Taxation (Multinational - Global and Domestic Minimum Tax) Rules 2024

CHAPTER 8 - ADMINISTRATION  

PART 8-2 - SAFE HARBOURS  

Division 2 - Transitional CbCR Safe Harbour  

Subdivision G - Treatment of Hybrid Arbitrage Arrangements  

SECTION 8-120   MEANING OF DEDUCTION/NON-INCLUSION ARRANGEMENT  

8-120(1)    
A deduction/non-inclusion arrangement is an arrangement:

(a)    under which a Constituent Entity (the investor ) of an MNE Group directly or indirectly provides credit or otherwise makes an investment in another Constituent Entity of the MNE Group (the recipient ); and

(b)    the provision of the credit or making of the investment results in an expense or loss in the financial statements of the recipient;

to the extent that:

(c)    there is no commensurate increase in the revenue or gain in the financial statements of the investor; or

(d)    the investor is not reasonably expected over the life of the arrangement to have a commensurate increase in its taxable income.

8-120(2)    
Despite subsection (1) , an arrangement is not a deduction/non-inclusion arrangement to the extent that the relevant expense or loss is solely with respect to Additional Tier One Capital.

8-120(3)    
For the purposes of paragraph (1)(d) , the investor does not have a commensurate increase in its taxable income to the extent that:

(a)    if an amount is included in its taxable income - the amount included in its taxable income is offset by a tax attribute (such as a loss carry forward or an unused interest carry forward) with respect to which a valuation adjustment or accounting recognition adjustment:

(i) has been made; or

(ii) would have been made if the adjustment determination were made without regard to the investor ' s ability to use the tax attribute with respect to any Hybrid Arbitrage Arrangement entered into after 15 December 2022; or

(b)    the provision of the credit or making of the investment that results in the expense or loss of the recipient mentioned in paragraph (1)(b) :

(i) gives rises to a taxable deduction or loss of a Constituent Entity of the MNE Group that is located in the same jurisdiction as the investor; and

(ii) is not included as an expense or loss in determining the MNE Group ' s Profit (Loss) before Income Tax for the jurisdiction (including as a result of being an expense or loss in the financial statements of a Flow-through Entity which is owned by a Constituent Entity of the MNE Group that is located in the jurisdiction of the investor).