragraph as the “first post-demerger year”), if the revenue reported in the consolidated financial statements of the ultimate parent entity of the demerged MNE group for the first post-demerger year is greater than or equal to the amount determined by the formula

    A × B ÷ 365

    where

    A

    is €750 million, and

    B

    is the number of days in the first post-demerger year; and

  • (b) any fiscal year (referred to in this paragraph as the “tested year”) among the three fiscal years of the demerged MNE group immediately following the first post-demerger year, if the revenue reported in the consolidated financial statements of the ultimate parent entity of the demerged MNE group for at least two out of the tested year and any other fiscal years of the demerged MNE group ending before the tested year and after the demerger (the tested year and each of those other years referred to in this paragraph as a “post-demerger year”) is greater than or equal to the amount determined by the formula

    A × C ÷ 365

    where

    C

    is the number of days in the post-demerger year.

• Marginal note:Merger — meaning

  (5) For the purposes of subsection (3), a merger is any arrangement under which

  • (a) all or substantially all of the entities of two or more groups are brought under common control such that those entities form a single group immediately following the conclusion of the arrangement; or

  • (b) one or more entities that are not included in any group are brought under common control with another entity, or one or more groups of entities, such that all those entities form a single group immediately following the conclusion of the arrangement.

• Marginal note:Demerger — meaning

  (6) For the purposes of subsection (4), a demerger is any arrangement under which the entities of a group are separated into two or more groups.

• Marginal note:Interpretation — fiscal year

  (7) For the purposes of paragraph (1)(a) and subsection (3), if an MNE group formed as a result of a merger does not have four actual fiscal years preceding the merger, the contiguous periods of equal length to the earliest of its actual fiscal years, the latest of which immediately precedes that earliest actual fiscal year, are deemed to be fiscal years of the MNE group.

Marginal note:Definition of MNE group

• 10 (1) An MNE group means a group that includes at least one entity or permanent establishment that is not located in the jurisdiction in which the ultimate parent entity of the group is located.

• Marginal note:Definition of group

  (2) A group means

  • (a) an ultimate parent entity and one or more other entities each of whose assets, liabilities, income, expenses and cash flows, by reason of ownership or control, either

    • (i) are included in the consolidated financial statements of the ultimate parent entity, or

    • (ii) would be included in the consolidated financial statements of the ultimate parent entity but for an exclusion on size or materiality grounds, or on the grounds that the entity is held for sale; or

  • (b) an entity that

    • (i) is not part of a group described in paragraph (a), and

    • (ii) has one or more permanent establishments that are not located in the jurisdiction in which the entity is located.

Marginal note:Definition of constituent entity

• 11 (1) A constituent entity, in respect of a group, means

  • (a) an entity, other than an excluded entity, that is included in the group; or

  • (b) a permanent establishment of a main entity that is described in paragraph (a).

• Marginal note:Permanent establishment — separate treatment

  (2) Except as expressly otherwise provided, a permanent establishment that is a constituent entity under paragraph (1)(b) is treated as a constituent entity separate from its main entity and any other permanent establishment of that main entity.

• Marginal note:Definition of standard constituent entity

  (3) A standard constituent entity, of an MNE group, means a constituent entity other than

  • (a) an investment entity;

  • (b) an insurance investment entity; or

  • (c) a minority-owned constituent entity.

Marginal note:Definition of ultimate parent entity

• 12 (1) An ultimate parent entity means

  • (a) an entity

    • (i) that has, directly or indirectly, a controlling interest in any other entity, and

    • (ii) in which no other entity has, directly or indirectly, a controlling interest; or

  • (b) the main entity of a group that is described in paragraph 10(2)(b).

• Marginal note:Exclusion — sovereign wealth funds

  (2) For the purposes of subsection (1), any governmental entity that satisfies the condition in subparagraph (b)(ii) of the definition governmental entity in subsection 2(1) is deemed not to have, directly or indirectly, a controlling interest in any other entity.

Marginal note:Definition of excluded entity

• 13 (1) An excluded entity, for a fiscal year, means

  • (a) an entity (referred to in this subsection as a “primary excluded entity”) that is throughout the fiscal year

    • (i) a governmental entity,

    • (ii) an international organization,

    • (iii) a non-profit organization,

    • (iv) a pension fund,

    • (v) an investment fund that is an ultimate parent entity,

    • (vi) a real estate investment vehicle that is an ultimate parent entity, or

    • (vii) a qualifying non-profit subsidiary;

  • (b) an entity if

    • (i) throughout the fiscal year ownership interests in the entity having a fair market value equal to at least 95% of the fair market value of all ownership interests in the entity are held directly, or indirectly through one or more excluded entities, by one or more primary excluded entities (other than a pension fund that is a pension services entity), and

    • (ii) all or substantially all the activities of the entity during the fiscal year consist of

      • (A) holding assets for the benefit of the one or more primary excluded entities,

      • (B) investing funds for the benefit of the one or more primary excluded entities,

      • (C) activities that are ancillary to those carried out by the one or more primary excluded entities, or

      • (D) any combination of clauses (A) to (C); or

  • (c) an entity if

    • (i) throughout the fiscal year ownership interests in the entity having a fair market value equal to at least 85% of the fair market value of all ownership interests in the entity are held directly, or indirectly through one or more excluded entities, by one or more primary excluded entities (other than a pension fund that is a pension services entity), and

    • (ii) all or substantially all of the entity’s financial accounting income for the fiscal year consists of excluded dividends or excluded equity gains or losses.

• Marginal note:Excluded entity — constituent entity election

  (2) For the purposes of subsection (1), if the relevant filing constituent entity elects in respect of a particular entity that would, in the absence of this subsection, be an excluded entity under paragraph (1)(b) or (c) for a fiscal year

  • (a) the particular entity is deemed not to be an excluded entity for the fiscal year; and

  • (b) the election is a five-year election.

PART 2Global Minimum Tax

DIVISION 1Liability for Tax

Marginal note:Top-up tax liability

• 14 (1) A person must pay a tax in respect of an MNE group for a fiscal year in the amount determined under subsection 15(1) if

  • (a) the MNE group is a qualifying MNE group for the fiscal year;

  • (b) one of the following conditions is met:

    • (i) the person is

      • (A) a relevant parent entity of the MNE group for the fiscal year, and

      • (B) located in Canada,

    • (ii) the person would, under the relevant assumptions, include in its income for the purposes of Part I of the Income Tax Act income for the fiscal year of a relevant parent entity that is

      • (A) located in Canada, and

      • (B) not a person; and

  • (c) the relevant parent entity referred to in subparagraph (b)(i) or (ii) has a direct or indirect ownership interest at any time in the fiscal year in one or more constituent entities of the MNE group that

    • (i) is not located in Canada, and

    • (ii) has a top-up amount for the fiscal year.

• Marginal note:Relevant assumptions

  (2) For the purposes of subparagraph (1)(b)(ii), the relevant assumptions are that

  • (a) the relevant parent entity referred to in that subparagraph has income for the fiscal year that would be included in computing its income for the purposes of Part I of the Income Tax Act if it were a person resident in Canada; and

  • (b) the person referred to in that subparagraph is resident in Canada for the purposes of the Income Tax Act.

• Marginal note:Definition of relevant parent entity

  (3) A relevant parent entity, of an MNE group for a fiscal year, means an entity that meets the following conditions:

  • (a) the entity is located in

    • (i) Canada, or

    • (ii) another jurisdiction where it is subject to tax under a qualified IIR (referred to in this subsection as a “Pillar Two jurisdiction”);

  • (b) the entity is neither

    • (i) an excluded entity for the purposes of this Act, nor

    • (ii) excluded from the application of the qualified IIR of the jurisdiction where it is located because of a provision in the law of that jurisdiction equivalent to subsection 13(1); and

  • (c) the entity is any of the following:

    • (i) the ultimate parent entity of the MNE group for the year,

    • (ii) a particular intermediate parent entity of the MNE group for the year, if

      • (A) the ultimate parent entity of the MNE group is not located in Canada or a Pillar Two jurisdiction, and

      • (B) no other intermediate parent entity of the MNE group that is located in Canada or a Pillar Two jurisdiction has, directly or indirectly, a controlling interest in the particular intermediate parent entity,

    • (iii) a partially-owned parent entity of the MNE group for the year that is not wholly owned, directly or indirectly, by another partially-owned parent entity of the MNE group that is located in Canada or a Pillar Two jurisdiction.

Marginal note:Top-up tax payable

• 15 (1) The amount of the tax a person must pay in respect of an MNE group for a fiscal year is equal to the total of all amounts, each of which is an amount determined by the formula

  A − B

  where

  A

  is the allocable share, of the top-up amount of a constituent entity of the MNE group that is not located in Canada for the fiscal year, of

  • (a) the person, if subparagraph 14(1)(b)(i) applies, or

  • (b) the relevant parent entity referred to in subparagraph 14(1)(b)(ii), if that subparagraph applies; and

  B

  is the total of all amounts each of which is a portion of the top-up amount of the constituent entity for the fiscal year that is included in both

  • (a) the amount determined for A for the fiscal year, and

  • (b) the allocable share, of the top-up amount of the constituent entity for the fiscal year, of a relevant parent entity of the MNE group through which the person referred to in paragraph (a), or the relevant parent entity referred to in paragraph (b), of the description of A indirectly holds an ownership interest in the constituent entity.

• Marginal note:Definition of allocable share

  (2) The allocable share, of the top-up amount of a constituent entity of an MNE group for a fiscal year, of a relevant parent entity, means the amount determined by the formula

  A × B

  where

  A

  is the top-up amount of the constituent entity for the fiscal year; and

  B

  is the relevant parent entity’s inclusion ratio for the constituent entity for the fiscal year.

• Marginal note:Definition of inclusion ratio

  (3) The inclusion ratio, of a relevant parent entity for a constituent entity of an MNE group for a fiscal year, means the ratio determined by the formula

  (A − B) ÷ A

  where

  A

  is the GloBE income of the constituent entity for the fiscal year; and

  B

  is the GloBE income of the constituent entity for the fiscal year that would be attributable to ownership interests other than ownership interests held directly or indirectly by the relevant parent entity, under the principles of the financial accounting standard applicable in preparing the consolidated financial statements of the ultimate parent entity of the MNE group for the fiscal year, if the net income of the constituent entity were equal to its GloBE income and on the assumption that

  • (a) the relevant parent entity had prepared consolidated financial statements (referred to in this subsection as “hypothetical consolidated financial statements”) in accordance with that financial accounting standard,

  • (b) the relevant parent entity had a controlling interest in the constituent entity such that all of the income and expenses of the constituent entity were consolidated on a line-by-line basis with those of the relevant parent entity in the hypothetical consolidated financial statements,

  • (c) none of the GloBE income of the constituent entity were attributable to transactions with group entities of the MNE group, and

  • (d) no ownership interests, other than those held directly or indirectly by the relevant parent entity, were held by any group entity of the MNE group.

• Marginal note:Flow-through and investment entities

  (4) For the purposes of subsection (3), if a constituent entity of an MNE group is a flow-through entity, an investment entity or an insurance investment entity, none of the GloBE income of the constituent entity is to be regarded as attributable to ownership interests held by any entity that is not included in the MNE group.

• Marginal note:Inclusion ratio — deemed GloBE income

  (5) For the purposes of subsection (3), if the net GloBE income of the MNE group for a jurisdiction for a fiscal year is nil, the GloBE income of a constituent entity of the MNE group that is located in the jurisdiction for the fiscal year is deemed to be the amount determined by the formula

  A + B

  where

  A

  is the amount determined by the formula

  C ÷ D

  where

  C

  is the allocated adjustment top-up amount of the constituent entity for the fiscal year, and

  D

  is the minimum rate; and

  B

  is the amount determined by the formula

  E ÷ D

  where

  E

  is the excess negative tax expense top-up amount of the constituent entity for the fiscal year.

DIVISION 2Computation of GloBE Income or Loss

GloBE Income or Loss

Marginal note:Definition of GloBE income or loss

16 GloBE income or loss, of a constituent entity for a fiscal year, means the constituent entity’s financial accounting income for the year, adjusted according to the rules in this Division and Divisions 5 and 7.

SUBDIVISION ADetermination of Financial Accounting Income

Marginal note:Definition of financial accounting income

• 17 (1) Financial accounting income, for a constituent entity for a fiscal year, means, subject to subsections (2) to (6),

  • (a) for a constituent entity other than a permanent establishment, the net income or loss determined for that constituent entity

    • (i) in the preparation of the consolidated financial statements of the ultimate parent entity of the MNE group that includes the constituent entity, or

    • (ii) under another acceptable financial accounting standard or authorized financial accounting standard, if

      • (A) it is not reasonably practicable to determine the financial accounting income for the constituent entity based on the accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity,

      • (B) the financial accounts of the constituent entity are maintained based on the other acceptable financial accounting standard or authorized financial accounting standard,

      • (C) the information in those financial accounts is reliable, such that an auditor applying the generally accepted auditing standards of the jurisdiction in which the ultimate parent entity or constituent entity is located (or, in the case of a flow-through entity, the jurisdiction in which the entity was created) would reasonably conclude that the constituent entity has in place processes and controls that are likely to ensure that the information in the financial accounts is fair and accurate, and

      • (D) that amount is adjusted to eliminate any permanent difference greater than €1 million that arises for the fiscal year because the other financial accounting standard is used instead of the financial accounting standard of the ultimate parent entity; and

  • (b) for a constituent entity that is a permanent establishment,

    • (i) if the permanent establishment is described in any of paragraphs (a) to (c) of the definition permanent establishment in subsection 2(1), the amount that

      • (A) is the net income or loss reflected in the separate financial accounts of the permanent establishment, if those financial accounts are prepared in accordance with an acceptable financial accounting standard or in accordance with an authorized financial accounting standard and subject to adjustments to prevent any material competitive distortions, or

      • (B) if the permanent establishment does not have separate financial accounts described in clause (A), would be the net income or loss of that permanent establishment reflected in separate financial accounts prepared on a stand-alone basis in accordance with the accounting standard used in the preparation of the ultimate parent entity’s consolidated financial statements, and

    • (ii) if the constituent entity is a permanent establishment described in paragraph (d) of the definition permanent establishment in subsection 2(1), the net income or loss determined on the assumption that

      • (A) the only income of the permanent establishment is its income that is exempted from tax in the jurisdiction where the main entity in respect of the permanent establishment is located and that is attributable to activities carried on outside the jurisdiction in which the main entity is located, and

      • (B) the only expenses of the permanent establishment are its expenses that are attributable to the activities described in clause (A) and are not deducted for tax purposes in the jurisdiction in which the main entity is located.

• Marginal note:Permanent establishments — adjustment

  (2) The amount that would, in the absence of this subsection, be a permanent establishment’s financial accounting income is adjusted to reflect only the amounts of income and expense that are — or, if paragraph (c) applies, would be — attributable to the permanent establishment (regardless of whether such amount is subject to tax or deductible, as the case may be, in the jurisdiction in which the permanent establishment is located) in accordance with

  • (a) if paragraph (a) of the definition permanent establishment in subsection 2(1) applies, the tax treaty applicable to the permanent establishment;

  • (b) if paragraph (b) of that definition applies, the law of the jurisdiction in which the permanent establishment is located; or

  • (c) if paragraph (c) of that definition applies, Article 7 of the OECD Model Tax Convention.

• Marginal note:Permanent establishments — general rule

  (3) Except as provided by subsection 18(26), the net income or loss of a permanent establishment (other than any portion of that amount that is excluded from the financial accounting income of the permanent establishment because of subsection (2)) is not to be taken into account in determining the GloBE income or loss of the main entity in respect of the permanent establishment.

• Marginal note:No consolidation adjustments

  (4) The financial accounting income of a constituent entity is to include income, expenses, gains and losses (other than amounts excluded from GloBE income or loss because of subsection (5)) arising from transactions between the constituent entity and any other group entity, other than any transactions to which an election under subsection 18(24) applies.

• Marginal note:Profit and loss statement — general rule

  (5) Unless otherwise required under this Act, no amount is included in computing the GloBE income or loss of a constituent entity if it is recognized outside of the profit and loss statement of the constituent entity’s financial statements.

• Marginal note:Financial accounting income — flow-through entity

  (6) If a constituent entity is a particular flow-through entity, the following rules apply in determining the financial accounting income for a fiscal year of the particular flow-through entity and any other group entities in respect of the net income or loss of the particular flow-through entity:

  • (a) amounts in respect of the particular flow-through entity’s net income or loss that are attributable to ownership interests of persons or entities that are not group entities and that hold their ownership interests in the particular flow-through entity directly, or through a tax transparent structure, are not to be included in computing the financial accounting income of any group entity, unless

    • (i) the particular flow-through entity is an ultimate parent entity, or

    • (ii) the particular flow-through entity is owned, directly or through a tax transparent structure, by an ultimate parent entity that is also a flow-through entity, in which case this paragraph does not apply to amounts in respect of the particular flow-through entity’s net income or loss to the extent those amounts are attributable to persons or entities that hold their ownership interests in the particular flow-through entity through that ultimate parent entity;

  • (b) if a particular group entity has an ownership interest in the particular flow-through entity, an amount that, in the absence of this paragraph — and, for greater certainty, after excluding amounts to which paragraph (a) applies and amounts allocated to a permanent establishment in accordance with paragraph (1)(b) — would be included in the financial accounting income of the particular flow-through entity is excluded from its financial accounting income and included in the financial accounting income of the particular group entity in accordance with the particular group entity’s ownership interest (determined having regard only to ownership interests held by group entities) in the particular flow-through entity, to the extent that

    • (i) the particular flow-through entity is not an ultimate parent entity,

    • (ii) the particular flow-through entity is fiscally transparent in relation to the particular group entity,

    • (iii) the particular group entity is not a flow-through entity, other than a reverse hybrid entity or an ultimate parent entity, and

    • (iv) the particular group entity holds its ownership interest in the particular flow-through entity

      • (A) directly, or

      • (B) indirectly, through one or more entities (each referred to in this clause as an “intermediate owner”), if

        • (I) each intermediate owner is fiscally transparent in relation to the particular group entity,

        • (II) where the particular group entity is not a flow-through entity or is a flow-through entity that is an ultimate parent entity, there is no intermediate owner that both

          1 is not a flow-through entity, and

          2 would meet the conditions in this subparagraph and subparagraph (ii) if the references in those subparagraphs to the “particular group entity” were read as references to that intermediate owner, and

        • (III) where the particular group entity is a reverse hybrid entity, there is no intermediate owner that would meet the conditions in this subparagraph and subparagraphs (ii) and (iii) if the references in those subparagraphs to the “particular group entity” were read as references to that intermediate owner;

  • (c) despite paragraph (b), if an amount of the net income or loss of the particular flow-through entity would, in the absence of this paragraph, be included under paragraph (b) in the financial accounting income of a particular group entity (referred to in this paragraph as the “lower-tier entity”) that is a reverse hybrid entity, and would also be included in the financial accounting income of another group entity (referred to in this paragraph as the “upper-tier entity”), that is not a flow-through entity or that is a flow-through entity that is an ultimate parent entity, in relation to an ownership interest the upper-tier entity holds in the particular flow-through entity through the lower-tier entity, the amount is

    • (i) included in the financial accounting income of the upper-tier entity, and

    • (ii) not included in the financial accounting income of the lower-tier entity; and

  • (d) any amount of the net income or loss of the particular flow-through entity that is not excluded in computing its financial accounting income because of paragraph (a) or (b), or subsection (3), is included in the financial accounting income of the particular flow-through entity.

• Marginal note:Flow-through entity — ownership interests

  (7) For the purpose of determining an entity’s financial accounting income under subsection (6), a reference to an ownership interest refers only to an ownership interest that carries rights to profit.

SUBDIVISION BAdjustments in Computing GloBE Income or Loss

Marginal note:Net tax expense

• 18 (1) An amount is included or excluded, as the case may be, in computing GloBE income or loss of a constituent entity for a fiscal year in order to reverse any debits or credits in the constituent entity’s financial accounting income in respect of

  • (a) covered taxes (including, for greater certainty, any covered tax in respect of income that is excluded from the computation of GloBE income or loss);

  • (b) to the extent it is not included in paragraph (a), any deferred tax asset attributable to a loss for the fiscal year;

  • (c) any tax under an IIR or UTPR;

  • (d) any tax under a qualified domestic minimum top-up tax;

  • (e) any tax paid or accrued by an insurance company in respect of returns to policyholders; or

  • (f) any disqualified refundable imputation tax.

• Marginal note:Purchase price accounting adjustments

  (2) GloBE income or loss, of a constituent entity for a fiscal year, excludes amounts in respect of any purchase price accounting adjustment reflected in the consolidated financial statements of the ultimate parent entity or the constituent entity’s financial accounts, arising as a result of an entity becoming a group entity because of the acquisition of ownership interests in that entity by an existing group entity, unless

  • (a) the acquisition occurs before December 1, 2021; and

  • (b) it is not reasonably practicable to determine the constituent entity’s financial accounting income in the absence of the adjustment.

• Marginal note:Excluded dividends

  (3) In computing the GloBE income or loss, of a constituent entity for a fiscal year, the following rules apply in respect of excluded dividends:

  • (a) the constituent entity’s GloBE income or loss for the fiscal year excludes any excluded dividends received or accrued by the constituent entity in the fiscal year; and

  • (b) if the filing constituent entity elects in respect of the constituent entity for a fiscal year,

    • (i) for the purposes of this subsection and the definition excluded dividends in subsection 2(1), all portfolio holdings of the constituent entity are deemed to be short-term portfolio holdings, and

    • (ii) the election is a five-year election.

• Marginal note:Excluded equity gains and losses

  (4) In computing the GloBE income or loss of a constituent entity for a fiscal year, the constituent entity’s GloBE income or loss excludes any excluded equity gain or loss of the constituent entity for the fiscal year.

• Marginal note:Insurance reserves

  (5) If a constituent entity is an insurance company, any expense in respect of the movement of insurance reserves of the entity is excluded in computing that entity’s GloBE income or loss for the fiscal year to the extent that the movement is economically matched by

  • (a) excluded dividends, net of any investment management fees, from a security held on behalf of a policyholder; or

  • (b) excluded equity gains or losses from a security held on behalf of a policyholder.

