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

CHAPTER 3 - COMPUTATION OF GloBE INCOME OR LOSS  

PART 3-5 - ALLOCATION OF INCOME OR LOSS FROM A FLOW-THROUGH ENTITY  

SECTION 3-255   CONSTITUENT ENTITY THAT IS A FLOW-THROUGH ENTITY - FINANCIAL ACCOUNTING NET INCOME OR LOSS  

3-255(1)    
If a Constituent Entity of a Group is a Flow-through Entity, deal with its Financial Accounting Net Income or Loss as follows:

(a)    first, reduce the amount of that Financial Accounting Net Income or Loss by the amount attributable to its owners that:

(i) are not Group Entities of the Group; and

(ii) hold a Direct Ownership Interest in the Flow-through Entity, or hold an Indirect Ownership Interest in the Flow-through Entity through a Tax Transparent Structure;

(b)    next, if there is a Permanent Establishment through which the business of the Flow-through Entity is wholly or partly carried out, allocate the remaining Financial Accounting Net Income or Loss to the Permanent Establishment to the extent set out in Part 3-4 ;

(c)    next, if the Flow-through Entity is a Tax Transparent Entity that is not the Ultimate Parent Entity of the Group, allocate the remaining Financial Accounting Net Income or Loss to the Flow-through Entity ' s Constituent Entity-owners in proportion with their respective rights to a share of the profits of the Flow-through Entity carried by Ownership Interests that they hold;

(d)    next, if the Flow-through Entity is a Tax Transparent Entity that:

(i) is the Ultimate Parent Entity of the Group; or

(ii) would be the Ultimate Parent Entity of the Group if any Controlling Interest in the Tax Transparent Entity held by an Excluded Entity were disregarded; or

(iii) is a Reverse Hybrid Entity;

allocate the remaining Financial Accounting Net Income or Loss to the Flow-through Entity.

3-255(2)    
Despite paragraph (1)(a) :

(a)    do not make the reduction in that paragraph if the Flow-through Entity is the Ultimate Parent Entity of the Group; and

(b)    do not make the reduction in that paragraph to the extent that the Flow-through Entity is owned by the Ultimate Parent Entity of the Group (directly or through a Tax Transparent Structure).

Note:

See Part 7-1 for the rules dealing with an Ultimate Parent Entity that is a Flow-through Entity.

3-255(3)    
To avoid doubt, if an amount of the Financial Accounting Net Income or Loss of the Flow-through Entity is allocated to another Constituent Entity under subsection (1) , the Financial Accounting Net Income or Loss of the Flow-through Entity is reduced by that amount.

3-255(4)    
Subsection (1) applies separately with respect to each Ownership Interest in the Flow-through Entity.