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

CHAPTER 7 - TAX NEUTRALITY AND DISTRIBUTION REGIMES  

PART 7-3 - ELIGIBLE DISTRIBUTION TAX SYSTEMS  

Note:

Taxes on distributed profits, deemed profit distributions and non-business expenses imposed under an Eligible Distribution Tax System are Covered Taxes (see paragraph 4-40(1)(b) ).

SECTION 7-75   EFFECT OF CONSTITUENT ENTITY LEAVING JURISDICTION, ETC.  

7-75(1)    
This section applies if, in a Fiscal Year (the departure year ), a Constituent Entity of an MNE Group that is located in a jurisdiction:

(a)    ceases to be a Constituent Entity of the MNE Group; or

(b)    transfers substantially all of its assets outside the MNE Group or outside that jurisdiction.

7-75(2)    
If the balance of a Deemed Distribution Tax Recapture Account for an earlier Fiscal Year for that jurisdiction for the MNE Group is above zero at the end of the departure year:

(a)    for the purposes of section 4-20 , treat the amount of the balance as increasing the Reduction to Covered Taxes of the Constituent Entities of the MNE Group that are located in the jurisdiction for the earlier Fiscal Year; and

(b)    recalculate the Effective Tax Rate and Jurisdictional Top-up Tax for the earlier Fiscal Year of the MNE Group for the jurisdiction in accordance with section 5-95 ; and

(c)    despite paragraph 5-95(3)(b) , treat as Additional Current Top-up Tax of the MNE Group for the jurisdiction for the departure year the amount that is:

(i) any increase in Jurisdictional Top-up Tax for the earlier Fiscal Year as a result of paragraph (b) of this subsection;

multiplied by:

(ii) the Disposition Recapture Ratio mentioned in subsection (3) for the Constituent Entity; and

(d)    reduce the balance of the Deemed Distribution Tax Recapture Account for the earlier Fiscal Year to zero.

7-75(3)    
The Disposition Recapture Ratio for the Constituent Entity is computed in according with the following formula:

GloBE Income of the CE
Net Income of the jurisdiction

where:

GloBE Income of the CE
is the sum of the GloBE Income of the Constituent Entity for each Fiscal Year corresponding to the Deemed Distribution Tax Recapture Accounts for the jurisdiction.

Net Income of the jurisdiction
is the sum of the Net GloBE Income of the MNE Group for the jurisdiction for each Fiscal Year corresponding to the Deemed Distribution Tax Recapture Accounts for the jurisdiction.