• Marginal note:Hedging currency risk — election

  (6) If the filing constituent entity elects, in respect of a particular constituent entity for a fiscal year, the following rules apply:

  • (a) any amount, in respect of a foreign exchange gain or loss, that is included in the particular constituent entity’s financial accounting income for a fiscal year is deemed to be an excluded equity gain or loss of the particular constituent entity for the year, to the extent that

    • (i) the gain or loss is

      • (A) in respect of a hedging instrument that hedges currency risk in respect of ownership interests (other than portfolio holdings) held by the particular constituent entity or another group entity, and

      • (B) recognized in other comprehensive income in the consolidated financial statements,

    • (ii) the hedging instrument is an effective hedge under the authorized financial accounting standard used in the preparation of the consolidated financial statements, and

    • (iii) the economic and accounting effect of the hedging instrument

      • (A) has not been transferred to another entity, if the particular constituent entity holds the hedging instrument, or

      • (B) has been transferred to the particular constituent entity, if the particular constituent entity does not hold the hedging instrument; and

  • (b) the election is a five-year election.

• Marginal note:Equity gain or loss inclusion — election

  (7) If the filing constituent entity elects, in respect of the group entities of the MNE group that are located in a jurisdiction, to include excluded equity gains or losses in computing GloBE income or loss for a fiscal year, the following rules apply:

  • (a) despite subsection (4), the GloBE income or loss of a group entity that is located in the jurisdiction includes an excluded equity gain or loss of the entity for the fiscal year to the extent that

    • (i) all of the following conditions are met:

      • (A) the gain or loss is subject to covered taxes (as a taxable gain or allowable loss) in the jurisdiction,

      • (B) the tax consequences of the taxable gain or allowable loss are reflected in the income tax expense in the group entity’s financial accounts,

      • (C) in the case of a gain from a disposition of an ownership interest, the gain is not excluded, reduced, offset or otherwise effectively sheltered from tax under local law by reason of any exemption, exclusion, deduction, credit or other form of relief specific to the type of gain,

    • (ii) in the case of a gain or loss described in paragraph (a) of the definition excluded equity gain or loss in subsection 2(1) that is not subject to covered taxes in the jurisdiction,

      • (A) gains or losses on the disposition of the ownership interest are subject to covered taxes in the jurisdiction, and

      • (B) the income tax expense in the group entity’s financial accounts includes deferred tax expense in respect of the changes in fair value or impairments, and

    • (iii) the gain or loss is in respect of an ownership interest that is not a qualified flow-through ownership interest (as defined in subsection 28(1));

  • (b) the election is a five-year election; and

  • (c) if the election is revoked, the revocation is not effective in respect of a particular ownership interest where a loss in respect of that particular ownership interest is included in computing a group entity’s GloBE income or loss because of this subsection.

• Marginal note:Included revaluation method gain or loss

  (8) GloBE income or loss, of a constituent entity for a fiscal year, includes any included revaluation method gain or loss of the constituent entity for the fiscal year.

• Marginal note:Asymmetric foreign currency gains and losses

  (9) If a constituent entity’s accounting functional currency is different from its tax functional currency, the constituent entity’s GloBE income or loss for a fiscal year

  • (a) includes a particular amount of gain or loss to the extent that

    • (i) the particular amount is

      • (A) attributable to fluctuations in the exchange rate between the accounting functional currency and tax functional currency,

      • (B) included in the computation of the constituent entity’s income for tax purposes, and

      • (C) not included in the constituent entity’s financial accounting income, or

    • (ii) the particular amount is

      • (A) attributable to fluctuations in the exchange rate between the tax functional currency and another currency that is not the accounting functional currency, and

      • (B) not included in the constituent entity’s financial accounting income (whether or not the particular amount is included in the constituent entity’s income for tax purposes); and

  • (b) excludes a particular amount of gain or loss to the extent that

    • (i) the particular amount is

      • (A) attributable to fluctuations in the exchange rate between the accounting functional currency and tax functional currency,

      • (B) included in the constituent entity’s financial accounting income, and

      • (C) not included in the computation of the constituent entity’s income for tax purposes, or

    • (ii) the particular amount is

      • (A) attributable to fluctuations in the exchange rate between the accounting functional currency and another currency that is not the tax functional currency,

      • (B) included in the constituent entity’s financial accounting income, and

      • (C) not included in the computation of the constituent entity’s income for tax purposes.

• Marginal note:Policy disallowed expenses

  (10) GloBE income or loss, of a constituent entity for a fiscal year, excludes

  • (a) expenses recorded by the constituent entity for illegal payments, including bribes and kickbacks;

  • (b) an expense recorded by the constituent entity for a fine or penalty equal to or greater than €50,000; and

  • (c) expenses recorded by the constituent entity for fines or penalties, the total of which amounts is equal to or greater than €50,000, if the fines or penalties are in respect of the same conduct, or for continuing conduct.

• Marginal note:Prior period errors and changes in accounting principles

  (11) If there has been a change in the opening equity of a constituent entity at the start of a fiscal year, the constituent entity’s GloBE income or loss for the fiscal year includes the amount of that change if the change is attributable to

  • (a) a correction of an error in the accounts for a previous fiscal year that affected the income or expenses included in the computation of GloBE income or loss for that year, except to the extent the correction of that error resulted in a material decrease in a liability for covered taxes subject to paragraph 27(1)(b); or

  • (b) a change in accounting principle or policy that affects income or expenses included in the computation of GloBE income or loss.

• Marginal note:Pension expense

  (12) GloBE income or loss, of a constituent entity for a fiscal year, includes the positive or negative amount determined by the formula

  (A + B) × (−1)

  where

  A

  is

  • (a) the amount, expressed as a negative number, that is recorded in the constituent entity’s financial accounting income for the fiscal year as pension liability expense in respect of a pension fund, or

  • (b) the amount that is recorded in the constituent entity’s financial accounting income for the fiscal year as income in respect of a pension fund; and

  B

  is the amount of pension contributions made by the constituent entity to the pension fund in the fiscal year.

• Marginal note:Arm’s length requirement — certain transactions

  (13) GloBE income or loss of a particular constituent entity of an MNE group for a fiscal year is to be adjusted to ensure that a transaction is reflected in accordance with the arm’s length principle if

  • (a) the particular constituent entity is party to the transaction with another constituent entity of the MNE group that is located in the same jurisdiction;

  • (b) either

    • (i) the recorded value of the transaction is not the same in each of the constituent entities’ financial accounts, or

    • (ii) the transaction is not recorded, in the particular constituent entity’s financial accounts, in accordance with the arm’s length principle; and

  • (c) where subparagraph (b)(ii) applies, any of the following conditions is met:

    • (i) only one of the constituent entities is a minority-owned constituent entity,

    • (ii) only one of the constituent entities is an investment entity or insurance investment entity,

    • (iii) the transaction is a sale or other transfer of an asset that results in a loss that is included in computing the GloBE income or loss of one of the constituent entities for the fiscal year.

• Marginal note:Arm’s length requirement — accounting and tax

  (14) If a transaction between two or more constituent entities of an MNE group (referred to in this subsection as the “counterparties”) that are not located in the same jurisdiction is not recorded in the same amount, not recorded in accordance with the arm’s length principle or not recorded at all in the financial accounts of the counterparties for a fiscal year

  • (a) the GloBE income or loss of each of the counterparties is to be adjusted to reflect the amount determined in respect of the transaction in computing the counterparties’ incomes for tax purposes, if

    • (i) as a result of transfer pricing adjustments, a difference between the treatment of an amount for tax purposes and for accounting purposes that is not eliminated over time and does not give rise to deferred tax (referred to in this subsection as a “permanent difference”) arises for each counterparty in respect of the transaction, and

    • (ii) the permanent difference for each counterparty corresponds to the permanent difference for the other counterparty; or

  • (b) the GloBE income or loss of each of the counterparties is to be adjusted to reflect the amount determined, as a result of a transfer pricing adjustment, in respect of the transaction in computing the income for tax purposes of one of the counterparties (referred to in this paragraph as the “high-tax entity”), if

    • (i) as a result of the transfer pricing adjustment, a permanent difference arises for the high-tax entity in respect of the transaction but does not arise for the other counterparty, and

    • (ii) the following conditions are met:

      • (A) the nominal tax rate that applies to the high-tax entity equals or exceeds the minimum rate, and

      • (B) the effective tax rate of the MNE group for the jurisdiction equals or exceeds the minimum rate in at least one of the two fiscal years immediately preceding the fiscal year.

• Marginal note:Qualified refundable tax credits

  (15) In computing the GloBE income or loss of a constituent entity for a fiscal year, a qualified refundable tax credit is treated as income as follows:

  • (a) if the tax credit is related to the acquisition or construction of assets and the originator has an accounting policy of reducing the carrying value of its assets in respect of such tax credits or recognizing the tax credit as deferred income, the originator must follow the accounting policy; and

  • (b) in any other case, the face value of the tax credit is treated as income in the fiscal year in which the entitlement under the tax credit accrues.

• Marginal note:Marketable transferable tax credits

  (16) In computing the GloBE income or loss of a constituent entity for a fiscal year,

  • (a) if the constituent entity is an originator of a marketable transferable tax credit, the face value of the tax credit is treated as income in the origination year, subject to the following rules:

    • (i) if the tax credit is transferred within 15 months of the end of the origination year, the purchase price (and not the face value) of the tax credit is treated as income in the origination year,

    • (ii) if the tax credit is related to the acquisition or construction of assets and the originator has an accounting policy of reducing the carrying value of its assets in respect of such tax credits, or recognizing the tax credit as deferred income, the originator must follow this same accounting policy,

    • (iii) if the tax credit is transferred more than 15 months after the end of the origination year,

      • (A) if the tax credit is described in subparagraph (ii), the amount by which the face value of the tax credit that was included in GloBE income or loss under that subparagraph exceeds the purchase price of the tax credit is treated as a loss on a pro rata basis over the remaining productive life of the asset, and

      • (B) in any other case, the amount by which the face value of the tax credit that was included in GloBE income or loss in the origination year exceeds the purchase price of the tax credit is treated as a loss in the fiscal year of the transfer, and

    • (iv) if all or a portion of the tax credit expires without use, the face value attributable to the expired portion of the tax credit is treated as a loss or increase to the carrying value of the asset, as the case may be, in the fiscal year of the expiration; and

  • (b) if the constituent entity is an unrelated purchaser of a marketable transferable tax credit, the following rules apply:

    • (i) if all or a portion of the tax credit is used by the unrelated purchaser to satisfy its liability for a covered tax, the amount by which the face value of the tax credit exceeds the purchase price is treated as income in the fiscal year in which, and in the proportion to which, the amount of the tax credit is used by the unrelated purchaser to satisfy its liability for a covered tax,

    • (ii) if the tax credit is transferred by the unrelated purchaser to another unrelated purchaser, the total of the sale price and any amount of the credit that has been used, minus the total of the purchase price and any gain recognized from use of the tax credit under subparagraph (i), is treated as income or loss, as the case may be, of the unrelated purchaser in the fiscal year of the transfer, and

    • (iii) if the tax credit expires without use, the amount by which the total of the purchase price and any gain recognized from use of the tax credit under subparagraph (i) exceeds the amount of the tax credit used is treated as a loss in the fiscal year of the expiration.

• Marginal note:Other tax credits

  (17) In computing the GloBE income or loss of a constituent entity for a fiscal year, the face value of a tax credit (other than a qualified refundable tax credit or a marketable transferable tax credit) is not treated as income.

• Marginal note:Anti-avoidance — intragroup financing arrangements

  (18) GloBE income or loss of a constituent entity that is a low-tax entity for a fiscal year excludes any expense that is attributable to an intragroup financing arrangement that can reasonably be expected, over the duration of the arrangement,

  • (a) to increase the amount of expenses taken into account in computing the GloBE income or loss of the low-tax entity; and

  • (b) not to result in a corresponding increase in the income for tax purposes of a high-tax counterparty for the fiscal year, including because an amount received or receivable in respect of the arrangement by the high-tax counterparty can reasonably be considered to be eligible for an exclusion, exemption, deduction, credit or other tax benefit under local law where the amount of that benefit is calculated by reference to the amount of payment received.

• Marginal note:Insurance companies

  (19) If a constituent entity is an insurance company, the constituent entity’s GloBE income or loss for a fiscal year

  • (a) excludes any amount that is

    • (i) included in the constituent entity’s financial accounting income for the fiscal year, and

    • (ii) in respect of a charge to policyholders for taxes paid by the constituent entity in respect of returns to the policyholders, to the extent an amount is included in computing the constituent entity’s GloBE income or loss under paragraph (1)(e); and

  • (b) includes returns to policyholders that are not reflected in the constituent entity’s financial accounting income for the fiscal year, to the extent that a corresponding increase or decrease in liability to policyholders is reflected in its financial accounting income.

• Marginal note:Qualifying tier one capital

  (20) In computing the GloBE income or loss of a constituent entity for a fiscal year,

  • (a) if an amount is recognized as a decrease to the equity of the constituent entity attributable to a distribution paid or payable in respect of qualifying tier one capital issued by the constituent entity, the amount is treated as an expense; and

  • (b) if an amount is recognized as an increase to the equity of the constituent entity attributable to distributions received or receivable in respect of qualifying tier one capital held by the constituent entity, the amount is treated as income.

• Marginal note:Stock-based compensation expense — election

  (21) If a filing constituent entity elects under this subsection, in respect of the costs or expenses of the group entities that are located in a jurisdiction that were paid with stock-based compensation (each referred to in this subsection as a “stock-based compensation expense”), the following rules apply:

  • (a) the election is a five-year election;

  • (b) in computing the GloBE income or loss of each group entity that is located in that jurisdiction for a fiscal year to which the election applies, the amount allowed as a deduction in respect of any stock-based compensation expense in computing that entity’s income for tax purposes under the law of that jurisdiction for a local taxation year ending in the fiscal year is to be substituted for the amount of that stock-based compensation expense reflected as an expense in that entity’s financial accounting income for that fiscal year;

  • (c) in computing the GloBE income or loss of each group entity that is located in that jurisdiction for any fiscal year to which the election applies, the group entity is to include as income an amount equal to the total of all amounts, each of which is a stock-based compensation expense that

    • (i) arose in respect of an option that expires without exercise in the fiscal year, and

    • (ii) was allowed as an expense in computing the GloBE income or loss of the group entity in accordance with the election for a prior fiscal year;

  • (d) if the election applies with respect to stock-based compensation expenses arising from a transaction, and any amount in respect of the stock-based compensation expenses arising from that transaction was reflected in the financial accounting income of a group entity for a fiscal year preceding the first fiscal year to which the election applies, in computing GloBE income or loss of that group entity for that first fiscal year, the amount determined by the following formula is to be included as income:

    A − B

    where

    A

    is the total of all amounts, each of which is an amount in respect of stock-based compensation expenses arising from that transaction that was allowed as an expense in computing the group entity’s GloBE income or loss for a fiscal year preceding the first fiscal year, and

    B

    is the total of all amounts, each of which is the amount in respect of those stock-based compensation expenses that would have been allowed as an expense in computing the GloBE income or loss of the group entity for a fiscal year preceding the first fiscal year, if the election had applied to that preceding fiscal year; and

  • (e) if the election is revoked, and any options in respect of any stock-based compensation to which the election applied have not been exercised — and the exercise period has not yet ended — before the revocation year, in computing GloBE income or loss of a group entity that is located in the jurisdiction for the revocation year, the amount determined by the following formula is to be included as income:

    A − B

    where

    A

    is the total of all amounts, each of which is an amount in respect of that stock-based compensation expense allowed as an expense in computing the GloBE income or loss of the group entity in accordance with the election for a fiscal year preceding the revocation year, and

    B

    is the total of all amounts, each of which is the amount in respect of that stock-based compensation that accrued as an expense in the group entity’s financial accounts, and would have been allowed as an expense in computing the group entity’s GloBE income or loss if the election had not applied, for a fiscal year preceding the revocation year.

• Marginal note:Fair value and impairment accounting — election

  (22) If a filing constituent entity elects under this subsection, in respect of a jurisdiction, to determine gains and losses using the realization principle for the purpose of computing GloBE income or loss for a fiscal year, the following rules apply:

  • (a) the election is a five-year election;

  • (b) the election applies to

    • (i) all entities that are

      • (A) if the filing constituent entity specifies in the election that it is to apply only to investment entities, group entities that are investment entities that are located in the jurisdiction, and

      • (B) in any other case, group entities that are located in the jurisdiction, and

    • (ii) all assets and, if clause (B) applies, all liabilities that are

      • (A) if the filing constituent entity specifies in the election that it is to apply only to tangible assets, tangible assets subject to fair value accounting or impairment accounting, and

      • (B) in any other case, assets and liabilities subject to fair value accounting or impairment accounting;

  • (c) if the election applies to a constituent entity for a fiscal year,

    • (i) gains or losses attributable to fair value or impairment accounting with respect to assets or liabilities to which the election applies are excluded in computing GloBE income or loss of the constituent entity for the fiscal year, and

    • (ii) for the purpose of determining a gain or loss in respect of an asset or liability that is subject to the election, the carrying value of the asset or liability is its carrying value at the later of

      • (A) the beginning of the first fiscal year to which the election applies, and

      • (B) the date on which the asset was acquired or the liability was incurred; and

  • (d) if the election is revoked and a constituent entity to which the election applied holds an asset or liability to which the election applied at the beginning of the revocation year, the constituent entity’s GloBE income or loss for the revocation year includes the positive or negative amount determined by the formula

    A − B

    where

    A

    is the fair value of the asset or liability at the beginning of the revocation year, and

    B

    is the carrying value of the asset or liability as determined under subparagraph (c)(ii).

• Marginal note:Aggregate asset gain — election

  (23) If the filing constituent entity elects under this subsection in respect of the aggregate asset gain for a fiscal year (referred to in this subsection as the “election year”) of the constituent entities of the MNE group that are located in a particular jurisdiction (each referred to in this subsection as a “local entity”), the following rules apply:

  • (a) covered taxes with respect to any net asset gain or net asset loss of a local entity in the election year are to be excluded in computing adjusted covered taxes;

  • (b) GloBE income or loss of local entities for the election year

    • (i) excludes any amounts allocated to local entities under paragraph (d) or (e) (other than any amount allocated to the election year under paragraph (e)), and

    • (ii) includes any amounts allocated to the election year under paragraph (e);

  • (c) for the purposes of subsection 31(1), GloBE income or loss, of a local entity for a fiscal year, is adjusted as follows:

    • (i) an amount allocated to a local entity under paragraph (d) for a fiscal year reduces the entity’s net asset loss for that year, and

    • (ii) an amount allocated to a local entity under paragraph (e) for a fiscal year is included as income for that year;

  • (d) amounts in respect of the aggregate asset gain are carried back to loss years within the look-back period, in order from the earliest loss year to the latest loss year, and allocated to the local entities for those loss years, with the amount allocated to any particular local entity for any particular loss year being determined by the formula

    A × B ÷ C

    where

    A

    is the lesser of

    • (i) the aggregate asset loss of local entities for the particular loss year, less the total of the amounts, if any, already allocated to those entities for that particular year under this paragraph because of a previous election under this subsection, and

    • (ii) the aggregate asset gain, less the total of the amounts, if any, allocated in respect of that gain under this paragraph to local entities for a preceding loss year,

    B

    is the particular local entity’s net asset loss for the particular loss year, and

    C

    is the total of all amounts, each of which is the net asset loss of a local entity for the particular loss year; and

  • (e) if any amount of the aggregate asset gain remains after reducing it by the total of the amounts in respect of the aggregate asset gain allocated to local entities under paragraph (d), that remainder is allocated evenly to each fiscal year in the look-back period (each referred to in this paragraph as a “look-back year”), with the amount that is allocated to a particular local entity for a particular look-back year being determined by the formula

    A ÷ 5 × B ÷ C

    where

    A

    is the aggregate asset gain, less the total of the amounts in respect of that aggregate asset gain allocated to local entities under paragraph (d),

    B

    is

    • (i) if no local entity has a net asset gain for the particular look-back year, 1, and

    • (ii) in any other case, the particular local entity’s net asset gain for the particular look-back year, and

    C

    is

    • (i) if subparagraph (i) of the description of B applies, the total number of local entities for the particular look-back year, and

    • (ii) if subparagraph (ii) of the description of B applies, the total of all amounts, each of which is the net asset gain of a local entity for the particular look-back year.

• Marginal note:Tax consolidated group — election

  (24) If a filing constituent entity elects under this subsection in respect of the standard constituent entities of an MNE group that are located in a particular jurisdiction and included in a tax consolidated group (each referred to in this subsection as a “relevant local entity”), the following rules apply:

  • (a) the financial accounting income of the relevant local entities is adjusted for a fiscal year for which the election has effect by applying the consolidated accounting treatment of the ultimate parent entity to eliminate income, expenses, gains and losses arising from transactions between relevant local entities;

  • (b) the election is a five-year election;

  • (c) the financial accounting income of the relevant local entities is to be adjusted for the first fiscal year for which the election has effect to ensure that there are no duplications or omissions of items of income, expenses, gains or losses arising as a result of electing under this subsection;

  • (d) if an election under this subsection is revoked, the financial accounting income of relevant local entities is to be adjusted for the revocation year to ensure that there are no duplications or omissions of items of income, expenses, gains or losses arising as a result of the revocation; and

  • (e) for the purposes of this subsection, relevant local entities that are located in a jurisdiction are considered to be included in a tax consolidated group if, under the law of that jurisdiction, the income, expenses, gains or losses of those group entities may be shared for tax purposes by virtue of a connection between the entities based on ownership or common control.

• Marginal note:Qualified debt release — election

  (25) If a filing constituent entity elects under this subsection for a fiscal year in respect of a constituent entity, the constituent entity’s GloBE income or loss excludes any qualified debt release amounts of the entity for the year.

• Marginal note:Permanent establishments — losses

  (26) Despite subsection 17(3), if a constituent entity that is a permanent establishment would, in the absence of this subsection, have a GloBE loss (referred to in this subsection as the “loss amount”) for a fiscal year

  • (a) that loss amount is to be treated as an expense of the main entity in respect of the permanent establishment (and not of the permanent establishment) in computing its GloBE income or loss for the fiscal year, to the extent that the loss amount

    • (i) is treated as an expense for the purposes of the computation of tax in the jurisdiction in which the main entity is located, and

    • (ii) is not set off against an item of income that is subject to tax under the laws of both the jurisdiction of the permanent establishment and of the main entity; and

  • (b) if the permanent establishment would, in the absence of this subsection, have GloBE income (referred to in this paragraph as the “income amount”) for a subsequent fiscal year, that income amount is treated as GloBE income of the main entity (and not of the permanent establishment) to the extent of the lesser of

    • (i) the income amount of the permanent establishment for the subsequent fiscal year, and

    • (ii) the amount, if any, by which the loss amount described in paragraph (a) exceeds the total of all amounts, each of which is, in respect of that loss amount, an amount that was treated as GloBE income of the main entity (and not of the permanent establishment) in a prior fiscal year under this paragraph.

