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

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.