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

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.