SUBDIVISION CInternational Shipping Net Income or Loss Exclusion

Marginal note:Exclusion of international shipping net income or loss

• 19 (1) In computing a constituent entity’s GloBE income or loss for a fiscal year, the constituent entity’s net income or loss from international shipping for that fiscal year is excluded.

• Marginal note:Definition of net income or loss from international shipping

  (2) Net income or loss from international shipping, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + B

  where

  A

  is the constituent entity’s core international shipping income for the fiscal year; and

  B

  is the constituent entity’s qualified ancillary international shipping income for the fiscal year.

• Marginal note:Definition of core international shipping income

  (3) Core international shipping income, of a constituent entity for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the constituent entity’s core international shipping revenue for the fiscal year; and

  B

  is the constituent entity’s core international shipping costs for the fiscal year.

• Marginal note:Definition of core international shipping revenue

  (4) Core international shipping revenue, of a constituent entity for a fiscal year, means the constituent entity’s revenue for the fiscal year obtained in consideration for the entity’s performance of core international shipping activities.

• Marginal note:Definition of core international shipping costs

  (5) Core international shipping costs, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + (B × C ÷ D)

  where

  A

  is the total costs incurred by the constituent entity for the fiscal year that are directly attributable to the entity’s performance of core international shipping activities;

  B

  is the total costs incurred by the constituent entity for the fiscal year that are indirectly attributable to the entity’s performance of core international shipping activities;

  C

  is the constituent entity’s core international shipping revenue for the fiscal year; and

  D

  is the constituent entity’s total revenue for the fiscal year from all sources.

• Marginal note:Definition of core international shipping activity

  (6) Core international shipping activity means an activity, if

  • (a) the strategic or commercial management of the performance of that activity by the constituent entity is effectively carried on within the jurisdiction in which the constituent entity is located; and

  • (b) the activity is any of the following:

    • (i) international shipping, whether the ship is owned, leased or otherwise at the disposal of the constituent entity,

    • (ii) arranging for another person to carry out international shipping under a slot-chartering arrangement,

    • (iii) leasing a ship to be used for international shipping on charter fully equipped, crewed and supplied,

    • (iv) leasing a ship to be used for international shipping on a bareboat charter basis to another constituent entity of the MNE group,

    • (v) the participation in a pool, joint business or international operating agency for international shipping,

    • (vi) the sale of a ship used for international shipping, provided that the ship has been held for use by the constituent entity for at least one year.

• Marginal note:Definition of qualified ancillary international shipping income

  (7) Qualified ancillary international shipping income, of a constituent entity that is located in a jurisdiction for a fiscal year, means

  • (a) the constituent entity’s ancillary international shipping income, if

    A ≤ B ÷ 2

    where

    A

    is the total of all amounts, each of which is the ancillary international shipping income of a group entity that is located in the jurisdiction for the fiscal year, and

    B

    is the total of all amounts, each of which is the core international shipping income of a group entity that is located in the jurisdiction for the fiscal year; or

  • (b) in any other case, the amount determined by the formula

    B ÷ 2 × C ÷ A

    where

    C

    is the constituent entity’s ancillary international shipping income for the fiscal year.

• Marginal note:Definition of ancillary international shipping income

  (8) Ancillary international shipping income, of a constituent entity for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the constituent entity’s ancillary international shipping revenue for the fiscal year; and

  B

  is the constituent entity’s ancillary international shipping costs for the fiscal year.

• Marginal note:Definition of ancillary international shipping revenue

  (9) Ancillary international shipping revenue, of a constituent entity for a fiscal year, means the constituent entity’s revenue for the fiscal year obtained in consideration for the entity’s performance of ancillary international shipping activities.

• Marginal note:Definition of ancillary international shipping costs

  (10) Ancillary international shipping costs, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + (B × C ÷ D)

  where

  A

  is the total costs incurred by the constituent entity for the fiscal year that are directly attributable to the entity’s performance of ancillary international shipping activities;

  B

  is the total costs incurred by the constituent entity for the fiscal year that are indirectly attributable to the entity’s performance of ancillary international shipping activities;

  C

  is the constituent entity’s ancillary international shipping revenue for the fiscal year; and

  D

  is the constituent entity’s total revenue for the fiscal year from all sources.

• Marginal note:Definition of ancillary international shipping activity

  (11) Ancillary international shipping activity means an activity, if

  • (a) the strategic or commercial management of the performance of that activity by the constituent entity is effectively carried on within the jurisdiction in which the constituent entity is located;

  • (b) the activity is performed primarily in connection with international shipping; and

  • (c) the activity is any of the following:

    • (i) leasing a ship on a bareboat charter basis to another shipping enterprise, other than another constituent entity of the MNE group, if

      • (A) the lease has not been in effect for a period exceeding three years, and

      • (B) it is established by subsequent events or otherwise that the lease is not part of a series of leases, or of leases and other transactions, that results in the leases being in effect for an aggregate period exceeding three years,

    • (ii) selling tickets for the transportation of passengers or cargo by ship between ports in a single jurisdiction, if

      • (A) the transportation is carried out by a shipping enterprise other than the constituent entity or another constituent entity of the MNE group, and

      • (B) the ship proceeds to, or has come from, a port in a different jurisdiction,

    • (iii) leasing and short-term storage of a container, or detention charges for the late return of a container,

    • (iv) the provision of services by engineers, maintenance staff, cargo handlers, catering staff or customer services personnel to another shipping enterprise, other than another constituent entity of the MNE group, engaged in international shipping,

    • (v) holding assets necessary for the constituent entity to carry on the business of international shipping.

SUBDIVISION DUltimate Parent Entities Subject to Tax Transparency or Deductible Dividend Regimes

Marginal note:GloBE income — flow-through ultimate parent entity

• 20 (1) The GloBE income, for a fiscal year, of an ultimate parent entity that is a flow-through entity excludes any amount that would, in the absence of this subsection, be included in computing the entity’s GloBE income or loss for the fiscal year and that is attributable to an ownership interest in the entity (referred to in this subsection as the “attributable amount”), if

  • (a) one of the following conditions is met:

    • (i) the holder of the ownership interest is subject to tax, for a taxable period ending within 12 months of the end of the fiscal year, on the full attributable amount at a nominal rate that is equal to, or exceeds, the minimum rate, or

    • (ii) it can reasonably be expected that

      (A + B) ≥ C × D

      where

      A

      is the amount that would, in the absence of this subsection and paragraph 22(4)(a), be adjusted covered taxes payable by the ultimate parent entity in respect of the attributable amount for the fiscal year,

      B

      is the tax payable by the holder in respect of the attributable amount for a taxable period ending within 12 months of the end of the fiscal year,

      C

      is the attributable amount, and

      D

      is the minimum rate;

  • (b) the holder is a natural person who

    • (i) is tax resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity; or

  • (c) the holder is a governmental entity, international organization, non-profit organization or pension fund that

    • (i) is resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity.

• Marginal note:Resident — interpretation

  (2) For the purposes of subparagraph (1)(c)(i) and paragraph 21(1)(c),

  • (a) an entity (other than a governmental entity) is resident in the jurisdiction where it is created and managed; and

  • (b) a governmental entity is resident in the jurisdiction of the government of which it is a part or that owns it.

• Marginal note:GloBE loss — flow-through ultimate parent entity

  (3) The GloBE loss, for a fiscal year, of an ultimate parent entity that is a flow-through entity is the amount determined by the formula

  A − B

  where

  A

  is the amount that would, in the absence of this subsection, be the ultimate parent entity’s GloBE loss for the year; and

  B

  is the portion of the loss amount referred to in the description of A that is attributable to an ownership interest in the entity, to the extent the holder of the ownership interest is allowed to use its share of the loss in computing the holder’s income for tax purposes.

• Marginal note:Permanent establishment — flow-through ultimate parent entity

  (4) Subsections (1) to (3) apply to a permanent establishment in the same manner as they apply to an ultimate parent entity that is a flow-through entity, if

  • (a) the ultimate parent entity carries on its business, in whole or in part, through the permanent establishment; or

  • (b) the following conditions are met:

    • (i) a flow-through entity carries on its business, in whole or in part, through the permanent establishment, and

    • (ii) the ultimate parent entity holds its interest in the flow-through entity directly or through a tax transparent structure.

Marginal note:GloBE income — deductible dividend regime

• 21 (1) The GloBE income, for a fiscal year, of an ultimate parent entity that is subject to a deductible dividend regime and distributes a deductible dividend within 12 months of the end of the fiscal year excludes the amount of the dividend (except to the extent its exclusion would result in a GloBE loss for the year), if

  • (a) one of the following conditions is met:

    • (i) the dividend recipient is subject to tax, for a taxable period that ends within 12 months of the end of the fiscal year, on the full amount of the dividend at a nominal rate that is equal to, or exceeds, the minimum rate,

    • (ii) it can reasonably be expected that

      (A + B) ≥ C × D

      where

      A

      is the amount that would, in the absence of this subsection and paragraph 22(4)(b), be adjusted covered taxes payable by the ultimate parent entity in respect of the dividend or the profits out of which the dividend is paid,

      B

      is the tax payable in respect of the dividend by the dividend recipient for a taxable period ending within 12 months of the end of the fiscal year,

      C

      is the amount of the dividend, and

      D

      is the minimum rate, or

    • (iii) it is the case that

      • (A) the dividend recipient is a natural person,

      • (B) the dividend recipient is subject to tax in respect of the dividend for a taxable period that ends within 12 months of the end of the fiscal year, and

      • (C) the dividend is a patronage dividend from a supply cooperative;

  • (b) the dividend recipient is a natural person who

    • (i) is tax resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity; or

  • (c) the dividend recipient is resident in the jurisdiction where the ultimate parent entity is located and is

    • (i) a governmental entity,

    • (ii) an international organization,

    • (iii) a non-profit organization, or

    • (iv) a pension fund that is not a pension services entity.

• Marginal note:Exclusion for covered taxes

  (2) If subsection (1) applies to exclude a particular amount from the GloBE income of an ultimate parent entity, the entity’s GloBE income also excludes the amount of the entity’s covered taxes that are, because of the exclusion of the particular amount from its GloBE income, excluded from the entity’s adjusted covered taxes under paragraph 22(4)(b).

• Marginal note:Back-to-back deductible dividends

  (3) Subsections (1) and (2) apply, with such modifications as the context requires, to a group entity for a fiscal year in respect of a particular deductible dividend distributed by the group entity directly or indirectly to the ultimate parent entity, to the extent that

  • (a) the group entity is located in the same jurisdiction as the ultimate parent entity;

  • (b) the group entity is subject to the deductible dividend regime;

  • (c) the ultimate parent entity’s ownership interests in the group entity are held directly or through a chain of group entities that meet the conditions in paragraphs (a) and (b);

  • (d) the ultimate parent entity distributes, within 12 months of the end of the fiscal year, the amount it received in respect of the particular deductible dividend; and

  • (e) the distribution by the ultimate parent entity is a deductible dividend in respect of which a condition in any of paragraphs (1)(a) to (c) is met.

• Marginal note:Deeming rule — patronage dividends

  (4) For the purposes of clause (1)(a)(iii)(B), a patronage dividend from a supply cooperative is deemed to be subject to tax to the extent that it reduces a cost or expense that is otherwise deductible in computing the recipient’s income for tax purposes.

DIVISION 3Computation of Adjusted Covered Taxes

SUBDIVISION AAdjusted Covered Taxes

Marginal note:Definition of adjusted covered taxes

• 22 (1) The adjusted covered taxes, of a constituent entity of an MNE group for a fiscal year, means the current tax expense, in respect of covered taxes, in the constituent entity’s financial accounts for the fiscal year, adjusted by the following:

  • (a) the positive or negative amount determined by the formula

    A − B

    where

    A

    is the total of the additions to covered taxes, in respect of the constituent entity for the fiscal year, under subsection (2), and

    B

    is the total of the reductions to covered taxes, in respect of the constituent entity for the fiscal year, under subsection (3);

  • (b) the total deferred tax adjustment amount of the constituent entity for the fiscal year, unless paragraph 26(b) or (c) applies in respect of the year and the jurisdiction in which the constituent entity is located; and

  • (c) each amount recorded in the equity or other comprehensive income of the constituent entity for the fiscal year that can reasonably be considered to relate to an increase or decrease in respect of covered taxes, if

    • (i) the covered taxes are in respect of an amount (referred to in this paragraph as the “included amount”) included in the constituent entity’s GloBE income or loss for the fiscal year, and

    • (ii) the included amount is subject to tax under the laws of the jurisdiction in which the constituent entity is located.

• Marginal note:Adjusted covered taxes — additions

  (2) For the purposes of subsection (1), each of the following amounts is an addition to covered taxes in respect of a constituent entity of an MNE group for a fiscal year:

  • (a) an amount recorded as an expense, in respect of covered taxes, in profit before taxation in the constituent entity’s financial accounts for the fiscal year;

  • (b) the constituent entity’s share of a GloBE loss deferred tax asset of the MNE group that is reversed in the fiscal year;

  • (c) an amount paid, in respect of covered taxes, in the fiscal year to the extent that the amount

    • (i) relates to an uncertain tax position, and

    • (ii) was treated as a reduction to the constituent entity’s covered taxes for a preceding fiscal year under paragraph (3)(d); and

  • (d) an amount of a credit or refund — or an amount in respect of a transfer — in respect of a qualified refundable tax credit or a marketable transferable tax credit, that is recorded as a reduction in the current tax expense, in respect of covered taxes, in the financial accounts of the constituent entity for the fiscal year.

• Marginal note:Adjusted covered taxes — reductions

  (3) For the purposes of subsection (1), each of the following amounts is a reduction to covered taxes in respect of a constituent entity for a fiscal year:

  • (a) in respect of an amount of income that is not included in computing the constituent entity’s GloBE income or loss,

    • (i) any portion of the constituent entity’s current tax expense, in respect of covered taxes, in its financial accounts (referred to in this subsection as “relevant current tax expense”) for the fiscal year that relates to the amount of income, or

    • (ii) any portion of an addition to covered taxes, in respect of the constituent entity for the fiscal year under subsection (2), that relates to the amount of income;

  • (b) in respect of a tax credit (other than a qualified refundable tax credit, marketable transferable tax credit or tax credit the tax benefit of which is a flow-through tax benefit) that is used to reduce the constituent entity’s liability for a covered tax,

    • (i) if the tax credit is a non-marketable transferable tax credit that was purchased by the constituent entity, the amount by which the face value of the tax credit exceeds its purchase price in proportion to the amount of the tax credit used to reduce the constituent entity’s liability for a covered tax for a taxable period that ends during the fiscal year, except any amount that is recorded as a reduction to the constituent entity’s relevant current tax expense for the fiscal year, and

    • (ii) in any other case, the portion of the tax credit that is

      • (A) used to reduce the constituent entity’s liability for a covered tax for a taxable period that ends during the fiscal year, and

      • (B) not recorded as a reduction to the constituent entity’s relevant current tax expense for the fiscal year;

  • (c) in respect of the transfer of a non-marketable transferable tax credit (other than a tax credit the tax benefit of which is a flow-through tax benefit),

    • (i) if the constituent entity is an originator of the tax credit, any amount received by the constituent entity in exchange for the transfer of the tax credit during the fiscal year, and

    • (ii) if the constituent entity is a purchaser of the tax credit and transfers the tax credit to another person during the fiscal year, the amount of any gain on that transfer;

  • (d) any portion of any amount that is credited or refunded to the constituent entity (other than in respect of a qualified refundable tax credit, marketable transferable tax credit or tax credit the tax benefit of which is a flow-through tax benefit), in respect of covered taxes, that is not treated as an adjustment to the constituent entity’s relevant current tax expense for the fiscal year;

  • (e) any portion of the constituent entity’s relevant current tax expense for the fiscal year that relates to an uncertain tax position; and

  • (f) any portion of the constituent entity’s relevant current tax expense for the fiscal year that is not expected to be paid on or before the day that is three years after the day on which the fiscal year ends.

• Marginal note:Adjusted covered taxes — special regimes

  (4) For greater certainty,

  • (a) if an amount is excluded in computing the GloBE income of a constituent entity under subsection 20(1), the entity’s adjusted covered taxes are to be reduced proportionally; and

  • (b) if an amount is excluded in computing the GloBE income of a constituent entity under subsection 21(1), the entity’s adjusted covered taxes (other than the taxes for which a dividend deduction under that subsection was allowed) are to be reduced proportionally.

• Marginal note:Adjusted covered taxes — no double counting

  (5) For the purposes of determining a constituent entity’s adjusted covered taxes, an amount, in respect of covered taxes, is not to be taken into account more than once in determining the adjusted covered taxes of

  • (a) a constituent entity for a particular fiscal year or another fiscal year; or

  • (b) more than one constituent entity for a particular fiscal year or another fiscal year.

Marginal note:Definition of covered taxes

• 23 (1) Covered taxes means taxes (other than excluded taxes) that

  • (a) are recorded in the financial accounts of a particular constituent entity in respect of its

    • (i) income or profits, or

    • (ii) share of the income or profits of another entity that is

      • (A) a group entity in respect of the particular constituent entity, and

      • (B) an entity in which the particular constituent entity holds, directly or indirectly, an ownership interest;

  • (b) are imposed under an eligible distribution tax system;

  • (c) are imposed in lieu of an income or profits tax of general application; or

  • (d) are charged by reference to

    • (i) retained earnings and corporate equity, or

    • (ii) multiple components consisting of retained earnings, corporate equity and income or profits.

• Marginal note:Definition of excluded taxes

  (2) Excluded taxes means

  • (a) any tax under a qualified IIR;

  • (b) any tax under a qualified domestic minimum top-up tax;

  • (c) any tax under, or as a result of the application of, a qualified UTPR;

  • (d) a disqualified refundable imputation tax; and

  • (e) a tax paid or accrued by an insurance company in respect of returns to policyholders.

SUBDIVISION BAllocation of Covered Taxes

Marginal note:Allocation of covered taxes to a permanent establishment

• 24 (1) An amount in respect of covered taxes is allocated from a particular constituent entity to a permanent establishment for a fiscal year if

  • (a) the permanent establishment is a group entity in respect of the particular constituent entity; and

  • (b) the amount is

    • (i) recorded in the financial accounts of the particular constituent entity, and

    • (ii) in respect of the GloBE income or loss of the permanent establishment for the fiscal year.

• Marginal note:Permanent establishment loss

  (2) If subsection 18(26) applies in respect of a permanent establishment and the main entity in respect of the permanent establishment, the following rules apply:

  • (a) a deferred tax expense in respect of a deferred tax asset is excluded in computing the adjusted covered taxes of the permanent establishment and the main entity if

    • (i) the deferred tax asset is attributable to a tax loss arising in the jurisdiction in which the permanent establishment is located, and

    • (ii) the loss is treated as an expense of the main entity under paragraph 18(26)(a); and

  • (b) if covered taxes arise in the jurisdiction in which the permanent establishment is located in respect of income (referred to in this paragraph as the “allocated income”) of the permanent establishment that is included in computing the GloBE income or loss of the main entity for a fiscal year under paragraph 18(26)(b), the covered taxes are allocated from the permanent establishment to the main entity for the fiscal year, to the extent of the lesser of

    • (i) the amount of the covered taxes, and

    • (ii) the amount determined by the formula

      A × B

      where

      A

      is the allocated income, and

      B

      is the highest rate of corporate tax on ordinary income in the jurisdiction where the main entity is located.

• Marginal note:Allocation — tax transparent entities

  (3) An amount in respect of covered taxes is allocated from a tax transparent entity to its constituent entity-owner, to the extent that

  • (a) the constituent entity-owner holds an ownership interest in the tax transparent entity; and

  • (b) the amount is

    • (i) recorded in the financial accounts of the tax transparent entity, and

    • (ii) in respect of any portion of the net income or loss of the tax transparent entity that is included in computing the financial accounting income of the constituent entity-owner because of paragraphs 17(6)(b) and (c).

• Marginal note:Allocation — controlled foreign companies

  (4) The following rules apply for the purposes of allocating, to a constituent entity (referred to in this subsection as the “controlled foreign company”) of an MNE group, amounts in respect of covered taxes to which a constituent entity-owner of the controlled foreign company is subject under a controlled foreign company tax regime:

  • (a) subject to paragraphs (b) and (c), an amount in respect of covered taxes arising in a fiscal year is allocated from the constituent entity-owner to the controlled foreign company, if

    • (i) the constituent entity-owner is located in one jurisdiction (referred to in this paragraph as the “parent jurisdiction”) and the controlled foreign company is located in another jurisdiction (referred to in this subsection as the “subsidiary jurisdiction”), and

    • (ii) the amount is

      • (A) recorded in the financial accounts of the constituent entity-owner for the fiscal year, and

      • (B) in respect of covered taxes, imposed under a controlled foreign company tax regime of the parent jurisdiction, applicable in respect of the constituent entity-owner’s share of the controlled foreign company’s income;

  • (b) for the purposes of clause (a)(ii)(B), in the case of covered taxes imposed under a blended controlled foreign company tax regime that are recorded in the financial accounts of a constituent entity-owner for a fiscal year that is a transitional special allocation year, the amount in respect of the covered taxes applicable in respect of the constituent entity-owner’s share of the controlled foreign company’s income for the fiscal year is deemed to be equal to the amount determined by the formula

    A × B ÷ C

    where

    A

    is the total amount, in respect of covered taxes imposed under the blended controlled foreign company tax regime, that is recorded in the financial accounts of the constituent entity-owner for the fiscal year,

    B

    is the amount determined by the formula

    D × E

    where

    D

    is the constituent entity-owner’s share of the income of the controlled foreign company, as determined under the blended controlled foreign company tax regime in computing the covered taxes, and

    E

    is the result of the formula

    F − G

    where

    F

    is the lowest rate that, if it were the corporate tax rate applicable in the subsidiary jurisdiction, would result in the tax charge in the subsidiary jurisdiction in respect of the controlled foreign company being sufficient to prevent a tax charge on the constituent entity-owner under the blended controlled foreign company tax regime in respect of its share of the income of the controlled foreign company for the fiscal year, and

    G

    is the rate that would be the effective tax rate of the MNE group for the subsidiary jurisdiction for the fiscal year, if the jurisdictional adjusted covered taxes of the MNE group for the subsidiary jurisdiction were

    • (i) determined without regard to any covered taxes imposed under a controlled foreign company tax regime, and

    • (ii) increased by an amount equal to the tax payable for the fiscal year, in respect of the standard constituent entities of the MNE group that are located in the subsidiary jurisdiction, under a qualified domestic minimum top-up tax of the subsidiary jurisdiction, to the extent the blended controlled foreign company tax regime allows a foreign tax credit for that tax payable on the same terms as any other creditable covered tax, and

    C

    is the total of all amounts each of which is an amount that would be determined for B if

    • (i) all references in the description of B to “the controlled foreign company” and “the subsidiary jurisdiction” were read as references to “an entity in which the constituent entity-owner holds an ownership interest” and “the jurisdiction where the entity is located”, respectively, and

    • (ii) where an entity is located in a jurisdiction for which an effective tax rate of the MNE group is not determined for the fiscal year, the effective tax rate of the MNE group for that jurisdiction for the year were determined based on the aggregate income and taxes recorded in the financial accounts of all entities, that are located in the jurisdiction, in which the constituent entity-owner holds an ownership interest, and as if those entities were constituent entities of the MNE group; and

  • (c) if the covered taxes, in respect of which an amount would, in the absence of this paragraph, be allocated from the constituent entity-owner to the controlled foreign company under paragraph (a), are applicable in whole or in part in respect of passive income of the controlled foreign company, the amount allocated under paragraph (a) in respect of the portion of the covered taxes that are applicable in respect of the passive income is not to exceed the lesser of

    • (i) the amount that would, in the absence of this paragraph, be allocated under paragraph (a) in respect of the portion of the covered taxes that are applicable in respect of the passive income, and

    • (ii) the amount determined by the formula

      A × B

      where

      A

      is the amount of the controlled foreign company’s passive income included under the controlled foreign company tax regime in computing the covered taxes, and

      B

      is the top-up percentage of the MNE group for the subsidiary jurisdiction, determined without regard to any amount that is described in subparagraph (i).

