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

CHAPTER 4 - COMPUTATION OF ADJUSTED COVERED TAXES  

PART 4-4 - MECHANISM TO ADDRESS TEMPORARY DIFFERENCES  

Note:

The Total Deferred Tax Adjustment Amount is added to Adjusted Covered Taxes under paragraph 4-5(b) .

SECTION 4-95   MEANING OF SUBSTITUTE LOSS CARRY-FORWARD DTA  

4-95(1)    
A Constituent Entity of an MNE Group has a Substitute Loss Carry-forward DTA that arises in a Fiscal Year if:

(a)    the jurisdiction in which the Constituent Entity is located requires that foreign source income covered by subsection (6) offset domestic source losses before foreign tax credits may be applied against tax imposed on foreign source income covered by subsection (6) ; and

(b)    the Constituent Entity has, in relation to the jurisdiction:

(i) a domestic tax loss that is fully or partially offset by foreign source income for the Fiscal Year covered by subsection (6) ; and

(ii) a foreign tax credit in respect of that foreign source income; and

(c)    the tax law of the jurisdiction allows foreign tax credits to be used to offset a tax liability in a subsequent Fiscal Year in relation to income that is included in the computation of the Constituent Entity ' s GloBE Income or Loss for that subsequent Fiscal Year.

4-95(2)    
A Constituent Entity of an MNE Group also has a Substitute Loss Carry-forward DTA arising in a Fiscal Year if:

(a)    the conditions in paragraphs (1)(a) and (b) are satisfied, but the condition in paragraph (1)(c) is not satisfied; and

(b)    the tax law of the jurisdiction permits the recharacterisation of domestic source income of a later Fiscal Year as foreign source income of that later Fiscal Year; and

(c)    the effect of that recharacterisation is to allow foreign tax credits arising in the later Fiscal Year to be used to offset a tax liability in the later Fiscal Year in relation to income that is included in the computation of the Constituent Entity ' s GloBE Income or Loss for the later Fiscal Year.

4-95(3)    
A Constituent Entity of an MNE Group also has a Substitute Loss Carry-forward DTA arising in a Fiscal Year if:

(a)    the conditions in paragraphs (1)(a) and (b) are satisfied; and

(b)    the tax law of the jurisdiction allows foreign tax credits to be used to offset a tax liability in a subsequent Fiscal Year in relation to income that is included in the computation of the Constituent Entity ' s GloBE Income or Loss for that subsequent Fiscal Year; and

(c)    both of the following apply:

(i) the tax law of the jurisdiction permits the recharacterisation of domestic source income of a later Fiscal Year as foreign source income of that later Fiscal Year;

(ii) the effect of that recharacterisation is to allow foreign tax credits arising in the later Fiscal Year to be used to offset a tax liability in the later Fiscal Year in relation to income that is included in the computation of the Constituent Entity ' s GloBE Income or Loss for the later Fiscal Year.

4-95(4)    
The amount of a Substitute Loss Carry-forward DTA that arises under subsection (1) is the lesser of the following:

(a)    the amount of the Constituent Entity ' s tax loss that is offset as mentioned in subparagraph (1)(b)(i) , multiplied by the tax rate applicable in the jurisdiction;

(b)    the amount of the foreign tax credit mentioned in subparagraph (1)(b)(ii) that the tax law of the jurisdiction allows to be carried forward from the Fiscal Year in which the Substitute Loss Carry-forward DTA arises to a subsequent Fiscal Year.

4-95(5)    
The amount of a Substitute Loss Carry-forward DTA that arises under subsection (2) or (3) is the amount of the Constituent Entity ' s domestic source income that:

(a)    the tax law of the Constituent Entity ' s jurisdiction permits the Constituent Entity to recharacterise as foreign source income of a later Fiscal Year; and

(b)    relates to the amount of the Constituent Entity ' s tax loss that is offset as mentioned in subparagraph (1)(b)(i) ;

multiplied by the tax rate applicable in the jurisdiction.

4-95(6)    
For the purposes of paragraph (1)(a) and subparagraph (1)(b)(i) , this subsection covers foreign source income if:

(a)    both of the following conditions are satisfied:

(i) the foreign source income is income of a controlled foreign company of a Constituent Entity of an MNE Group;

(ii) the Constituent Entity is taxed on the foreign source income under a Controlled Foreign Company Tax Regime; or

(b)    both of the following conditions are satisfied:

(i) the foreign source income is income of a Hybrid Entity or Reverse Hybrid Entity in which a Constituent Entity of an MNE Group holds an ownership interest;

(ii) the Constituent Entity is taxed on the foreign source income; or

(c)    both of the following conditions are satisfied:

(i) the foreign source income is income of a Permanent Establishment of a Main Entity which is a Constituent Entity of an MNE Group;

(ii) the Main Entity is taxed on the foreign source income.