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

CHAPTER 7 - TAX NEUTRALITY AND DISTRIBUTION REGIMES  

PART 7-2 - ULTIMATE PARENT ENTITY SUBJECT TO DEDUCTIBLE DIVIDEND REGIME  

SECTION 7-20   ULTIMATE PARENT ENTITY SUBJECT TO DEDUCTIBLE DIVIDEND REGIME - REDUCE GloBE INCOME AND COVERED TAXES  

7-20(1)    
This section applies if:

(a)    the Ultimate Parent Entity of an MNE Group is subject to a Deductible Dividend Regime; and

(b)    the Ultimate Parent Entity distributes an amount (the dividend amount ) referrable to its GloBE Income for a Fiscal Year as a Deductible Dividend within 12 months after the end of the Fiscal Year.

7-20(2)    
Reduce the Ultimate Parent Entity ' s GloBE Income for the Fiscal Year by the dividend amount (but not below zero) if any of the following conditions are satisfied:

(a)    both of the following apply:

(i) the dividend is subject to Tax in the hands of the recipient of the dividend for a taxable period that ends within 12 months after the end of the Fiscal Year;

(ii) the condition in subsection (3) is met;

(b)    the recipient of the dividend is an individual that:

(i) is a tax resident in the jurisdiction in which the Ultimate Parent Entity is located; and

(ii) holds Ownership Interests in the Ultimate Parent Entity that, in the aggregate, are a right to 5% or less of the profits and assets of the Ultimate Parent Entity;

(c)    the recipient of the dividend is:

(i) a Governmental Entity of the jurisdiction in which the Ultimate Parent Entity is located; or

(ii) an International Organisation, a Non-profit Organisation, or a Pension Fund (other than a Pension Fund that is a Pension Services Entity) that was created and is managed in the jurisdiction in which the Ultimate Parent Entity is located.

7-20(3)    
For the purposes of subparagraph (2)(a)(ii) , the condition in this subsection is met if:

(a)    the dividend is subject to Tax in the hands of the recipient of the dividend at a nominal rate that equals or exceeds the Minimum Rate; or

(b)    it can be reasonably expected that the sum of:

(i) the Covered Taxes for the Fiscal Year paid by the Ultimate Parent Entity on an amount of GloBE Income to which the dividend amount relates; and

(ii) the Taxes payable by the recipient of the dividend on the dividend amount;

equals or exceeds the dividend amount multiplied by the Minimum Rate; or

(c)    the recipient of the dividend is an individual and the dividend is a patronage dividend from a supply Cooperative.

7-20(4)    
For the purposes of subsections (2) and (3) , an amount of a patronage dividend from a supply Cooperative is taken to be subject to Tax in the hands of the recipient of the dividend to the extent it reduces an expense or cost that is deductible in computing the taxable income of the recipient of the dividend.

7-20(5)    
If an Ultimate Parent Entity ' s GloBE Income for a Fiscal Year is reduced under subsection (2) , reduce its Covered Taxes for the Fiscal Year as follows:

(a)    first, compute the amount by which:

(i) the Ultimate Parent Entity ' s GloBE Income for the Fiscal Year after the reduction;

falls short of:

(ii) the Ultimate Parent Entity ' s GloBE Income for the Fiscal Year before the reduction;

(b)    next, compute the fraction that is:

(i) that shortfall;

divided by:

(ii) the Ultimate Parent Entity ' s GloBE Income for the Fiscal Year before the reduction;

(c)    next, multiply the Ultimate Parent Entity ' s Covered Taxes for the Fiscal Year (other than any taxes paid on undistributed GloBE Income pursuant to the Deductible Dividend Regime itself, including taxes that are based on corporate equity or retained earnings) by that fraction.

The result of paragraph (c) is the amount of the reduction under this subsection of the Ultimate Parent Entity ' s Covered Taxes for the Fiscal Year.

7-20(6)    
If an Ultimate Parent Entity ' s Covered Taxes for the Fiscal Year are reduced under subsection (5) by an amount, reduce its GloBE Income for the Fiscal Year by that amount in addition to the reduction of that GloBE Income under subsection (2) .

7-20(7)    
If:

(a)    an Ultimate Parent Entity ' s GloBE Income for the Fiscal Year is reduced under subsection (2) ; and

(b)    its Covered Taxes for the Fiscal Year are reduced under subsection (5) ;

reduce the Eligible Payroll Costs incurred in the Fiscal Year of its Eligible Employees and the carrying value for the Fiscal Year of its Eligible Tangible Assets by the amount computed by multiplying them by the fraction computed under paragraph (5)(b) .