• Marginal note:Allocation — hybrid entities

  (5) The following rules apply for the purposes of allocating amounts in respect of covered taxes from a constituent entity-owner to a constituent entity (referred to in this subsection as the “hybrid entity”) of an MNE group that is a hybrid entity in relation to the constituent entity-owner:

  • (a) subject to paragraph (b), an amount in respect of covered taxes (referred to in this subsection as the “covered taxes amount”) recorded in the financial accounts of the constituent entity-owner for a fiscal year is allocated from the constituent entity-owner to the hybrid entity to the extent the covered taxes are in respect of income of the hybrid entity; and

  • (b) if the covered taxes are, in whole or in part, in respect of passive income of the hybrid entity, the amount to be allocated from the constituent entity-owner to the hybrid entity under paragraph (a), in respect of the portion of the covered taxes that are in respect of the hybrid entity’s passive income, is not to exceed the lesser of

    • (i) the portion of the covered taxes amount that is in respect of the hybrid entity’s passive income, and

    • (ii) the amount determined by the formula

      A × B

      where

      A

      is the amount of the hybrid entity’s passive income that is included in computing the covered taxes of the constituent entity-owner under the fiscal transparency rule in the jurisdiction where it is located, and

      B

      is the top-up percentage of the MNE group for the jurisdiction where the hybrid entity is located, determined without regard to the portion of the covered taxes amount that is in respect of the hybrid entity’s passive income.

• Marginal note:Allocation — distributions

  (6) An amount in respect of covered taxes (referred to in this subsection as the “covered taxes amount”) for a fiscal year is allocated from a constituent entity-owner to a particular constituent entity in which it holds a direct ownership interest, if the covered taxes amount is

  • (a) recorded in the financial accounts of the constituent entity-owner for the fiscal year; and

  • (b) in respect of a dividend or similar amount, in respect of the direct ownership interest, that is distributed — or deemed, under the tax laws of the jurisdiction in which the particular constituent entity is located, to be distributed — by the particular constituent entity to the constituent entity-owner in the fiscal year.

SUBDIVISION CTotal Deferred Tax Adjustment Amount

Marginal note:Definition of total deferred tax adjustment amount

• 25 (1) The total deferred tax adjustment amount, of a constituent entity for a fiscal year, means the positive or negative amount determined by the formula

  A + B − C

  where

  A

  is

  • (a) if the tax rate applicable in determining the constituent entity’s deferred tax expense, in respect of covered taxes, recorded in its financial accounts for the year exceeds the minimum rate, the amount that would be the constituent entity’s deferred tax expense in respect of covered taxes (subject to the exclusions under subsection (2)), if the applicable tax rate were the minimum rate, and

  • (b) in any other case, the constituent entity’s deferred tax expense, in respect of covered taxes, recorded in its financial accounts for the year (subject to the exclusions under subsection (2));

  B

  is the total of all amounts each of which is

  • (a) an amount paid in the year in respect of an unclaimed accrual of the constituent entity, or

  • (b) the amount of any recaptured deferred tax liability determined for a preceding fiscal year that reverses in the year; and

  C

  is the total of all amounts each of which is

  • (a) a reduction to the amount determined for A that would have occurred due to the recognition of a loss deferred tax asset for a current year tax loss but for the recognition criteria under the applicable accounting standard having not been met, or

  • (b) to the extent not reflected as a reduction in determining the amount for A, the amount by which a deferred tax asset has increased because of subsection (5).

• Marginal note:Total deferred tax adjustment amount — exclusions

  (2) In determining the amount for A in subsection (1), the following are to be excluded:

  • (a) the portion of deferred tax expense that is in respect of

    • (i) an item that is not included in computing GloBE income or loss,

    • (ii) a disallowed accrual or an unclaimed accrual, or

    • (iii) the generation or use of a tax credit;

  • (b) the effect of any valuation adjustment or accounting recognition adjustment in respect of a deferred tax asset; and

  • (c) the portion of deferred tax expense that arises because of a re-measurement with respect to a change in the rate of tax applicable in determining the deferred tax expense.

• Marginal note:Foreign tax credits — substitute loss carry-forward

  (3) Despite subparagraph (2)(a)(iii), deferred tax expense must be included in determining the amount for A in subsection (1) if it is in respect of a deferred tax asset in respect of

  • (a) a substitute loss carry-forward tax credit, except that, in a fiscal year in which the substitute loss carry-forward tax credit is used, the deferred tax expense is to be included only to the extent the substitute loss carry-forward tax credit is used to reduce or eliminate covered taxes in respect of income that is included in computing the constituent entity’s GloBE income or loss; or

  • (b) a substitute loss carry-forward recapture amount.

• Marginal note:Substitute loss carry-forward recapture amount

  (4) To the extent it would not otherwise arise or reverse, as the case may be, a deferred tax asset is deemed, in respect of a substitute loss carry-forward recapture amount of a constituent entity that is located in a particular jurisdiction, to

  • (a) arise in the fiscal year that the substitute loss carry-forward recapture amount arises, in an amount equal to the product obtained by multiplying the substitute loss carry-forward recapture amount by the statutory tax rate applicable to the constituent entity in the fiscal year under the income tax laws of the particular jurisdiction; and

  • (b) reverse, in any fiscal year (referred to in this paragraph as a “recharacterization year”) in which a recharacterization of income (referred to in this paragraph as the “recharacterized income”) described in paragraph (b) of the definition substitute loss carry-forward recapture amount in subsection 2(1) occurs, in an amount equal to the tax credits used by the constituent entity solely as a result of the recharacterization of income in the recharacterization year, to the extent that

    • (i) the tax credits arise under the income tax laws of the particular jurisdiction in respect of tax paid to the government of a jurisdiction other than the particular jurisdiction,

    • (ii) the amount of the recharacterized income in the recharacterization year, together with the total amounts of recharacterized income in the preceding fiscal years, does not exceed the substitute loss carry-forward recapture amount, and

    • (iii) the tax credits are used to reduce or eliminate covered taxes that would otherwise be owing by the constituent entity under the income tax laws of the particular jurisdiction in respect of any amount of income that is included in computing the constituent entity’s GloBE income or loss.

• Marginal note:Deferred tax asset below minimum rate

  (5) The amount of a deferred tax asset recorded in the financial accounts of a constituent entity of an MNE group for a fiscal year is deemed to be the amount that it would be if the tax rate applicable in determining the amount of the deferred tax asset were the minimum rate, if the following conditions are met:

  • (a) the tax rate that would, in the absence of this subsection, be applicable in determining the amount of the deferred tax asset is less than the minimum rate; and

  • (b) the deferred tax asset is a loss deferred tax asset that is attributable to a GloBE loss of the constituent entity for the fiscal year.

• Marginal note:Recaptured deferred tax liability

  (6) For the purpose of applying subsection 31(1) in a fiscal year (referred to in this subsection as the “current fiscal year”), the adjusted covered taxes of a constituent entity for a fiscal year (referred to in this subsection as the “adjustment fiscal year”) that is the fifth fiscal year preceding the current fiscal year are to be reduced to the extent of all or the portion of any deferred tax liability that is

  • (a) included in determining the total deferred tax adjustment amount of the constituent entity for the adjustment fiscal year;

  • (b) not paid in any of the five fiscal years following the adjustment fiscal year; and

  • (c) not a recapture exception accrual.

SUBDIVISION DGloBE Loss Election

Marginal note:GloBE loss deferred tax asset

26 If a filing constituent entity of a particular MNE group elects, in respect of a jurisdiction that does not have an eligible distribution tax system, for the GloBE transition year of the particular MNE group in respect of the jurisdiction, the following rules apply:

• (a) paragraphs (b) and (c) apply in respect of each fiscal year (referred to in this section as an “election year”) of the particular MNE group that is the GloBE transition year or that occurs after the GloBE transition year but before the revocation year in respect of the election;

• (b) a GloBE loss deferred tax asset of the particular MNE group, in respect of the jurisdiction, is deemed to arise in any election year in which the particular MNE group has a net GloBE loss in respect of the jurisdiction, in an amount determined by the formula

  A × B

  where

  A

  is the absolute value of the net GloBE loss for the election year, and

  B

  is the minimum rate;

• (c) for the purposes of applying paragraph 22(2)(b) in respect of an election year (referred to in this paragraph as the “application year”) in which the particular MNE group has net GloBE income in respect of the jurisdiction, a particular constituent entity that is located in the jurisdiction is considered to have reversed a particular GloBE loss deferred tax asset of the particular MNE group in respect of the jurisdiction that arose in a preceding election year (referred to in this paragraph as the “loss election year”), in an amount determined by the formula

  C x D ÷ E

  where

  C

  is the lesser of

  • (i) the amount determined by the formula

    F × G − H

    where

    F

    is the particular MNE group’s net GloBE income in respect of the jurisdiction for the application year,

    G

    is the minimum rate, and

    H

    is the total of all amounts each is which is the amount determined by the formula

    K − L

    where

    K

    is the amount of another GloBE loss deferred tax asset of the particular MNE group, in respect of the jurisdiction, that arose in another election year preceding the loss election year, and

    L

    is the total of all amounts each of which is the portion of the other GloBE loss deferred tax asset that was considered to have been applied by a constituent entity in an election year preceding the application year, and

  • (ii) the amount determined by the formula

    I − J

    where

    I

    is the particular GloBE loss deferred tax asset, and

    J

    is the total of all amounts each of which is all or the portion of the particular GloBE loss deferred tax asset that was considered to have been reversed by a constituent entity in an election year preceding the application year,

  D

  is the particular constituent entity’s GloBE income for the application year, and

  E

  is the total of all amounts each of which is the GloBE income of any constituent entity of the particular MNE group that is located in the jurisdiction for the application year; and

• (d) if the ultimate parent entity of the particular MNE group is a flow-through entity that is located in the jurisdiction, paragraphs (b) and (c) are to be applied in relation to the constituent entities of the particular MNE group that are located in the jurisdiction as if the ultimate parent entity were

  • (i) the only constituent entity, of a separate MNE group, that is located in the jurisdiction, and

  • (ii) not a constituent entity, of the particular MNE group, that is located in the jurisdiction.

SUBDIVISION EPost-Filing Adjustments and Tax Rate Changes

Marginal note:Adjustments to covered taxes for a prior year

• 27 (1) If, in a fiscal year (referred to in this subsection as the “current year”), there is an adjustment to the liability for covered taxes, recorded in the financial accounts, of a particular constituent entity of an MNE group for a prior fiscal year that are relevant in determining its adjusted covered taxes for the prior year, the following rules apply:

  • (a) if the adjustment results in an increase in the liability, or an immaterial decrease in the liability,

    • (i) where the adjustment relates to a change, in the particular constituent entity’s deferred tax expense arising in the prior year, to which subsection (2) applies, the particular constituent entity’s adjusted covered taxes for the fiscal year in which the deferred tax expense is reversed are to be increased to reflect the increase in the liability to the extent that it would not, in the absence of this subsection, already be reflected in the adjusted covered taxes of the particular constituent entity for any fiscal year, and

    • (ii) in any other case, the particular constituent entity’s adjusted covered taxes for the current year are to be increased or reduced, as the case may be, to reflect the increase or immaterial decrease in the liability to the extent that it would not, in the absence of this subsection, already be reflected in the adjusted covered taxes of the particular constituent entity for any fiscal year;

  • (b) if the adjustment results in a decrease (other than an immaterial decrease) in the liability, for the purposes of applying subsection 31(1) in the current year

    • (i) the particular constituent entity’s adjusted covered taxes for the prior year are to be reduced to reflect the decrease in the liability,

    • (ii) the particular constituent entity’s GloBE income or loss for the prior year is to be adjusted to the extent

      • (A) the decrease in the liability results from a reduction in the particular constituent entity’s GloBE income or an increase in its GloBE loss for the prior year, and

      • (B) it is necessary to ensure there is no reduction in the MNE group’s effective tax rate (determined without reference to this subsection), in respect of the jurisdiction in which the particular constituent entity is located, for the prior year, and

    • (iii) the GloBE income or loss, of the particular constituent entity and any other constituent entity of the MNE group that is located in the jurisdiction, for any fiscal year subsequent to the prior year, is to be adjusted, as necessary and appropriate, to reflect the decrease in the liability;

  • (c) for the purposes of paragraphs (a) and (b), the adjustment results in an immaterial decrease if

    • (i) the filing constituent entity of the MNE group elects under this paragraph in respect of the adjustment,

    • (ii) the adjustment results in a decrease in the liability, and

    • (iii) the amount determined by the following formula is less than €1 million:

      A − B

      where

      A

      is the total of all amounts each of which is an adjustment in the current year resulting in a decrease to the liability for covered taxes, recorded in the financial accounts, of any constituent entity that is located in the jurisdiction for the prior year that are relevant in determining its adjusted covered taxes for the prior year, and

      B

      is the amount that would be determined for A if the reference in the description of A to “decrease” were read as a reference to “increase”; and

  • (d) to the extent the adjustment arises because a loss for tax purposes for any fiscal year following the prior year is carried back to reduce income for tax purposes for the prior year, the particular constituent entity is deemed to have a deferred tax asset that

    • (i) arises in the current year,

    • (ii) is equal to the portion of the loss for tax purposes that reduces income for tax purposes for the prior year multiplied by the minimum rate, and

    • (iii) is treated as having been reversed in the prior year for the purposes of applying subsection 31(1) in respect of the prior year.

• Marginal note:Adjustments — deferred tax expense

  (2) For the purposes of subsection (1), a change, in a fiscal year (referred to in this subsection as the “current year”), in a constituent entity’s deferred tax expense that arose in a prior fiscal year is to be treated as an adjustment, in the current year, to the constituent entity’s liability for covered taxes, recorded in the financial accounts, for the prior year to the extent that

  • (a) the change results from a reduction, in the current year, to the rate of tax — that was applicable in determining the deferred tax expense for the prior year — below the minimum rate; and

  • (b) the deferred tax expense was reflected in determining the constituent entity’s total deferred tax adjustment amount for the prior year.

• Marginal note:Idem

  (3) For the purposes of subsection (1),

  • (a) a change, in a particular fiscal year, in a constituent entity’s deferred tax expense that arose in a prior fiscal year is to be treated as an adjustment, in the fiscal year in which the deferred tax expense is reversed, to the constituent entity’s liability for covered taxes, recorded in the financial accounts, for the prior year to the extent that

    • (i) the change results from an increase, in the particular year, to the rate of tax — that was applicable in determining the deferred tax expense for the prior year — from a rate that was less than the minimum rate, and

    • (ii) the deferred tax expense was reflected in determining the constituent entity’s total deferred tax adjustment amount for the prior year; and

  • (b) any portion of the change that is attributable to an increase of the rate of tax in excess of the minimum rate is to be disregarded in determining the adjustment under paragraph (a).

• Marginal note:Adjustments — unpaid covered taxes

  (4) For the purposes of applying subsection 31(1) in a fiscal year (referred to in this subsection as the “current year”), a constituent entity’s adjusted covered taxes for another fiscal year (referred to in this subsection as the “prior year”) are to be adjusted to exclude any portion of the current tax expense that is recorded, in respect of covered taxes, in the constituent entity’s financial accounts for the prior year and included in its adjusted covered taxes for the prior year, if

  • (a) the portion is not paid by the day (referred to in this subsection as the “specified day”) that is three years after the last day of the prior year;

  • (b) the specified day is within the current year; and

  • (c) the portion is greater than €1 million.

SUBDIVISION FQualified Flow-Through Tax Benefits

Marginal note:Definitions

• 28 (1) The following definitions apply in this section.

  adjusted investment amount

  adjusted investment amount, of an owner in respect of a qualified flow-through ownership interest for a fiscal year (referred to in this definition as the “determination year”), means the amount determined by the formula

  A − B − C

  where

  A

  is the investment amount of the owner in respect of the ownership interest;

  B

  is the total of all amounts each of which is the qualified flow-through tax benefits of the owner in respect of the ownership interest for a fiscal year preceding the determination year; and

  C

  is the total of all amounts each of which is the other flow-through amounts of the owner in respect of the ownership interest for the determination year or any preceding fiscal year. (montant d’investissement ajusté)

  excess benefits

  excess benefits, of an owner in respect of a proportional amortization method interest for a particular fiscal year, means the amount determined by the formula

  A + B − C

  where

  A

  is

  • (a) if the amount determined for C is equal to the proportional investment reduction amount of the owner in respect of the interest for the particular fiscal year, the other flow-through amounts of the owner in respect of the interest for the particular fiscal year, and

  • (b) in any other case, the lesser of

    • (i) the other flow-through amounts of the owner in respect of the interest for the particular fiscal year, and

    • (ii) the amount determined by the formula

      D − E

      where

      D

      is the proportional amortization method investment remaining amount of the owner in respect of the interest for the fiscal year immediately preceding the particular fiscal year, and

      E

      is the qualified flow-through tax benefits of the owner in respect of the interest for the fiscal year immediately preceding the particular fiscal year;

  B

  is the flow-through tax benefits of the owner in respect of the interest for the particular fiscal year, to the extent that the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been increased (or to not have been reduced) solely because of the application of the proportional amortization method, or another financial accounting method that provides similar results as to current tax expense, in respect of the interest for the particular fiscal year; and

  C

  is the lesser of

  • (a) the amount determined for subparagraph (b)(ii) of the description of A, and

  • (b) the proportional investment reduction amount of the owner in respect of the interest for the particular fiscal year. (bénéfices excédentaires)

  expected tax benefits ratio

  expected tax benefits ratio, of an owner in respect of a proportional amortization method interest for a fiscal year, means the amount determined by the formula

  A ÷ B

  where

  A

  is the flow-through tax benefits of the owner in respect of the interest for the fiscal year; and

  B

  is the total amount of flow-through tax benefits that the owner reasonably expects, at the time when the interest is first acquired, to receive in respect of the interest. (ratio des avantages fiscaux attendus)

  flow-through tax benefits

  flow-through tax benefits, of an owner in respect of a qualified flow-through ownership interest for a fiscal year, means the total of all amounts each of which is

  • (a) the tax benefit, in respect of a tax credit (other than a qualified refundable tax credit or marketable transferable tax credit of the owner), received by the owner in respect of the ownership interest for the fiscal year; or

  • (b) the tax benefit, in respect of a tax loss, received by the owner in respect of the ownership interest for the fiscal year. (avantages fiscaux intermédiaires)

  investment amount

  investment amount, of an owner in respect of an ownership interest, means the total fair market value of all consideration provided by the owner for the ownership interest. (montant d’investissement)

  other flow-through amounts

  other flow-through amounts, of an owner in respect of a qualified flow-through ownership interest for a fiscal year, means the total of the following amounts received by the owner in respect of the ownership interest in the fiscal year:

  • (a) the tax benefits of qualified refundable tax credits and marketable transferable tax credits of the owner;

  • (b) distributions (including returns of capital); and

  • (c) proceeds from sales of all or part of the ownership interest. (autres montants intermédiaires)

  proportional amortization method interest

  proportional amortization method interest means a qualified flow-through ownership interest in respect of which the owner uses the proportional amortization method for financial accounting purposes. (participation selon la méthode d’amortissement proportionnelle)

  proportional amortization method investment remaining amount

  proportional amortization method investment remaining amount, of an owner in respect of a proportional amortization method interest for a fiscal year (referred to in this definition as the “determination year”), means the amount determined by the formula

  A − B

  where

  A

  is the investment amount of the owner in respect of the interest; and

  B

  is the total of all amounts each of which is the lesser of the following amounts for the determination year or a preceding fiscal year:

  • (a) the amount determined by the formula

    C + D

    where

    C

    is

    • (i) in the case of the determination year, nil, and

    • (ii) in any other case, the qualified flow-through tax benefits of the owner in respect of the interest for the fiscal year, and

    D

    is the other flow-through amounts of the owner in respect of the interest for the fiscal year, and

  • (b) the proportional investment reduction amount of the owner in respect of the interest for the fiscal year. (montant de l’investissement résiduel selon la méthode d’amortissement proportionnelle)

  proportional investment reduction amount

  proportional investment reduction amount, of an owner in respect of a proportional amortization method interest for a fiscal year, means the amount determined by the formula

  A × B

  where

  A

  is the investment amount of the owner in respect of the interest; and

  B

  is the expected tax benefits ratio of the owner in respect of the interest for the fiscal year. (montant de la réduction de l’investissement proportionnel)

  qualified flow-through ownership interest

  qualified flow-through ownership interest means, subject to subsection (5), an ownership interest in a particular tax transparent entity held by a constituent entity of an MNE group directly, or indirectly through one or more other tax transparent entities that are not constituent entities of the MNE group, if

