Global Minimum Tax Act (S.C. 2024, c. 17, s. 81)

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.