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

CHAPTER 7 - TAX NEUTRALITY AND DISTRIBUTION REGIMES  

PART 7-1 - ULTIMATE PARENT ENTITY THAT IS A FLOW-THROUGH ENTITY  

SECTION 7-5   FLOW-THROUGH ENTITY THAT IS ULTIMATE PARENT ENTITY - REDUCE GloBE INCOME AND COVERED TAXES  

7-5(1)    
This section applies if:

(a)    the Ultimate Parent Entity of an MNE Group is a Flow-through Entity; and

(b)    an amount (the attributable income ) of the Ultimate Parent Entity ' s GloBE Income for a Fiscal Year is attributable to a Direct Ownership Interest held by another Entity in the Ultimate Parent Entity.

7-5(2)    
Reduce the Ultimate Parent Entity ' s GloBE Income for the Fiscal Year by the attributable income (but not below zero) if any of the following conditions are satisfied:

(a)    the holder of the Direct Ownership Interest is subject to Tax in respect of such income for a taxable period that ends within 12 months after the end of the Fiscal Year and the condition in subsection (3) is met;

(b)    the holder 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 holder is a Governmental Entity, an International Organisation, a Non-profit Organisation, or a Pension Fund that:

(i) if the holder is a Governmental Entity - is a Governmental Entity of the jurisdiction in which the Ultimate Parent Entity is located; and

(ii) if the holder is not a Governmental Entity - was created and is managed in the jurisdiction in which the Ultimate Parent Entity is located; and

(iii) 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.

7-5(3)    
For the purposes of paragraph (2)(a) , the condition in this subsection is met if:

(a)    the holder of the Ownership Interest is subject to Tax on the full amount of such income 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 payable by the Ultimate Parent Entity on the attributable income; and

(ii) if one or more other Constituent Entities of the MNE Group are Tax Transparent Entities - the Covered Taxes for the Fiscal Year payable by the other Constituent Entities, to the extent (if any) that those Covered Taxes relate directly to the attributable income; and

(iii) the Taxes payable by the holder of the Ownership Interest in respect of the attributable income;

equals or exceeds the full amount of the attributable income multiplied by the Minimum Rate.

7-5(4)    
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 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.