  • (a) the assets, liabilities, income, expenses and cash flows of the particular tax transparent entity are not consolidated on a line-by-line basis in the consolidated financial statements of the ultimate parent entity of the MNE group; and

  • (b) at the time the ownership interest was acquired by the owner, the total return to be received by the owner (including distributions, the tax benefits of tax losses and the tax benefits of qualified refundable tax credits and marketable transferable tax credits of the owner received in respect of the ownership interest, but excluding the tax benefits of tax credits other than qualified refundable tax credits and marketable transferable tax credits of the owner) from its investment in the ownership interest could not reasonably have been expected to be greater than or equal to the investment amount of the owner in respect of the ownership interest. (titre de participation intermédiaire admissible)

  qualified flow-through tax benefits

  qualified flow-through tax benefits, of an owner in respect of a qualified flow-through ownership interest for a fiscal year in which the ownership interest is subject to an election under subsection 18(7), means

  • (a) if the ownership interest is a proportional amortization method interest, the least of

    • (i) the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year,

    • (ii) the proportional amortization method investment remaining amount of the owner in respect of the ownership interest for the fiscal year, and

    • (iii) the amount, if any, by which the proportional investment reduction amount, of the owner in respect of the ownership interest for the fiscal year, exceeds the other flow-through amounts of the owner in respect of the ownership interest for the fiscal year; and

  • (b) in any other case, the lesser of

    • (i) the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year, and

    • (ii) the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year. (avantages fiscaux intermédiaires admissibles)

  recapture amount

  recapture amount, of an owner in respect of a qualified flow-through ownership interest for a particular fiscal year, means the lesser of

  • (a) the amount determined by the formula

    A − B + C

    where

    A

    is the other flow-through amounts of the owner in respect of the ownership interest for the particular fiscal year,

    B

    is

    • (i) if the ownership interest is a proportional amortization method interest,

      • (A) where the amount determined for C in the formula in the definition excess benefits in this subsection is equal to the proportional investment reduction amount of the owner in respect of the ownership interest for the particular fiscal year, the amount determined for A, and

      • (B) in any other case, the proportional amortization method investment remaining amount of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

    • (ii) in any other case, the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

    C

    is

    • (i) where clause (i)(A) of the description of B applies, nil, and

    • (ii) in any other case, the qualified flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

  • (b) the amount determined by the formula

    D − E

    where

    D

    is the total of all amounts each of which is the qualified flow-through tax benefits of the owner in respect of the ownership interest for a fiscal year preceding the particular fiscal year, and

    E

    is the total of all amounts each of which is the recapture amount of the owner in respect of the ownership interest for a fiscal year preceding the particular fiscal year. (montant de récupération)

  tax benefit

  tax benefit, of an owner in respect of a qualified flow-through ownership interest

  • (a) includes, in respect of a tax credit,

    • (i) a refund received by the owner in respect of the tax credit, and

    • (ii) any amount received by the owner in exchange for the transfer of the tax credit; and

  • (b) means, in respect of a tax loss attributed to the owner in respect of the ownership interest, the product obtained by multiplying the amount of the tax loss by the statutory income tax rate applicable to the owner in the jurisdiction where it is located. (avantage fiscal)

• Marginal note:Adjusted covered taxes — additions and reductions

  (2) If an owner holds a qualified flow-through ownership interest in another entity, the adjusted covered taxes of the owner for a fiscal year are deemed to be the amount that would, in the absence of section 8, be determined by the formula

  A + B − C

  where

  A

  is the adjusted covered taxes of the owner for the fiscal year, as determined without regard to any amount determined for B or C in respect of the ownership interest for the fiscal year;

  B

  is

  • (a) if the ownership interest is a proportional amortization method interest, the amount determined by the formula

    D − E

    where

    D

    is the qualified flow-through tax benefits, if any, of the owner in respect of the ownership interest for the fiscal year, and

    E

    is the amount by which the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been increased (or to not have been reduced) in respect of those qualified flow-through tax benefits solely because of the application of the proportional amortization method, or another financial accounting method that provides similar results as to current tax expense, in respect of the ownership interest for the fiscal year, and

  • (b) in any other case, the lesser of

    • (i) the qualified flow-through tax benefits, if any, of the owner in respect of the ownership interest for the fiscal year, and

    • (ii) the amount by which the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been reduced in the fiscal year because of those qualified flow-through tax benefits; and

  C

  is the amount determined by the formula

  F + G

  where

  F

  is

  • (a) if the ownership interest is a proportional amortization method interest, the excess benefits of the owner in respect of the ownership interest for the fiscal year, and

  • (b) in any other case, the amount by which the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year exceeds the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year, except to the extent that the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been reduced in the fiscal year because of those flow-through tax benefits, and

  G

  is the recapture amount of the owner in respect of the ownership interest for the fiscal year.

• Marginal note:Proportional amortization method interest — election

  (3) A qualified flow-through ownership interest held by an owner that is a constituent entity of an MNE group that would not, in the absence of this subsection, be a proportional amortization method interest is irrevocably deemed to be a proportional amortization method interest if the filing constituent entity of the MNE group so elects in the later of

  • (a) the fiscal year in which the ownership interest is first acquired by the owner; and

  • (b) the first fiscal year in which

    • (i) the owner is subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax, and

    • (ii) the owner is a constituent entity of the MNE group.

• Marginal note:Deemed ownership interests — debt-accounted investments

  (4) For the purposes of this section, an investment, other than an ownership interest, in a particular tax transparent entity held by a particular constituent entity of an MNE group directly, or indirectly through one or more other tax transparent entities that are not constituent entities of the MNE group, is deemed to be an ownership interest held by the particular constituent entity in the particular tax transparent entity if the investment

  • (a) is treated as an equity interest under the income tax laws of the jurisdiction in which the particular constituent entity is located; and

  • (b) would be treated as an equity interest under an authorized financial accounting standard of the jurisdiction in which the particular tax transparent entity operates.

• Marginal note:Qualified flow-through ownership interest — anti-avoidance

  (5) An ownership interest in an entity held by an owner that would, in the absence of this subsection, be a qualified flow-through ownership interest is not a qualified flow-through ownership interest if

  • (a) the owner

    • (i) does not have a bona fide economic interest in the entity, or

    • (ii) is protected from the loss of its investment in the entity; or

  • (b) the tax laws of the jurisdiction in which the entity operates make receipt of the tax benefit in respect of any tax credits of the entity by the owner conditional on the owner or the developer of the project that originates the tax credits being subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax.

DIVISION 4Computation of Effective Tax Rate and Top-up Amount

SUBDIVISION AEffective Tax Rate

Marginal note:Definition of effective tax rate

• 29 (1) The effective tax rate, of an MNE group for a jurisdiction for a fiscal year, means

  • (a) if the net GloBE income of the MNE group for the jurisdiction for the fiscal year is nil, the minimum rate; and

  • (b) in any other case, the result (expressed as a percentage rounded to four decimal points) of the formula

    (A − B) ÷ C

    where

    A

    is the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for the fiscal year,

    B

    is the lesser of

    • (i) the amount determined for A, and

    • (ii) the excess negative tax expense of the MNE group for the jurisdiction for the fiscal year, and

    C

    is the net GloBE income of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Definition of net GloBE income

  (2) The net GloBE income, of an MNE group for a jurisdiction for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the total of all amounts each of which is the GloBE income for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction; and

  B

  is the total of all amounts each of which is the GloBE loss for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction.

• Marginal note:Definition of jurisdictional adjusted covered taxes

  (3) The jurisdictional adjusted covered taxes, of an MNE group for a jurisdiction for a fiscal year, means the total of all amounts each of which is the adjusted covered taxes for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction.

• Marginal note:Definition of excess negative tax expense

  (4) The excess negative tax expense, of an MNE group for a jurisdiction for a particular fiscal year, means the amount determined by the formula

  A + B − C

  where

  A

  is the absolute value of the total of all amounts each of which is the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for a fiscal year

  • (a) that precedes the particular fiscal year,

  • (b) in which the amount that would, in the absence of section 8, be the net GloBE income of the MNE group for the jurisdiction is nil or greater, and

  • (c) in which the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction are less than nil;

  B

  is the total of all amounts each of which is the amount by which the excess negative tax expense top-up amount, of a standard constituent entity of the MNE group that is located in the jurisdiction, for a fiscal year that precedes the particular fiscal year, is reduced because of an election under subsection 31(5); and

  C

  is the total of all amounts each of which is the amount determined for B in the formula in paragraph (1)(b) in respect of the MNE group for the jurisdiction for a fiscal year, that precedes the particular fiscal year, in which that paragraph applies.

SUBDIVISION BTop-up Amount of a Standard Constituent Entity

Marginal note:Definition of top-up amount

• 30 (1) The top-up amount, of a particular standard constituent entity of an MNE group that is located in a jurisdiction for a fiscal year, means

  • (a) if the net GloBE income of the MNE group for the jurisdiction for the fiscal year is greater than nil, the amount determined by the formula

    A × B ÷ C

    where

    A

    is the jurisdictional top-up amount of the MNE group for the jurisdiction for the fiscal year,

    B

    is the GloBE income of the particular standard constituent entity for the fiscal year, and

    C

    is the total of all amounts each of which is the GloBE income, of a standard constituent entity of the MNE group that is located in the jurisdiction, for the fiscal year; and

  • (b) if the net GloBE income of the MNE group for the jurisdiction for the fiscal year is nil, the total of

    • (i) the allocated adjustment top-up amount of the particular standard constituent entity for the fiscal year, and

    • (ii) where the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for the fiscal year is less than nil, the excess negative tax expense top-up amount of the particular standard constituent entity for the fiscal year.

• Marginal note:Definition of jurisdictional top-up amount

  (2) The jurisdictional top-up amount, of an MNE group for a jurisdiction for a fiscal year, means the amount determined by the formula

  A × B + C − D

  where

  A

  is the top-up percentage of the MNE group for the jurisdiction for the fiscal year;

  B

  is the excess profit of the MNE group for the jurisdiction for the fiscal year;

  C

  is the total of all amounts each of which is an adjustment top-up amount of the MNE group for the jurisdiction for the fiscal year; and

  D

  is the total amount of tax payable for a fiscal year, in respect of the standard constituent entities of the MNE group that are located in the jurisdiction, under a qualified domestic minimum top-up tax of the jurisdiction.

• Marginal note:Definition of top-up percentage

  (3) The top-up percentage, of an MNE group for a jurisdiction for a fiscal year, means the percentage point difference determined by the formula

  A − B

  where

  A

  is the minimum rate; and

  B

  is the effective tax rate of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Definition of excess profit

  (4) The excess profit, of an MNE group for a jurisdiction for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the net GloBE income of the MNE group for the jurisdiction for the fiscal year; and

  B

  is the substance-based income exclusion amount of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Definition of allocated adjustment top-up amount

  (5) The allocated adjustment top-up amount of a particular standard constituent entity of an MNE group that is located in a jurisdiction for a particular fiscal year means the total of all amounts each of which is determined by the formula

  (A − B) × C ÷ D

  where

  A

  is a particular adjustment top-up amount of the MNE group for the jurisdiction for the particular fiscal year;

  B

  is the amount determined by the formula

  E × A ÷ (F + G)

  where

  E

  is the total amount of tax payable for the particular fiscal year, in respect of the standard constituent entities of the MNE group that are located in the jurisdiction, under a qualified domestic minimum top-up tax of the jurisdiction,

  F

  is the total of all adjustment top-up amounts of the MNE group for the jurisdiction for the particular fiscal year, and

  G

  is the jurisdictional excess negative tax expense top-up amount of the MNE group for the jurisdiction for the particular fiscal year, if the formula in that definition in subsection 31(4) were read without reference to C;

  C

  is the GloBE income of the particular standard constituent entity, for the adjustment year to which the particular adjustment top-up amount relates, as adjusted because of the application of any ETR adjustment provision in the particular fiscal year or any preceding fiscal year; and

  D

  is the total of all amounts each of which is the GloBE income, for the adjustment year, of a standard constituent entity of the MNE group that is located in the jurisdiction, as adjusted because of the application of any ETR adjustment provision in the particular fiscal year or any preceding fiscal year.

Marginal note:Adjustment top-up amount

• 31 (1) For the purposes of determining an adjustment top-up amount of an MNE group for a jurisdiction for a fiscal year, if an ETR adjustment provision applies in the fiscal year to adjust, for the purposes of this subsection, the GloBE income or loss or adjusted covered taxes of any standard constituent entity of the MNE group that is located in the jurisdiction, or the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction, for an adjustment year, the following rules apply:

  • (a) the jurisdictional top-up amount of the MNE group for the jurisdiction for the adjustment year (referred to in this subsection as the “recalculated jurisdictional top-up amount”) is calculated taking into account the adjustment; and

  • (b) the amount determined by the following formula is an adjustment top-up amount of the MNE group for the jurisdiction for the fiscal year:

    (A − B) × C

    where

    A

    is the recalculated jurisdictional top-up amount of the MNE group for the jurisdiction for the adjustment year,

    B

    is the jurisdictional top-up amount of the MNE group for the jurisdiction for the adjustment year, determined without reference to paragraph (a), and

    C

    is

    • (i) the disposition recapture ratio, if the adjustment is an adjustment to adjusted covered taxes under subsection 37(5), and

    • (ii) 1, in any other case.

• Marginal note:Definition of excess negative tax expense top-up amount

  (2) Subject to subsection (5), the excess negative tax expense top-up amount of a particular negative tax expense constituent entity of an MNE group that is located in a jurisdiction for a fiscal year means the amount determined by the formula

  A × B ÷ C

  where

  A

  is the jurisdictional excess negative tax expense top-up amount of the MNE group for the jurisdiction for the fiscal year;

  B

  is the amount determined by the formula

  D × E − F

  where

  D

  is the GloBE income or loss of the particular negative tax expense constituent entity for the fiscal year,

  E

  is the minimum rate, and

  F

  is the adjusted covered taxes of the particular negative tax expense constituent entity for the fiscal year; and

  C

  is the total of all amounts each of which is the amount determined for B for a negative tax expense constituent entity of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Definition of negative tax expense constituent entity

  (3) A negative tax expense constituent entity, in respect of an MNE group for a fiscal year, means a standard constituent entity of the MNE group whose adjusted covered taxes for the fiscal year are less than each of the following amounts:

  • (a) nil; and

  • (b) the amount that would, in the absence of section 8, be determined by the formula

    A × B

    where

    A

    is the GloBE income or loss of the entity for the fiscal year, and

    B

    is the minimum rate.

• Marginal note:Definition of jurisdictional excess negative tax expense top-up amount

  (4) The jurisdictional excess negative tax expense top-up amount, of an MNE group for a jurisdiction for a fiscal year in which its net GloBE income for the jurisdiction is nil and its jurisdictional adjusted covered taxes for the jurisdiction is less than nil, means the amount determined by the formula

  A − B − C

  where

  A

  is the amount that would, in the absence of section 8, be determined by the formula

  D × E

  where

  D

  is the total of all amounts each of which is the GloBE income or loss for the fiscal year of a standard constituent entity of the MNE group that is located in the jurisdiction, and

  E

  is the minimum rate;

  B

  is the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for the fiscal year; and

  C

  is the amount determined by the formula

  F × (A − B) ÷ (A − B + G)

  where

  F

  is the total amount of tax payable for the fiscal year, in respect of the standard constituent entities of the MNE group that are located in the jurisdiction, under a qualified domestic minimum top-up tax of the jurisdiction, and

  G

  is the total of all adjustment top-up amounts of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Election — excess negative tax expense carry-forward

  (5) If the filing constituent entity of an MNE group elects for a jurisdiction for a fiscal year, the excess negative tax expense top-up amount of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year is deemed to be the greater of

  • (a) nil; and

  • (b) the portion of the excess negative tax expense top-up amount, determined without reference to this subsection, that can reasonably be considered to relate to a tax loss that was carried back from the fiscal year to another fiscal year of the MNE group ending before the fiscal year and deducted under the income tax laws of the jurisdiction in the other fiscal year.

SUBDIVISION CSubstance-based Income Exclusion

Marginal note:Definition of substance-based income exclusion amount

• 32 (1) Subject to subsection (16), the substance-based income exclusion amount of an MNE group for a jurisdiction for a fiscal year means the lesser of

  • (a) the total of all amounts each of which is determined by the formula

    A + B

    where

    A

    is, subject to subsection 49(1), 5% of the eligible payroll costs of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year, and

    B

    is, subject to subsection 49(2), 5% of the eligible tangible asset amount of the standard constituent entity for the fiscal year, and

  • (b) the portion of the amount described in paragraph (a) that the filing constituent entity of the MNE group specifies as the substance-based income exclusion amount of the MNE group for the jurisdiction in the GIR in respect of the MNE group for the fiscal year.

• Marginal note:Definition of eligible payroll costs

  (2) Subject to subsections (5) to (7) and subparagraph 38(1)(d)(i), the eligible payroll costs of a particular standard constituent entity of an MNE group for a fiscal year, means all payroll costs (other than excluded costs of the particular standard constituent entity) in respect of eligible employees of any standard constituent entity of the MNE group, incurred

  • (a) if the particular standard constituent entity is a permanent establishment, by the main entity in respect of the permanent establishment and reflected in the separate financial accounts for the fiscal year of the permanent establishment, as adjusted in accordance with clause 17(1)(b)(ii)(B) or subsection 17(2); and

  • (b) in any other case, by the particular standard constituent entity and reflected in the particular standard constituent entity’s financial accounts for the fiscal year.

• Marginal note:Definition of excluded costs

  (3) Excluded costs, of a particular standard constituent entity of an MNE group, means any costs if

  • (a) it is not the case that

    • (i) the costs are payable primarily in respect of work done in the course of the ordinary operating activities of any standard constituent entity of the MNE group, and

    • (ii) that work is done in the jurisdiction in which the particular standard constituent entity is located;

  • (b) the costs are capitalized and included in the carrying value of an asset used to calculate the eligible tangible asset amount of any constituent entity of the MNE group, as determined without reference to subsection (11);

  • (c) where the particular standard constituent entity is the main entity in respect of a permanent establishment, the costs are reflected in the separate financial accounts of the permanent establishment as adjusted in accordance with clause 17(1)(b)(ii)(B) or subsection 17(2);

  • (d) the costs are core international shipping costs, or ancillary international shipping costs that can reasonably be considered to be attributable to qualified ancillary international shipping income, of any constituent entity of the MNE group; or

  • (e) where the particular standard constituent entity is a permanent establishment, the costs can reasonably be considered to be attributable to income that is excluded from the GloBE income or loss of the particular standard constituent entity under paragraph 17(6)(a) or subsection 20(4).

• Marginal note:Interjurisdictional employee deeming rule

  (4) For the purposes of subparagraph (3)(a)(ii), if an eligible employee of a particular standard constituent entity of an MNE group spends more than 50% of the time that the eligible employee is doing work (referred to in this subsection as the “ordinary course work”) in the course of the ordinary operating activities of the standard constituent entities of the MNE group in a fiscal year, in the jurisdiction in which the particular standard constituent entity is located, all the ordinary course work is deemed to be done in the jurisdiction for the fiscal year.

• Marginal note:Eligible payroll costs — flow-through entity allocation

  (5) If a particular amount would, in the absence of this subsection, be included in the eligible payroll costs of a constituent entity that is a flow-through entity for a fiscal year, the following rules apply:

  • (a) if the constituent entity is an ultimate parent entity, the portion of the particular amount that is determined by the following formula is excluded from the eligible payroll costs of the constituent entity for the fiscal year:

    A × B ÷ C

    where

    A

    is the particular amount,

    B

    is the amount of any reduction to the GloBE income of the constituent entity for the fiscal year under subsection 20(1), and

    C

    is the GloBE income of the constituent entity for the fiscal year before the reduction referred to in the description of B; and

  • (b) in any other case,

    • (i) the eligible payroll costs of the constituent entity for the fiscal year are deemed to be nil, and

    • (ii) if all or any portion of the net income or loss of the constituent entity is allocated to one or more of its constituent entity-owners (each referred to in this subparagraph as a “relevant owner”) under paragraphs 17(6)(b) and (c) for the fiscal year,

      • (A) the particular amount is allocated to each relevant owner in the same proportion as the financial accounting income is allocated to that relevant owner, and

      • (B) if a relevant owner is located in the same jurisdiction as the constituent entity, any portion of the particular amount that is allocated to the relevant owner under clause (A) is included in the eligible payroll costs of the relevant owner for the fiscal year.

• Marginal note:Eligible payroll costs — deductible dividend regime

  (6) If a particular amount would, in the absence of this subsection, be included in the eligible payroll costs, for a fiscal year, of a constituent entity that is subject to a deductible dividend regime, the portion of the particular amount determined by the following formula is excluded from the eligible payroll costs of the constituent entity for the fiscal year:

  A × B ÷ C

  where

  A

  is the particular amount;

  B

  is the total amount of any reductions to the GloBE income of the constituent entity for the fiscal year under subsections 21(1) to (3); and

  C

  is the GloBE income of the constituent entity for the fiscal year before the reductions referred to in the description of B.

• Marginal note:Eligible payroll costs — taxable distribution method

  (7) If a particular amount would, in the absence of this subsection, be included in the eligible payroll costs, for a fiscal year, of a constituent entity an ownership interest in which is subject to an election under subsection 42(2), the portion of the particular amount determined by the following formula is excluded from the eligible payroll costs of the constituent entity for the fiscal year:

  A × B ÷ C

  where

  A

  is the particular amount;

  B

  is the portion of the GloBE income of the constituent entity for the fiscal year that is attributable to ownership interests of the constituent entity in respect of which an election under subsection 42(2) applies for the fiscal year; and

  C

  is the GloBE income of the constituent entity for the fiscal year.

• Marginal note:Definition of eligible employee

  (8) An eligible employee, of a standard constituent entity of an MNE group, means an individual who is

  • (a) regarded as an employee (or, if a distinction is made, a part-time employee) of the standard constituent entity under the laws of the jurisdiction in which it is located; or

  • (b) an independent contractor who acts under the direction and control of one or more standard constituent entities of the MNE group.

• Marginal note:Definition of eligible tangible asset amount

  (9) Subject to subsections (10) to (13) and subparagraph 38(1)(d)(ii), the eligible tangible asset amount of a standard constituent entity for a fiscal year means the amount determined by the formula

  (A + B) ÷ 2

  where

  A

  is the total of all amounts each of which is the carrying value of an eligible tangible asset of the standard constituent entity at the start of the fiscal year; and

  B

  is the total of all amounts each of which is the carrying value of an eligible tangible asset of the standard constituent entity at the end of the fiscal year.

• Marginal note:Eligible tangible asset amount — main entity limitation

  (10) The eligible tangible asset amount for a fiscal year of a standard constituent entity that is a main entity in respect of a permanent establishment is not to include any amount in respect of the carrying value of an eligible tangible asset held by the standard constituent entity to the extent that the eligible tangible asset is reflected in the separate financial accounts of the permanent establishment as adjusted in accordance with clause 17(1)(b)(ii)(B) or subsection 17(2).

• Marginal note:Eligible tangible asset amount — flow-through entity allocation

  (11) If an amount would, in the absence of this subsection, be included in the eligible tangible asset amount, for a fiscal year, of a constituent entity that is a flow-through entity, the rules in subsection (5) apply in respect of the amount, except that any reference in that subsection to “eligible payroll costs” is to be read as a reference to “eligible tangible asset amount”.

• Marginal note:Eligible tangible asset amount — deductible dividend regime

  (12) If an amount would, in the absence of this subsection, be included in the eligible tangible asset amount, for a fiscal year, of a constituent entity that is subject to a deductible dividend regime, subsection (6) applies in respect of the amount, except that any reference in that subsection to “eligible payroll costs” is to be read as a reference to “eligible tangible asset amount”.

• Marginal note:Eligible tangible asset amount — taxable distribution method

  (13) If an amount would, in the absence of this subsection, be included in the eligible tangible asset amount, for a fiscal year, of a constituent entity an ownership interest in which is subject to an election under subsection 42(2), subsection (7) applies in respect of the amount, except that any reference in that subsection to “eligible payroll costs” is to be read as a reference to “eligible tangible asset amount”.

• Marginal note:Definition of eligible tangible asset

  (14) An eligible tangible asset of a constituent entity at a particular time means an asset that is

  • (a) held at the particular time by

    • (i) if the constituent entity is a permanent establishment, the main entity in respect of the permanent establishment, and

    • (ii) in any other case, the constituent entity;

  • (b) if the constituent entity is a permanent establishment, reflected in the separate financial accounts of the permanent establishment as adjusted in accordance with clause 17(1)(b)(ii)(B) or subsection 17(2) for the fiscal year that includes the particular time;

  • (c) any of the following:

    • (i) property, plant or equipment,

    • (ii) natural resources,

    • (iii) if the constituent entity is the lessee, a right-of-use asset in respect of the lease of a tangible asset,

    • (iv) if the constituent entity is the lessor, property, all or any portion of which is leased out to a person under an operating lease, or

    • (v) a licence from, or similar arrangement with, a government if

      • (A) the licence or arrangement is for the use of immovable property or exploitation of natural resources, and

      • (B) the use of the property or exploitation of the resources entails significant investment in tangible assets; and

  • (d) none of the following:

    • (i) property that is held for sale, lease or investment, or, if the constituent entity is the lessee, that is leased out to a person under a finance lease,

    • (ii) a tangible asset used in the generation of core international shipping income in the fiscal year that includes the particular time,

    • (iii) if the constituent entity is a permanent establishment, an asset to the extent it can reasonably be considered to be used in the generation of income that is excluded from the GloBE income or loss of the constituent entity under paragraph 17(6)(a) or subsection 20(4), or

    • (iv) a right-of-use asset in respect of the lease of a tangible asset that is regularly leased several times to different lessees during the fiscal year, if the average lease period, including any renewals and extensions, with respect to lessees of the asset is 30 days or less (referred to in this subsection and subsection (15) as a “short-term rental asset”).

• Marginal note:Eligible tangible asset — carrying value

  (15) For the purposes of subsection (9), the carrying value of an eligible tangible asset of a constituent entity of an MNE group at a particular time is the carrying value of the eligible tangible asset recorded, or calculated as it would have been if it were recorded, at the particular time for the purposes of preparing the consolidated financial statements of the ultimate parent entity of the MNE group, as reduced (to the extent it has not already been so reduced) by the amount

  • (a) of any positive difference between the carrying value so determined and the carrying value of the same eligible tangible asset at the time it was most recently acquired by the constituent entity, to the extent such difference is solely attributable to one or more revaluations of the asset;

  • (b) of any accumulated depreciation, amortization, depletion or impairment loss in respect of the asset;

  • (c) of the reversal of any impairment loss to the extent that the reversal exceeds the impairment loss;

  • (d) recorded by another constituent entity of the MNE group in its financial accounts as a right-of-use asset in respect of the eligible tangible asset (other than a short-term rental asset);

  • (e) of undiscounted value of any payments remaining due, in respect of the eligible tangible asset (other than a short-term rental asset), from a lessee of the eligible tangible asset that is not a constituent entity of the MNE group;

  • (f) if the eligible tangible asset is used in the generation of qualified ancillary international shipping income of the constituent entity for the fiscal year that includes the particular time, determined by the formula

    A × B ÷ C

    where

    A

    is the carrying value of the eligible tangible asset, determined without reference to this paragraph and paragraph (g),

    B

    is the qualified ancillary international shipping income of the constituent entity for the fiscal year, and

    C

    is the ancillary international shipping income of the constituent entity for the fiscal year; and

  • (g) determined, for the fiscal year that includes the particular time, by the formula

    D × E ÷ F

    where

    D

    is the carrying value of the eligible tangible asset, determined without reference to this paragraph,

    E

    is

    • (i) nil, if the eligible tangible asset — or the underlying leased tangible asset, where the condition in subparagraph (14)(c)(iii) is satisfied, or the underlying immovable property or natural resources, where the condition in subparagraph (14)(c)(v) is satisfied — is located in the jurisdiction in which the constituent entity is located for more than 50% of the days in the fiscal year (referred to in this paragraph as the “qualifying days”) that paragraphs (14)(a) and, if the constituent entity is a permanent establishment, (14)(b) are satisfied in respect of the eligible tangible asset, and

    • (ii) the number of qualifying days in which the eligible tangible asset is not located in the jurisdiction in which the constituent entity is located, in any other case, and

    F

    is the number of qualifying days.

• Marginal note:Election not to apply exclusion for a jurisdiction

  (16) The substance-based income exclusion amount of an MNE group for a jurisdiction for a fiscal year is deemed to be nil if the filing constituent entity of the MNE group elects under this subsection not to apply the substance-based income exclusion for the jurisdiction for the fiscal year.

SUBDIVISION DDe Minimis Jurisdiction Exclusion

Marginal note:De minimis jurisdiction exclusion

• 33 (1) Despite sections 30 and 34, the top-up amount for a particular fiscal year of each constituent entity (referred to in this section as an “eligible constituent entity”) of an MNE group that is located in a jurisdiction (other than a stateless constituent entity, investment entity or insurance investment entity) is deemed to be the amount that would be the top-up amount of the eligible constituent entity if the top-up percentage that is relevant in calculating that top-up amount were nil, if

  • (a) the filing constituent entity of the MNE group elects in respect of the jurisdiction for the particular fiscal year;

  • (b) the amount determined by the following formula is less than €10 million:

    (A + B + C) ÷ D

    where

    A

    is the jurisdictional GloBE revenue of the MNE group for the jurisdiction for the particular fiscal year,

    B

    is the jurisdictional GloBE revenue of the MNE group for the jurisdiction for the fiscal year (referred to in this subsection as the “first preceding year”) immediately preceding the particular fiscal year,

    C

    is the jurisdictional GloBE revenue of the MNE group for the jurisdiction for the fiscal year (referred to in this subsection as the “second preceding year”) immediately preceding the first preceding year, and

    D

    is

    • (i) 3, if the jurisdictional GloBE revenue of the MNE group for the jurisdiction is greater than nil — or at least one eligible constituent entity of the MNE group that is located in the jurisdiction has a GloBE loss — for both the first preceding year and the second preceding year,

    • (ii) 2, if the jurisdictional GloBE revenue of the MNE group for the jurisdiction is greater than nil — or at least one eligible constituent entity of the MNE group that is located in the jurisdiction has a GloBE loss — for only one of the first preceding year and the second preceding year, and

    • (iii) 1, in any other case; and

  • (c) the amount determined by the following formula is less than €1 million:

    (E + F + G) ÷ D

    where

    E

    is the jurisdictional GloBE income or loss of the MNE group for the jurisdiction for the particular fiscal year,

    F

    is the jurisdictional GloBE income or loss of the MNE group for the jurisdiction for the first preceding year, and

    G

    is the jurisdictional GloBE income or loss of the MNE group for the jurisdiction for the second preceding year.

• Marginal note:Definition of jurisdictional GloBE revenue

  (2) The jurisdictional GloBE revenue, of an MNE group for a jurisdiction for a fiscal year, means the total of all amounts determined by the formula

  A × B ÷ 365

  where

  A

  is the financial accounting revenue of an eligible constituent entity of the MNE group that is located in the jurisdiction for the fiscal year, subject to any adjustments made in determining the GloBE income or loss of the eligible constituent entity for the fiscal year under Division 2, subsection 25(6) and paragraphs 27(1)(b) and 37(4)(b) and (5)(b), other than any adjustment

  • (a) in respect of expenses, or

  • (b) that is a decrease to the eligible constituent entity’s GloBE income or loss for the fiscal year resulting from the application of an ETR adjustment provision in a subsequent fiscal year; and

  B

  is the number of days in the fiscal year.

• Marginal note:Definition of financial accounting revenue

  (3) The financial accounting revenue, of an eligible constituent entity of an MNE group for a fiscal year, means the revenue amount for the fiscal year determined for the entity in the manner set out, and in accordance with the principles reflected, in the definition financial accounting income in subsection 17(1), with such modifications as the context requires.

• Marginal note:Definition of jurisdictional GloBE income or loss

  (4) The jurisdictional GloBE income or loss, of an MNE group for a jurisdiction for a fiscal year, means the amount that would, in the absence of section 8, be determined by the formula

  A × B ÷ 365

  where

  A

  is the total of all amounts each of which is the GloBE income or loss for the fiscal year of an eligible constituent entity of the MNE group that is located in the jurisdiction determined without taking into account any adjustment that is a decrease to the eligible constituent entity’s GloBE income or loss for the fiscal year resulting from the application of an ETR adjustment provision in a subsequent fiscal year; and

  B

  is the number of days in the fiscal year.

SUBDIVISION ETop-up Amount of a Minority-Owned Constituent Entity

Marginal note:Deeming rule — minority-owned subgroup

• 34 (1) For the purposes of sections 29 to 31 and subsections 32(1), (2), (4), (8) to (10) and (16), each minority-owned constituent entity that would, in the absence of this section, be a constituent entity of an MNE group is deemed not to be a constituent entity of the MNE group.

• Marginal note:Minority-owned constituent entity — top-up amount

  (2) The top-up amount of a minority-owned constituent entity (other than an investment entity or an insurance investment entity) of a minority-owned subgroup that is located in a jurisdiction for a fiscal year is the amount that would be determined under subsection 30(1) if the references in sections 29 to 31 and subsections 32(1) to (4), (8) to (10) and (16) to “MNE group” and “standard constituent entity” were read as references to “minority-owned subgroup” and “minority-owned constituent entity (other than an investment entity or an insurance investment entity)”, respectively.

• Marginal note:Interpretation rule

  (3) For the purposes of determining the top-up amount of a minority-owned constituent entity under subsection (2), subsection 21(3) and sections 37 to 39, 41 and 42 apply with such modifications, if any, as the context requires.

• Marginal note:Allocation of minority-owned constituent entity top-up amount

  (4) For the purposes of Division 1, the GloBE income of a minority-owned constituent entity of a minority-owned subgroup that is located in a jurisdiction for a fiscal year, is

  • (a) if the net GloBE income of the minority-owned subgroup for the jurisdiction for the fiscal year, as computed in determining the top-up amount of the minority-owned constituent entity under subsection (2), is nil, the GloBE income that would be determined under subsection 15(5) if the net GloBE income, and the allocated adjustment top-up amount and excess negative tax expense top-up amount of the minority-owned constituent entity, were the amounts computed in determining the top-up amount of the minority-owned constituent entity under subsection (2); and

  • (b) in any other case, the GloBE income computed in determining the minority-owned constituent entity’s top-up amount under subsection (2).

SUBDIVISION FTop-up Amount of a Joint Venture Entity

Marginal note:Joint venture top-up amount

• 35 (1) The top-up amount of a joint venture entity of a joint venture group, in respect of a particular MNE group, for a fiscal year is the amount that would be determined under subsection 30(1), 34(2) or 36(2), if

  • (a) all references in Divisions 2 and 3, Subdivisions A to E, G and H of this Division, Divisions 5 to 7 and Subdivision B of Division 8 to

    • (i) “MNE group” and “ultimate parent entity” were read as references to “joint venture group” and “joint venture”, respectively, and

    • (ii) “standard constituent entity” and “constituent entity” were read as references to “joint venture entity”;

  • (b) for greater certainty, the GloBE income or loss and adjusted covered taxes, as well as all the amounts that are to be computed under Subdivisions A to E, G and H of this Division and Divisions 5 to 7 in determining the top-up amount of the joint venture entity, were determined

    • (i) applying the rules in paragraph (a), and

    • (ii) based on the assumption that the joint venture group was a separate MNE group of which the joint venture was the ultimate parent entity and the joint venture entities were the only constituent entities;

  • (c) any amount of covered taxes that would be allocated from a constituent entity of the particular MNE group to the joint venture entity under any of subsections 24(4) to (6), if those subsections were applied without regard to paragraphs (a) and (b) of this subsection and the joint venture entity were a constituent entity of the particular MNE group, were allocated to the joint venture entity; and

  • (d) for the purposes of this subsection, any other modifications were made to Part 1 and Divisions 2 and 3, this Division, Divisions 5 to 7, Subdivision B of Division 8 and Subdivision A of Division 9 of this Part as the context requires.

• Marginal note:Allocation of joint venture top-up amount

  (2) For the purposes of Division 1 of this Part and Division 2 of Part 5,

  • (a) any joint venture entity in respect of a qualifying MNE group is deemed to be a constituent entity but not a relevant parent entity of the qualifying MNE group; and

  • (b) the GloBE income of a joint venture entity of a joint venture group that is located in a jurisdiction for a fiscal year, is

    • (i) if the net GloBE income of the joint venture group for the jurisdiction for the fiscal year, as computed in determining the top-up amount of the joint venture entity under subsection (1), is nil, the GloBE income that would be determined under subsection 15(5) if the net GloBE income, and the allocated adjustment top-up amount and excess negative tax expense top-up amount of the joint venture entity, were the amounts computed in determining the top-up amount of the joint venture entity under subsection (1), and

    • (ii) in any other case, the GloBE income computed in determining the joint venture entity’s top-up amount under subsection (1).

• Marginal note:Permanent establishment — deemed joint venture subsidiary

  (3) For the purposes of this section, if the main entity in respect of a permanent establishment is a joint venture, or a joint venture subsidiary of the joint venture, the permanent establishment is deemed to be a joint venture subsidiary of the joint venture separate and distinct from the main entity and any other permanent establishment of the main entity that is also deemed to be a joint venture subsidiary under this subsection.

SUBDIVISION GTop-up Amount of an Investment Entity

Marginal note:Definitions

• 36 (1) The following definitions apply in this section.

  investment entity adjusted covered taxes amount

  investment entity adjusted covered taxes amount means the amount that would, in the absence of section 8, be determined in respect of an investment subgroup entity for a fiscal year by the formula

  A − (B × A)

  where

  A

  is the amount of adjusted covered taxes of the investment subgroup entity for the fiscal year; and

  B

  is the minority investor percentage of the investment subgroup entity for the fiscal year. (montant des impôts concernés ajustés de l’entité d’investissement)

  investment entity GloBE income amount

  investment entity GloBE income amount means the amount that would, in the absence of section 8, be determined in respect of an investment subgroup entity for a fiscal year by the formula

  A − (B × A)

  where

  A

  is the GloBE income or loss of the investment subgroup entity for the fiscal year; and

  B

  is the minority investor percentage of the investment subgroup entity for the fiscal year. (montant du revenu GloBE de l’entité d’investissement)

  investment subgroup

  investment subgroup, in respect of an MNE group, means all investment subgroup entities of the MNE group. (sous-groupe d’investissement)

  investment subgroup entity

  investment subgroup entity, of an MNE group, means a constituent entity of the MNE group that is an investment entity or an insurance investment entity. (entité de sous-groupe d’investissement)

  minority investor percentage

  minority investor percentage, of an investment subgroup entity for a fiscal year, means the percentage of the GloBE income or loss of the investment subgroup entity for the fiscal year that is attributable (based on the relevant assumptions) to any ownership interest in the investment subgroup entity, other than any ownership interest held, directly or indirectly, by the ultimate parent entity of the MNE group of which the investment subgroup entity is a constituent entity. (pourcentage de l’investisseur minoritaire)

  minority-owned investment entity

  minority-owned investment entity, of a minority-owned subgroup of an MNE group, means a constituent entity of the MNE group that is

  • (a) an investment entity or an insurance investment entity; and

  • (b) included in the minority-owned subgroup. (entité d’investissement à détention minoritaire)

  minority-owned investment subgroup

  minority-owned investment subgroup, in respect of a minority-owned subgroup, means all minority-owned investment entities of the minority-owned subgroup. (sous-groupe d’investissement à détention minoritaire)

  relevant assumptions

  relevant assumptions, in respect of an attribution of GloBE income or loss for a fiscal year to an ownership interest in an investment subgroup entity, means the assumptions that

  • (a) the principles of the authorized financial accounting standard applicable in the preparation of the consolidated financial statements for the fiscal year of the ultimate parent entity of the MNE group that includes the investment subgroup entity are used for the purposes of the attribution;

  • (b) the net income of the investment subgroup entity is equal to its GloBE income or loss; and

  • (c) no amount of the GloBE income or loss of the investment subgroup entity is attributable to transactions with other group entities of the MNE group. (hypothèses pertinentes)

• Marginal note:Investment subgroup entity — top-up amount

  (2) Subject to subparagraphs 42(2)(d)(ii) and (e)(ii), the top-up amount of an investment subgroup entity of an investment subgroup in respect of an MNE group for a fiscal year is the amount determined under subsection 30(1) applying the following rules:

  • (a) any references in sections 29 to 32 and 34 to

    • (i) “MNE group”, except the reference to that term in the expression “ultimate parent entity of the MNE group” in subsection 32(15) which is to be read as a reference to “ultimate parent entity of the MNE group in which the investment subgroup is included”, are to be read as references to “investment subgroup”,

    • (ii) “standard constituent entity” or “constituent entity” are to be read as references to “investment subgroup entity”,

    • (iii) “GloBE income or loss”, except the references to that term in subsection 31(1), paragraph 32(3)(e) and subparagraph 32(14)(d)(iii), are to be read as references to “investment entity GloBE income amount”,

    • (iv) “GloBE income”, except the references to that term in paragraph 32(5)(a) and subsection 32(6), are to be read as references to “positive investment entity GloBE income amount”,

    • (v) “GloBE loss” are to be read as references to “negative investment entity GloBE income amount”,

    • (vi) “adjusted covered taxes”, except references to that term in subsection 31(1), are to be read as references to “investment entity adjusted covered taxes amount”,

    • (vii) “minority-owned subgroup” are to be read as references to “minority-owned investment subgroup”, and

    • (viii) “minority-owned constituent entity (other than an investment entity or an insurance investment entity)” are to be read as references to “minority-owned investment entity”;

  • (b) for greater certainty, all other amounts that are to be determined under sections 29 to 32 and 34 in determining the top-up amount of an investment subgroup entity of an investment subgroup are also to be determined applying the rules in paragraph (a);

  • (c) the amounts that would, in the absence of this paragraph, be determined for A and B in the formula in subsection 32(1) in respect of the investment subgroup entity are to be multiplied by the ratio determined by the formula

    A ÷ B

    where

    A

    is the investment entity GloBE income amount of the investment subgroup entity for the fiscal year, and

    B

    is the GloBE income or loss of the investment subgroup entity for the fiscal year;

  • (d) despite paragraph (a), all references to “fiscal year” in sections 29 to 32 and 34 are to the fiscal year of the MNE group; and

  • (e) any other modifications are made to sections 29 to 32 and 34 as the context requires.

• Marginal note:Interpretation rule

  (3) For the purposes of determining the top-up amount of an investment subgroup entity under subsection (2), subsection 21(3) and sections 37 to 39, 41 and 42 apply with such modifications, if any, as the context requires.

• Marginal note:Allocation of investment subgroup entity top-up amount

  (4) For the purposes of Division 1, the GloBE income of an investment subgroup entity of an investment subgroup that is located in a jurisdiction for a fiscal year, is

  • (a) if the net GloBE income of the investment subgroup for the jurisdiction for the fiscal year, as computed in determining the top-up amount of the investment subgroup entity under subsection (2), is nil, the GloBE income that would be determined under subsection 15(5) if the net GloBE income, and the allocated adjustment top-up amount and excess negative tax expense top-up amount of the investment subgroup entity, were the amounts computed in determining the top-up amount of the investment subgroup entity under subsection (2); and

  • (b) in any other case, the GloBE income computed in determining the investment subgroup entity’s top-up amount under subsection (2).

SUBDIVISION HEligible Distribution Tax Systems

Marginal note:Deemed distribution tax — rules

• 37 (1) If the filing constituent entity of an MNE group elects, in respect of a jurisdiction that has an eligible distribution tax system, for a fiscal year (referred to in this subsection as the “election year”),

  • (a) the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for the election year is deemed to be equal to the jurisdictional adjusted covered taxes determined without reference to this paragraph, plus an amount equal to the deemed distribution tax of the MNE group for the jurisdiction for the election year;

  • (b) a deemed distribution tax recapture account of the MNE group must be established by the MNE group in respect of the jurisdiction for the election year, and

    • (i) the account must be maintained and recorded by the MNE group, and

    • (ii) a record of the account must be made available at the request of the Minister for examination or inspection by any person authorized by the Minister for that purpose;

  • (c) subject to subsections (4) and (5), the outstanding balance of the deemed distribution tax recapture account is determined as follows:

    • (i) at the end of the election year, the balance is increased by the amount of the deemed distribution tax of the MNE group for the jurisdiction for the election year, and

    • (ii) at the end of each fiscal year (referred to in this paragraph as a “subsequent year”) following the election year, the outstanding balances of the deemed distribution tax recapture accounts in respect of the jurisdiction established for fiscal years preceding the subsequent year are reduced, but not below zero, in chronological order

      • (A) first by the taxes recorded by any standard constituent entities of the MNE group that are located in the jurisdiction during the subsequent year in relation to an actual or deemed distribution of profits,

      • (B) then by the amount of any net GloBE loss of the MNE group for the jurisdiction for the subsequent year multiplied by the minimum rate, and

      • (C) then by the recapture account loss carry-forward of the MNE group for the jurisdiction for the subsequent year; and

  • (d) any amount of tax recorded by a standard constituent entity of an MNE group in relation to an actual or deemed distribution of profits is not to be included in the adjusted covered taxes of that entity for any fiscal year to the extent that the amount is applied as a reduction under clause (c)(ii)(A) in determining the outstanding balance of any deemed distribution tax recapture account of the MNE group.

• Marginal note:Definition of deemed distribution tax

  (2) The deemed distribution tax, of an MNE group for a jurisdiction for a fiscal year, means the lesser of

  • (a) the amount determined by the formula

    A × B − C × B

    where

    A

    is the minimum rate,

    B

    is the net GloBE income of the MNE group for the jurisdiction for the fiscal year, and

    C

    is the rate that would be the effective tax rate of the MNE group for the jurisdiction for the fiscal year if

    • (i) it were determined without reference to this section, and

    • (ii) paragraph 29(1)(b) were read without reference to subparagraph (i) in the description of B in the formula in that paragraph and applied without reference to section 8, and

  • (b) the amount of tax that would be payable in respect of the standard constituent entities of the MNE group under the eligible distribution tax system of the jurisdiction for the fiscal year, if all the standard constituent entities of the MNE group that are located in the jurisdiction had distributed all of their income that was subject to the eligible distribution tax system during the fiscal year.

• Marginal note:Definition of recapture account loss carry-forward

  (3) The recapture account loss carry-forward, of an MNE group for a jurisdiction for a particular fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the total of all amounts each of which is determined by the formula

  C − D

  where

  C

  is the amount determined under clause (1)(c)(ii)(B) for the jurisdiction for any fiscal year preceding the particular fiscal year, and

  D

  is the total of all amounts each of which is the portion of the amount determined for C that was applied at the end of the preceding fiscal year referred to in the description of C as a reduction under clause (1)(c)(ii)(B) in determining the balance of a deemed distribution tax recapture account of the MNE group for the jurisdiction; and

  B

  is the total of all amounts each of which is the portion of a recapture account loss carry-forward of the MNE group for the jurisdiction for a fiscal year preceding the particular fiscal year that was applied as a reduction under clause (1)(c)(ii)(C) in determining the balance of a deemed distribution tax recapture account of the MNE group for the jurisdiction.

• Marginal note:ETR adjustment provision — four-year rule

  (4) If the outstanding balance of a deemed distribution tax recapture account of an MNE group in respect of a jurisdiction for a particular fiscal year is greater than nil at the end of the fourth fiscal year (referred to in this subsection as the “recapture year”) immediately following the particular fiscal year

  • (a) this subsection applies in the recapture year;

  • (b) for the purposes of applying subsection 31(1), the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for the particular fiscal year (being the adjustment year) is deemed to be equal to the jurisdictional adjusted covered taxes, determined without reference to this subsection and subsection 31(1), minus an amount equal to the outstanding balance of the deemed distribution tax recapture account at the end of the recapture year; and

  • (c) for the purposes of applying subparagraph (1)(c)(ii), at the end of any fiscal year following the recapture year, the outstanding balance of the deemed distribution tax recapture account is deemed to be nil.

• Marginal note:ETR adjustment provision — departing constituent entity

  (5) In the fiscal year (referred to in this subsection as the “departure year”) in which a departing constituent entity of an MNE group that is located in a jurisdiction leaves the MNE group or transfers substantially all of its assets to a recipient that is not, at the time of the transfer, a standard constituent entity of the MNE group that is located in the jurisdiction

  • (a) this subsection applies;

  • (b) for the purposes of applying subsection 31(1), the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction for a fiscal year preceding the departure year (referred to in this subsection as a “pre-departure year”) for which the outstanding balance of the deemed distribution tax recapture account at the end of the departure year is greater than nil (each of those pre-departure years being an adjustment year), is deemed to be equal to the jurisdictional adjusted covered taxes for that pre-departure year, determined without reference to this subsection and subsection 31(1), minus an amount (referred to in this subsection as a “recapture amount”) equal to the outstanding balance of the deemed distribution tax recapture account for that pre-departure year at the end of the departure year; and

  • (c) for the purposes of applying this Act at any time after the departure year, each of the outstanding balance of the deemed distribution tax recapture account at the end of the departure year, net GloBE income, jurisdictional adjusted covered taxes and substance-based income exclusion amount of the MNE group for the jurisdiction for a pre-departure year that is an adjustment year is deemed to be the amount determined without reference to this paragraph (referred to in this paragraph as “the amount otherwise determined”), minus the product obtained by multiplying the amount otherwise determined by the disposition recapture ratio of the departing constituent entity for the pre-departure year.

• Marginal note:Definition of disposition recapture ratio

  (6) The disposition recapture ratio of a departing constituent entity of an MNE group for a jurisdiction for a fiscal year means the lesser of

  • (a) 1; and

  • (b) the amount determined by the formula

    A ÷ B

    where

    A

    is the GloBE income of the departing constituent entity for the fiscal year, and

    B

    is the net GloBE income of the MNE group for the jurisdiction for the fiscal year.

DIVISION 5Reorganizations and Asset Transfers

Marginal note:Constituent entities joining and leaving MNE group

• 38 (1) Subject to subsection (2), if an entity (referred to in this subsection as the “transferred entity”) ceases to be a constituent entity of an MNE group (referred to in this subsection as the “MNE group” or the “disposing MNE group”), or becomes a constituent entity of an MNE group (referred to in this subsection as the “MNE group” or the “acquiring MNE group”) — including where the entity becomes the ultimate parent entity of an MNE group — as a result of a transfer, in a fiscal year (referred to in this section as the “transfer year”) of the MNE group, of ownership interests in the transferred entity or in another entity that holds, directly or indirectly, an ownership interest in the transferred entity, the following rules apply:

  • (a) the transferred entity is to be treated as a constituent entity of the MNE group for the transfer year, if any portion of the transferred entity’s assets, liabilities, income, expenses or cash flows is included on a line-by-line basis in the consolidated financial statements of the ultimate parent entity of the MNE group for the fiscal year;

  • (b) any portion of the transferred entity’s financial accounting income and adjusted covered taxes that is not taken into account in the consolidated financial statements of the ultimate parent entity of the MNE group for the transfer year is not to be taken into account in determining any amount under this Act in respect of the MNE group for the transfer year;

  • (c) the transferred entity’s GloBE income or loss and adjusted covered taxes, for the transfer year and any subsequent fiscal years, is to be determined using its historical carrying value of its assets and liabilities;

  • (d) in determining, under subsection 32(1), the substance-based income exclusion amount of the MNE group for the jurisdiction in which the transferred entity is located for the transfer year,

    • (i) any portion of the transferred entity’s eligible payroll costs that is not taken into account in the preparation of the consolidated financial statements of the ultimate parent entity of the MNE group for the transfer year is not to be taken into account, and

    • (ii) the eligible tangible asset amount of the transferred entity for the transfer year is not to exceed the amount determined by the formula

      A × B ÷ C

      where

      A

      is the amount that would be the transferred entity’s eligible tangible asset amount for the transfer year as determined under subsection 32(9) if that subsection were applied without reference to this subparagraph,

      B

      is

      • (A) if the MNE group is an acquiring MNE group, the total number of days in the transfer year less the number of days in the transfer year preceding and including the day on which the disposition occurred, and

      • (B) if the MNE group is a disposing MNE group, the total number of days in the transfer year less the number of days in the transfer year following the day on which the disposition occurred, and

      C

      is the total number of days in the transfer year;

  • (e) deferred tax assets (other than GloBE loss deferred tax assets) and deferred tax liabilities of the transferred entity that arose, and did not reverse, before the transfer are to be taken into account, in the transfer year and any subsequent fiscal years, in determining amounts under this Act in respect of the acquiring MNE group, in the same manner and to the same extent as if the ultimate parent entity of the acquiring MNE group had a controlling interest in respect of the transferred entity in the period that

    • (i) began with the time at which the deferred tax asset or deferred tax liability arose, and

    • (ii) ended at the time of the transfer;

  • (f) for the purposes of applying section 25 in determining the transferred entity’s total deferred tax adjustment amount,

    • (i) any deferred tax liability (referred to in this paragraph as the “transferred deferred tax liability”) that was taken into account in determining the transferred entity’s total deferred tax adjustment amount for a fiscal year in respect of the disposing MNE group and that has not reversed in or before the transfer year the transfer, is deemed

      • (A) in respect of the disposing MNE group, to reverse in the group’s fiscal year immediately preceding the transfer year, and

      • (B) in respect of the acquiring MNE group, to have arisen in, and been included in determining the transferred entity’s total deferred tax adjustment amount for, the transfer year, and

    • (ii) if the transferred deferred tax liability does not reverse in any of the five fiscal years of the acquiring MNE group immediately following the transfer year, the reduction in adjusted covered taxes under subsection 25(6) in respect of the recapture of the transferred deferred tax liability is to be applied in the fifth fiscal year immediately following the transfer year instead of in the transfer year; and

  • (g) if the transferred entity is a relevant parent entity of two or more qualifying MNE groups for the transfer year, the transferred entity is to apply sections 14 and 18 separately in respect of each of those MNE groups for the transfer year.

• Marginal note:Transfers treated as transfers of assets and liabilities — application

  (2) Despite subsection (1), the acquisition or disposition by a constituent entity of an MNE group of a controlling interest in another entity (referred to in this subsection as the “transferred entity”) is to be treated as an acquisition or disposition, as the case may be, of the assets and liabilities of the transferred entity for the purposes of section 39, if

  • (a) the disposition — or the disposition giving rise to the acquisition, as the case may be — is treated in the same or substantially similar manner as a disposition of the transferred entity’s assets and liabilities under the laws of

    • (i) if the transferred entity is a tax transparent entity at the time of the disposition, the jurisdiction in which the assets of the transferred entity are located, or

    • (ii) in any other case, the jurisdiction in which the transferred entity is located; and

  • (b) the jurisdiction referred to in subparagraph (a)(i) or (ii), as the case may be, imposes a covered tax on the transferor in respect of the disposition — or the disposition giving rise to the acquisition, as the case may be — that is calculated by reference to the amount by which the consideration paid or payable on the disposition, or the fair value of the assets and liabilities, exceeds the transferred entity’s tax basis in respect of the assets and liabilities.

Marginal note:Acquisitions and dispositions of assets and liabilities — no GloBE reorganization

• 39 (1) If a constituent entity of an MNE group disposes of or acquires assets and liabilities (other than in the course of a GloBE reorganization) in a fiscal year,

  • (a) in the case of a disposition, any gain or loss on the disposition is to be included in determining the disposing constituent entity’s GloBE income or loss for the year; and

  • (b) in the case of an acquisition, the GloBE income or loss of the acquiring constituent entity is to be determined using

    • (i) if subsection 38(2) applies to treat the acquiring constituent entity as having acquired the assets and liabilities, the fair value of the assets and liabilities, and

    • (ii) in any other case, the acquiring constituent entity’s carrying value of the acquired assets and liabilities immediately after the acquisition, determined under the accounting standard used in preparing the consolidated financial statements of the ultimate parent entity of the MNE group.

• Marginal note: Transfers of assets and liabilities — GloBE reorganization

  (2) If a constituent entity of an MNE group disposes of or acquires assets and liabilities in a fiscal year in the course of a GloBE reorganization

  • (a) in the case of a disposition, in computing the disposing constituent entity’s GloBE income or loss for the fiscal year,

    • (i) if the disposition gives rise to a non-qualifying gain or loss, the non-qualifying gain or loss is to be included, and

    • (ii) in any other case, any gain or loss on the disposition is to be excluded; and

  • (b) in the case of an acquisition, the acquiring constituent entity’s GloBE income or loss for the fiscal year and each subsequent fiscal year is to be determined using the disposing constituent entity’s carrying values of the assets and liabilities immediately before the disposition, adjusted, in a manner consistent with the income tax laws of the jurisdiction in which the acquiring constituent entity is located, to take into account any non-qualifying gain or loss arising from the disposition.

• Marginal note:Election to adjust assets and liabilities to fair value

  (3) If the filing constituent entity elects for a particular fiscal year in respect of a particular constituent entity of the MNE group that is required or permitted, under the income tax laws of the jurisdiction where it is located, to adjust the basis of its assets or the amount of its liabilities (referred to in this subsection as “adjusted assets” and “adjusted liabilities”) for tax purposes to fair value in the particular fiscal year as a result of a transaction or event (referred to in this subsection as the “triggering event”), other than a triggering event that is a sale of assets in the ordinary course of a business or the application of a transfer pricing provision under the income tax laws, the following rules apply:

  • (a) the fair value for financial accounting purposes of an adjusted asset or adjusted liability immediately after the triggering event is to be used in determining the particular constituent entity’s GloBE income or loss for the particular fiscal year and each subsequent fiscal year;

  • (b) for the purposes of determining the particular constituent entity’s GloBE income or loss, the particular constituent entity’s

    • (i) gain, if any, in respect of an adjusted asset or adjusted liability is the amount determined by the formula

      A − B − C

      where

      A

      is the fair value of the asset or liability immediately after the triggering event,

      B

      is the carrying value of the asset or liability for financial accounting purposes immediately before the triggering event, and

      C

      is the non-qualifying gain, if any, in respect of the asset or liability arising in connection with the triggering event, and

    • (ii) loss, if any, in respect of an adjusted asset or adjusted liability is the amount determined by the formula

      B − A − D

      where

      D

      is the non-qualifying loss, if any, in respect of the asset or liability arising in connection with the triggering event;

  • (c) the net total amount of the gains and losses determined under paragraph (b) is to be

    • (i) included in computing the particular constituent entity’s GloBE income or loss for the particular fiscal year, or

    • (ii) divided into five equal amounts to be included in computing the particular constituent entity’s GloBE income or loss for the particular fiscal year and the four immediately following fiscal years; and

  • (d) if subparagraph (c)(ii) applies and the particular constituent entity leaves the MNE group in any of the five fiscal years referred to in that subparagraph, any portion of the net total amount referred to in paragraph (c) that has not been included in computing the particular constituent entity’s GloBE income or loss for a previous fiscal year is to be included in computing its GloBE income or loss for the final fiscal year in which it was a constituent entity of the MNE group.

DIVISION 6Multi-Parented MNE Groups

Marginal note:Multi-parented MNE group rules

• 40 (1) Except for this section and subparagraph 14(3)(c)(ii), the following rules apply in respect of a multi-parented MNE group:

  • (a) all the entities of all the groups (referred to in this section as the “constituent groups”) constituting the multi-parented MNE group are deemed to be entities of a single MNE group that is the multi-parented MNE group;

  • (b) all the entities (other than excluded entities) of all the constituent groups are deemed to be constituent entities of the single MNE group;

  • (c) references to the “consolidated financial statements” of an ultimate parent entity in this Act are to be read as references to the financial statements described in either paragraph (f) of the definition dual-listed arrangement, or paragraph (c) of the definition stapled structure, in subsection 2(1), as applicable, and the financial accounting standard used in the preparation of those financial statements is deemed to be the accounting standard of the ultimate parent entities of each of the constituent groups;

  • (d) the ultimate parent entity of each constituent group is deemed to be an ultimate parent entity of the single MNE group; and

  • (e) references to “ultimate parent entity” in this Act are to be read as references to all of the ultimate parent entities of the constituent groups, as the context requires.

• Marginal note:Deemed group entities

  (2) If a particular entity would be included in a particular constituent group of a multi-parented MNE group if all the ownership interests in the particular entity held by group entities of the constituent groups of the multi-parented MNE group were held by a single group entity (other than the particular entity) of the particular constituent group, the particular entity is deemed

  • (a) for the purposes of subsection (1) and subsection 11(1), to be included in the particular constituent group; and

  • (b) for the purposes of section 35, not to be a joint venture or a joint venture subsidiary in respect of any of the constituent groups of the multi-parented MNE group.

DIVISION 7Elections in Relation to Investment Entities

SUBDIVISION ATax Transparency Election

Marginal note:Investment entity tax transparency election

• 41 (1) A constituent entity, of an MNE group, that is an investment entity or an insurance investment entity is deemed to be a flow-through entity that is a tax transparent entity in relation to a constituent entity-owner of the constituent entity, if

  • (a) the filing constituent entity of the MNE group elects in respect of the constituent entity-owner under this subsection; and

  • (b) either

    • (i) both of the following conditions are met:

      • (A) the constituent entity-owner is subject to tax in the jurisdiction where it is located under a mark-to-market or similar regime based on the annual changes in fair value of its ownership interest in the constituent entity, and

      • (B) under that regime, the tax rate applicable to the constituent entity-owner with respect to those annual changes in fair value is greater than or equal to the minimum rate, or

    • (ii) the constituent entity-owner is a mutual insurance company.

• Marginal note:Indirect constituent entity-owners

  (2) For the purposes of clause (1)(b)(i)(A), a constituent entity-owner is deemed to be subject to tax in the jurisdiction where it is located under a mark-to-market or similar regime with respect to its indirect ownership interest in an investment entity or an insurance investment entity, if the constituent entity-owner

  • (a) holds that ownership interest through one or more other investment entities or insurance investment entities; and

  • (b) is subject to tax in the jurisdiction where it is located under a mark-to-market or similar regime with respect to all its direct ownership interests in any entity described in paragraph (a).

• Marginal note:Five-year election

  (3) The following rules apply in respect of an election made under subsection (1):

  • (a) the election is a five-year election; and

  • (b) if the election is revoked at any time, for the purpose of determining the GloBE income or loss of the investment entity or insurance investment entity in respect of which the election was made after that time, any gain or loss from the disposition after that time of an asset or liability held by the entity is to be determined based on

    • (i) if the entity’s assets and liabilities are accounted for on a fair value basis, the fair value of the asset or liability on the first day of the fiscal year in which the disposition occurs, and

    • (ii) in any other case, the fair value of the asset or liability on the first day of the revocation year.

SUBDIVISION BTaxable Distribution Method Election

Marginal note:Definitions

• 42 (1) The following definitions apply in this section.

  qualifying owner

  qualifying owner, of an investment entity, means an entity if

  • (a) the entity

    • (i) is a group entity in respect of the investment entity,

    • (ii) is not an investment entity, and

    • (iii) holds an ownership interest in the investment entity; and

  • (b) it can reasonably be expected that the aggregate of the tax payable by the entity in respect of distributions from the investment entity and the tax payable by the entity in respect of the distributed profits is equal to or greater than the amount of the distributions multiplied by the minimum rate. (détenteur admissible)

  testing period

  testing period in respect of the undistributed net GloBE income of an investment entity for a tested year, means the tested year and

  • (a) if any of the three fiscal years immediately following the tested year is a revocation year, any fiscal years following the tested year that precede the revocation year; and

  • (b) in any other case, the three fiscal years immediately following the tested year. (période de test)

  undistributed net GloBE income

  undistributed net GloBE income, of an investment entity for a tested year, means the amount determined by the formula

  A − B

  where

  A

  is the investment entity’s GloBE income for the tested year (which, for greater certainty, does not include any amount deemed to be included in the investment entity’s GloBE income for that tested year because of clause (2)(d)(i)(A) or (2)(e)(i)(A)); and

  B

  is the total of all amounts, other than to the extent the amounts are taken into account as reductions in computing the undistributed net GloBE income of the investment entity for a previous tested year, each of which is

  • (a) covered taxes paid or payable by the investment entity for the tested year,

  • (b) a distribution or deemed distribution by the investment entity that is received by shareholders (other than other investment entities) in the testing period in respect of the tested year,

  • (c) the investment entity’s GloBE loss for a fiscal year within the testing period in respect of the tested year, or

  • (d) a GloBE loss of the investment entity for an election year that precedes the tested year, to the extent the loss was not taken into account as a reduction in computing the investment entity’s undistributed net GloBE income for any tested year preceding the tested year. (revenu GloBE net non distribué)

• Marginal note:Taxable distribution method election

  (2) If the filing constituent entity elects under this section in respect of a qualifying owner’s ownership interest in an investment entity or insurance investment entity (referred to in this section as the “investment entity”) and an election under subsection 41(1) is not in effect in relation to that ownership interest, the following rules apply in respect of fiscal years to which the election applies (each referred to in this section as an “election year” or a “tested year”):

  • (a) the election is a five-year election;

  • (b) distributions and deemed distributions of amounts out of the investment entity’s GloBE income for an election year are included in computing the GloBE income or loss of the qualifying owner for the election year in which it receives the distribution;

  • (c) any amount in respect of covered taxes paid or payable by the investment entity that is allowed as a credit against the tax liability of the qualifying owner, in respect of a distribution from the investment entity, arising in an election year is included for that election year in computing the qualifying owner’s

    • (i) GloBE income or loss, and

    • (ii) adjusted covered taxes;

  • (d) for the particular election year that is the third fiscal year immediately following a tested year

    • (i) for the purposes of subsection 15(3), the GloBE income of the investment entity for the particular election year is deemed to be equal to the total of all amounts, each of which is

      • (A) the proportionate share — of a qualifying owner in respect of whose ownership interest in the investment entity an election under this subsection applies — of the investment entity’s undistributed net GloBE income for the tested year, and

      • (B) the GloBE income, if any, of the investment entity for the particular election year attributable to any ownership interests in the investment entity in respect of which an election under this subsection does not apply, and

    • (ii) the top-up amount of the investment entity for the particular election year, determined in the absence of this subparagraph, is increased by the amount determined by the formula

      A × B

      where

      A

      is the total of all amounts described in clause (i)(A), and

      B

      is the minimum rate;

  • (e) if the election is revoked,

    • (i) for the purposes of subsection 15(3), the GloBE income of the investment entity for the revocation year is deemed to be equal to the total of all amounts, each of which is

      • (A) the proportionate share — of a qualifying owner in respect of whose ownership interest in the investment entity an election under this subsection applies — of the investment entity’s undistributed net GloBE income for any of the three tested years immediately preceding the revocation year, and

      • (B) the GloBE income, if any, of the investment entity for the revocation year attributable to any ownership interests in the investment entity in respect of which an election under this subsection does not apply, and

    • (ii) the top-up amount of the investment entity for the revocation year, determined in the absence of this subparagraph, is increased by the amount determined by the formula

      A × B

      where

      A

      is the total of all amounts described in clause (i)(A), and

      B

      is the minimum rate; and

  • (f) the investment entity’s GloBE income or loss for an election year that is attributable to any ownership interests in respect of which an election under this subsection applies, and any adjusted covered taxes in respect of that GloBE income or loss, are excluded from all computations of effective tax rates and top-up amounts under this Act, other than as provided in paragraphs (c) to (e).

• Marginal note:Deemed distribution — transfer of ownership interest

  (3) For the purposes of this section, if, in an election year, a qualifying owner (referred to in this subsection as the “transferor”) transfers an ownership interest in an investment entity in respect of which an election under subsection (2) applies to a person that is not a group entity in respect of the transferor,

  • (a) the transfer is treated as a deemed distribution by the investment entity to the transferor; and

  • (b) the amount of the deemed distribution is the amount determined by the formula

    A × B ÷ C

    where

    A

    is the total of all amounts, each of which is the transferor’s proportionate share of the investment entity’s undistributed net GloBE income (determined without reference to the deemed distribution), immediately before the transfer, for a tested year that is any of the three fiscal years immediately preceding the transfer year,

    B

    is the value of the transferred ownership interest, and

    C

    is the total value of all the ownership interests in the investment entity.

DIVISION 8Safe Harbours

SUBDIVISION APermanent Safe Harbours

Marginal note:Definitions

43 The following definitions apply in this Subdivision.

non-material constituent entity

non-material constituent entity means a particular constituent entity of an MNE group, or a permanent establishment of the particular constituent entity, if

• (a) the particular constituent entity’s assets, liabilities, income, expenses and cash flows are not included in the ultimate parent entity’s consolidated financial statements;

• (b) the consolidated financial statements are

  • (i) described in paragraph (a) or (c) of the definition consolidated financial statements in subsection 2(1), and

  • (ii) externally audited and the accompanying auditor’s opinion does not contain objections or qualifications in relation to the exclusion of the particular constituent entity from the consolidation perimeter; and

• (c) where the total revenue, as reported on the MNE group’s country-by-country report, that is attributable to the particular constituent entity for a fiscal year is greater than €50 million, the financial accounts that are used to complete the MNE group’s country-by-country report are prepared in accordance with an acceptable financial accounting standard or authorized financial accounting standard. (entité constitutive non matérielle)

relevant country-by-country reporting regulations

relevant country-by-country reporting regulations, in respect of an MNE group, means

• (a) the country-by-country reporting requirements of

  • (i) if the country-by-country report is filed by the ultimate parent entity of the MNE group, the jurisdiction where the ultimate parent entity is located, or

  • (ii) if the country-by-country report is filed by the surrogate parent entity of the MNE group (as defined in the OECD final report referred to in paragraph (b)), the jurisdiction where the surrogate parent entity is located; or

• (b) in any other case, the Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 - 2015 Final Report, published by the OECD on October 5, 2015 and the Guidance on the Implementation of Country-by-Country Reporting: BEPS Action 13, published by the OECD in October 2022, as amended from time to time. (règlements pertinents en matière de déclaration pays par pays)

simplified income

simplified income, of a non-material constituent entity of an MNE group for a fiscal year, means

• (a) if an election is made under section 46 for the fiscal year, the amount determined under paragraph 46(a) for the fiscal year; and

• (b) in any other case, the non-material constituent entity’s GloBE income or loss for the fiscal year. (résultat net simplifié)

simplified revenue

simplified revenue, of a non-material constituent entity of an MNE group for a fiscal year, means

• (a) if an election is made under section 46 for the fiscal year, the amount determined under paragraph 46(a) for the fiscal year; and

• (b) in any other case, the non-material constituent entity’s financial accounting revenue for the fiscal year. (chiffre d’affaires simplifié)

simplified tax

simplified tax, of a non-material constituent entity of an MNE group for a fiscal year, means

• (a) if an election is made under section 46 for the fiscal year, the amount determined under paragraph 46(b) for the fiscal year; and

• (b) in any other case, the non-material constituent entity’s adjusted covered taxes for the fiscal year. (impôt simplifié)

Marginal note:Qualified domestic minimum top-up tax safe harbour

44 The top-up amount of a particular constituent entity of an MNE group or particular joint venture entity in respect of an MNE group (referred to in this section as the “particular entity”) is deemed to be nil for a fiscal year, if

• (a) the particular entity is

  • (i) located in a jurisdiction that has a qualified domestic minimum top-up tax for the fiscal year, or

  • (ii) a stateless entity the top-up amount of which is subject to such a tax in a jurisdiction;

• (b) the jurisdiction’s qualified domestic minimum top-up tax has qualified domestic minimum top-up tax safe harbour status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework and published on the website of the OECD;

• (c) the filing constituent entity of the MNE group is permitted to elect, in accordance with chapter 5.1 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) July 2023, published by the OECD on July 13, 2023, as amended from time to time, the qualified domestic minimum top-up tax safe harbour for the fiscal year in respect of the particular entity; and

• (d) the filing constituent entity of the MNE group elects to apply the qualified domestic minimum top-up tax safe harbour for the fiscal year in respect of the particular entity.

Marginal note:Simplified calculations safe harbour

45 The top-up amount of each standard constituent entity of an MNE group that is located in a jurisdiction for a particular fiscal year is deemed to be the amount that would be its top-up amount if the top-up percentage that is relevant in calculating that top-up amount were nil, if

• (a) all of the standard constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year are non-material constituent entities;

• (b) the filing constituent entity of the MNE group elects the simplified calculations safe harbour for the jurisdiction for a particular fiscal year; and

• (c) at least one of the following tests is met, in respect of the MNE group, for the jurisdiction in the particular fiscal year:

  • (i) the de minimis threshold test described in subsection 47(3), where

    • (A) the reference to “total revenues of the MNE group for the jurisdiction for the year” in paragraph 47(3)(a) is read as a reference to “total of all amounts each of which is the simplified revenue of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”, and

    • (B) the reference to “profit (loss) before income tax of the MNE group for the jurisdiction for the year” in paragraph 47(3)(b) is read as a reference to “total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”,

  • (ii) the simplified effective tax rate test described in subsection 47(4), where

    • (A) paragraphs 47(4)(a), (b) and (c) are read as “at least 15%”, and

    • (B) the simplified effective tax rate of the non-material constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year under subsection 47(5) is the amount that it would be if

      • (I) the reference to “qualifying income tax expense” in the description of A in that subsection were read as a reference to “simplified tax”, and

      • (II) the reference to “the profit (loss) before income tax of the MNE group for the jurisdiction for the fiscal year” in the description of B in that subsection were read as a reference to “the total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”, or

  • (iii) the routine profits test described in subsection 47(6), where

    • (A) the reference to “qualified substance-based income exclusion” in paragraph 47(6)(a) is read as a reference to “substance-based income exclusion”, and

    • (B) the references to “profit (loss) before income tax of the MNE group for the jurisdiction for the year” in paragraphs 47(6)(a) and (b) are read as references to “total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”.

Marginal note:Non-material constituent entities

46 If the filing constituent entity of an MNE group elects in respect of a non-material constituent entity for a fiscal year, for the purposes of section 45

• (a) the simplified income and simplified revenue of the non-material constituent entity are equal to the portion of the total revenues of the MNE group for the jurisdiction in which the non-material constituent entity is located, as determined in accordance with the relevant country-by-country reporting regulations, that is attributable to the non-material constituent entity for the fiscal year; and

• (b) the simplified tax of the non-material constituent entity is equal to the portion of the income tax accrued (current year) of the MNE group for the jurisdiction in which the non-material constituent entity is located, as determined in accordance with the relevant country-by-country reporting regulations, that is attributable to the non-material constituent entity for the fiscal year.

SUBDIVISION BTransitional Safe Harbours

Marginal note:Definitions — transitional CbCR safe harbour

• 47 (1) The following definitions apply in this section.

  deduction/non-inclusion arrangement

  deduction/non-inclusion arrangement means an arrangement entered into after December 15, 2022 under which a particular constituent entity of an MNE group directly or indirectly provides credit to, or otherwise makes an investment in, another constituent entity of the MNE group that results in an expense or loss in the financial statements of any constituent entity, to the extent that

  • (a) there is no commensurate increase in the revenue or gain in the financial statements of the particular constituent entity;

  • (b) the particular constituent entity is not reasonably expected over the life of the arrangement to have a commensurate increase in its taxable income; and

  • (c) the expense or loss is not solely in respect of qualifying tier one capital issued pursuant to regulatory requirements applicable to the banking sector. (accord de déduction/non-inclusion)

  duplicate loss arrangement

  duplicate loss arrangement means an arrangement entered into after December 15, 2022 that results in an expense or loss being included in the financial statements of a constituent entity of an MNE group, to the extent that

  • (a) the expense or loss is also included as an expense or loss in the financial statements of another constituent entity of the MNE group; or

  • (b) the arrangement also gives rise to a duplicate amount that is deductible for purposes of determining the taxable income of another constituent entity of the MNE group that is located in a different jurisdiction from the first constituent entity. (accord de duplication de perte)

  duplicate tax recognition arrangement

  duplicate tax recognition arrangement means an arrangement entered into after December 15, 2022 that results in each of two or more constituent entities of an MNE group including all or any portion of the same income tax expense in its adjusted covered taxes or qualifying income tax expense, unless the arrangement

  • (a) also results in the income subject to tax being included in the relevant financial statements of each of those constituent entities; or

  • (b) would, in the absence of this paragraph, be a duplicate tax recognition arrangement solely because, in computing the simplified effective tax rate of the standard constituent entities of the MNE group that are located in a jurisdiction in a fiscal year under subsection (5), no adjustments are required in respect of income tax expenses that would otherwise be allocated to another constituent entity in determining its adjusted covered taxes. (accord de duplication de dépense fiscale)

  net unrealized fair value loss

  net unrealized fair value loss means the total of all amounts each of which is the loss of a standard constituent entity of an MNE group that is located in a jurisdiction arising from changes in fair value of ownership interests (other than portfolio holdings), as reduced by the total amount of gains of such entities arising from such changes. (perte nette non réalisée de la juste valeur)

  profit (loss) before income tax

  profit (loss) before income tax, of an MNE group for a jurisdiction for a fiscal year, means profit (loss) before income tax in the jurisdiction as reported on the MNE group’s qualified country-by-country report (or that would have been so reported if the MNE group had been required to file a country-by-country report), that is attributable to standard constituent entities, adjusted to

  • (a) exclude any net unrealized fair value loss in the jurisdiction that exceeds €50 million; and

  • (b) add back any amount recorded as a reduction in income in the financial accounts of a standard constituent entity that is attributable to an impairment of goodwill related to any transaction entered into after November 30, 2021, for the purposes of applying

    • (i) the routine profits test under subsection (6), and

    • (ii) the simplified effective tax rate test under subsection (4), if the financial accounts of the standard constituent entity do not also have a reversal of a deferred tax liability, or recognition or increase of a deferred tax asset, in respect of the impairment of goodwill. (bénéfice (perte) avant impôts)

  qualified country-by-country report

  qualified country-by-country report, in respect of an MNE group, means a country-by-country report for a jurisdiction for a fiscal year that

  • (a) is filed in accordance with the relevant country-by-country reporting regulations (as defined in section 43);

  • (b) is prepared on the basis of qualified financial statements of the standard constituent entities of the MNE group for the jurisdiction for the fiscal year; and

  • (c) in the case of a multi-parented MNE group, includes the information of all constituent entities of the multi-parented MNE group. (déclaration pays par pays admissible)

  qualified financial statements

  qualified financial statements, of the standard constituent entities of an MNE group that are located in a jurisdiction for a particular fiscal year, means the financial accounts or financial statements of the standard constituent entities, if

  • (a) the financial accounts or financial statements are

    • (i) used to prepare the consolidated financial statements of the ultimate parent entity for the particular fiscal year,

    • (ii) prepared in accordance with an acceptable financial accounting standard or authorized financial accounting standard, if the information contained in those statements is maintained based on that accounting standard and is reliable,

    • (iii) if a standard constituent entity is not included in the consolidated financial statements of the MNE group on a line-by-line basis solely due to size or materiality grounds, the financial accounts of the standard constituent entity that are used for preparation of the MNE group’s country-by-country report, or

    • (iv) if a standard constituent entity is a permanent establishment that does not have separate financial accounts described in subparagraph (i) or separate financial statements described in subparagraph (ii), the separate financial statements prepared by the main entity for the permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes; and

  • (b) either

    • (i) the financial accounts or statements do not incorporate purchase price accounting adjustments, or

    • (ii) where the financial accounts or financial statements of one or more of the standard constituent entities incorporate purchase price accounting adjustments, it is the case that

      • (A) the MNE group has not submitted a country-by-country report for a fiscal year beginning after December 31, 2022 and before the particular fiscal year that was based on the standard constituent entity’s financial accounts or financial statements without the purchase price accounting adjustments, or

      • (B) the standard constituent entity was required by law or regulation to change its financial accounts or financial statements to include purchase price accounting adjustments for a fiscal year beginning after December 31, 2022 and that precedes or is the particular fiscal year. (états financiers admissibles)

  qualified person

  qualified person means

  • (a) in respect of an ultimate parent entity that is a flow-through entity, a holder described in any of paragraphs 20(1)(a) to (c); and

  • (b) in respect of an ultimate parent entity that is subject to a deductible dividend regime, a dividend recipient described in any of paragraphs 21(1)(a) to (c). (personne admissible)

  qualified substance-based income exclusion amount

  qualified substance-based income exclusion amount, of an MNE group for a jurisdiction for a fiscal year, means the substance-based income exclusion amount of the MNE group for the jurisdiction for the fiscal year determined without regard to the eligible payroll costs and eligible tangible asset amount of any standard constituent entity of the MNE group that is located in the jurisdiction that, for the purposes of the group’s qualified country-by-country report

  • (a) is not regarded as a constituent entity of the MNE group; or

  • (b) is not regarded as located in the jurisdiction. (montant de l’exclusion de revenus fondée sur la substance admissible)

  qualifying income tax expense

  qualifying income tax expense means the income tax expense as reported on the qualified financial statements of a standard constituent entity of an MNE group, adjusted to exclude

  • (a) any amount that does not relate to covered taxes; and

  • (b) any amount that relates to uncertain tax positions. (charges d’impôts admissibles)

  total revenues

  total revenues, of an MNE group for a jurisdiction for a fiscal year, means total revenues in the jurisdiction as reported on the MNE group’s qualified country-by-country report (or that would have been so reported if the MNE group had been required to file a country-by-country report), that are attributable to standard constituent entities, adjusted to include the revenues of constituent entities of the MNE group that are held for sale and are not already included. (recettes totales)

• Marginal note:Election — transitional CbCR safe harbour

  (2) If the filing constituent entity of an MNE group elects the transitional safe harbour for a jurisdiction for a particular fiscal year, the top-up amount of each standard constituent entity of the MNE group that is located in the jurisdiction for the particular fiscal year is deemed to be nil, if

  • (a) the particular fiscal year begins before January 1, 2027 and ends before July 1, 2028;

  • (b) either

    • (i) a qualified country-by-country report in respect of the MNE group has been filed in relation to the jurisdiction for the particular fiscal year, or

    • (ii) if the MNE group is not required to file a country-by-country report, the filing constituent entity files a GIR, in respect of the MNE group for the particular fiscal year, and completes section 2.2.1.3(a) of the GIR, in relation to the jurisdiction for the particular fiscal year, using the data from qualified financial statements that would have been reported as total revenues and profit (loss) before income tax in a qualified country-by-country report;

  • (c) the election has been made in respect of the jurisdiction for each preceding fiscal year in which a constituent entity of, or joint venture entity in respect of, the MNE group that is located in the jurisdiction is subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax;

  • (d) an election under subsection 37(1) has not been made by the MNE group in respect of the jurisdiction for the particular fiscal year;

  • (e) at least one of the following tests is met, in respect of the MNE group, for the jurisdiction in the particular fiscal year:

    • (i) the de minimis threshold test,

    • (ii) the simplified effective tax rate test, or

    • (iii) the routine profits test;

  • (f) all of the data used to perform the computations under subsections (3) to (6) for all of the standard constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year (other than any non-material constituent entities or permanent establishments) comes from qualified financial statements described in subparagraph (a)(i) of the definition qualified financial statements in subsection (1), or from qualified financial statements described in subparagraph (a)(ii) of that definition; and

  • (g) any payment received or receivable by a particular standard constituent entity located in the jurisdiction for the fiscal year from another constituent entity of the MNE group that is treated as an expense in the qualified financial statements of the other constituent entity for the fiscal year is included, for the purposes of applying the transitional safe harbour, in the total revenues and profit (loss) before income tax of the MNE group for the jurisdiction where the particular standard constituent entity is located for the fiscal year.

• Marginal note:De minimis threshold test

  (3) The de minimis threshold test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if

  • (a) the total revenues of the MNE group for the jurisdiction for the year is less than €10 million; and

  • (b) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is less than €1 million.

• Marginal note:Simplified effective tax rate test

  (4) The simplified effective tax rate test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if the simplified effective tax rate of the standard constituent entities of the MNE group that are located in that jurisdiction is

  • (a) in the case of a fiscal year beginning before January 1, 2025, at least 15%;

  • (b) in the case of a fiscal year beginning in 2025, at least 16%; or

  • (c) in the case of a fiscal year beginning after December 31, 2025, at least 17%.

• Marginal note:Simplified effective tax rate

  (5) The simplified effective tax rate of the standard constituent entities of an MNE group that are located in a jurisdiction in a fiscal year is the result (expressed as a percentage rounded to four decimal points) of the formula

  A ÷ B

  where

  A

  is the total of all amounts each of which is the qualifying income tax expense of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year; and

  B

  is the profit (loss) before income tax of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Routine profits test

  (6) The routine profits test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if

  • (a) the qualified substance-based income exclusion amount for the jurisdiction for the year is equal to or greater than the profit (loss) before income tax of the MNE group for the jurisdiction for the year; or

  • (b) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is nil or reflects an overall loss.

• Marginal note:Application to joint ventures

  (7) For the purposes of applying this section to a joint venture or joint venture group

  • (a) subsection (2) is to be read without reference to its paragraph (b);

  • (b) references to “MNE group” are to be read as references to “joint venture group”, other than in the expression “filing constituent entity of an MNE group”, paragraphs (2)(c) and (d) and subsection (8);

  • (c) references to “standard constituent entity” are to be read as references to “joint venture entity”, other than in subsection (8);

  • (d) references to “MNE group’s qualified country-by-country report” are to be read as references to “joint venture group’s qualified financial statements”;

  • (e) in applying the definition qualified financial statements in subsection (1) in relation to the joint venture group

    • (i) the reference to “ultimate parent entity” in subparagraph (a)(i) of that definition is to be read as a reference to “joint venture”, and

    • (ii) the reference to “the financial accounts of the standard constituent entity that are used for preparation of the MNE group’s country-by-country report” in subparagraph (a)(iii) of that definition is to be read as a reference to “the financial accounts of the joint venture entity that would be used if a qualified country-by-country report had been prepared in respect of the joint venture group”; and

  • (f) the definition qualified substance-based income exclusion amount in subsection (1) is to be read as “means the substance-based income exclusion amount of the joint venture group for the jurisdiction for the fiscal year”.

• Marginal note:Application to minority-owned constituent entities

  (8) For the purposes of this section, a minority-owned constituent entity is treated as a standard constituent entity of an MNE group.

• Marginal note:Tax-neutral ultimate parent entities

  (9) No election may be made under subsection (2) in respect of the jurisdiction where the ultimate parent entity of an MNE group is located for a fiscal year if

  • (a) the ultimate parent entity is a flow-through entity; and

  • (b) it is not the case that all the ownership interests in the ultimate parent entity are held by qualified persons.

• Marginal note:Tax-neutral ultimate parent entities — adjustments

  (10) If an ultimate parent entity of an MNE group is a flow-through entity or subject to a deductible dividend regime,

  • (a) the profit (loss) before income tax of the MNE group for the jurisdiction where the ultimate parent entity is located is to be adjusted to exclude any profit (loss) before income tax of the ultimate parent entity to the extent that such amount is

    • (i) attributable to an ownership interest held by a qualified person, or

    • (ii) distributed in respect of an ownership interest held by a qualified person; and

  • (b) the qualifying income tax expense of any constituent entity of the MNE group is adjusted to exclude any taxes in respect of the profit (loss) before income tax that is excluded under paragraph (a).

• Marginal note:Investment entities as standard constituent entities

  (11) For the purposes of this section, an investment entity or insurance investment entity is treated as a standard constituent entity of an MNE group for a fiscal year, if

  • (a) the investment entity is included in the MNE group;

  • (b) all the constituent entities of the MNE group with direct ownership interests in the investment entity or insurance investment entity are located in the same jurisdiction as the investment entity or insurance investment entity; and

  • (c) no election under subsection 41(1) or 42(2) is in effect in respect of the investment entity or insurance investment entity for the fiscal year.

• Marginal note:Investment entities — amounts reflected in owners’ jurisdiction

  (12) If subsection (11) does not apply in respect of an investment entity or insurance investment entity that is a constituent entity of an MNE group for a fiscal year, for the purposes of applying subsections (3) to (6), the profit (loss) before income tax and total revenues of the MNE group attributable to, and qualifying income tax expense of, the investment entity or insurance investment entity are to be reflected in the jurisdictions where its direct constituent entity-owners are located, in proportion to their respective ownership interest in the investment entity or insurance investment entity.

• Marginal note:Location of investment entities

  (13) For the purposes of this section, an investment entity or insurance investment entity is considered to be located in the jurisdiction where it is resident for the purposes of a qualified country-by-country report.

• Marginal note:Hybrid arbitrage arrangements

  (14) For the purposes of applying subsections (3) to (6) in respect of an MNE group for a jurisdiction for a fiscal year,

  • (a) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is to exclude any expense or loss arising as a result of

    • (i) a deduction/non-inclusion arrangement, or

    • (ii) a duplicate loss arrangement; and

  • (b) the qualifying income tax expense of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year is to exclude any income tax expense arising as a result of a duplicate tax recognition arrangement.