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

CHAPTER 4 - COMPUTATION OF ADJUSTED COVERED TAXES  

PART 4-1 - ADJUSTED COVERED TAXES  

Division 2 - Qualified flow-through ownership interests  

SECTION 4-38   MEANING OF QUALIFIED FLOW-THROUGH OWNERSHIP INTEREST, INVESTMENT AMOUNT AND ADJUSTED INVESTMENT AMOUNT  

4-38(1)    
A qualified flow-through ownership interest of a Constituent Entity is an investment in a particular Tax Transparent Entity held by the Constituent Entity directly, or indirectly through one or more other Tax Transparent Entities that are not Constituent Entities of the MNE group, if:

(a)    the investment:

(i) is treated, for tax purposes, as an equity interest in the jurisdiction in which the Constituent Entity is located; and

(ii) would be so treated under an Authorised Financial Accounting Standard in the jurisdiction in which the Tax Transparent Entity operates, but only if the Tax Transparent Entity ' s assets, liabilities, income, expenses and cash flows are not consolidated on a line-by-line basis in the Consolidated Financial Statements of the Ultimate Parent Entity of the MNE Group; and

(b)    at the time the Constituent Entity acquired the investment, the Constituent Entity:

(i) could not reasonably have expected that its total return (including distributions, the tax benefits of tax losses and the tax benefits of Qualified Refundable Tax Credits, but excluding the tax benefits of other kinds of tax credits) from the investment would equal or exceed the total fair market value of the consideration provided in respect of the investment (the investment amount ); and

(ii) could have reasonably expected a return on a portion of the investment amount in the form of tax credits other than Qualified Refundable Tax Credits.

4-38(2)    
However, an investment mentioned in subsection (1) is not a qualified flow-through ownership interest if any of the following applies:

(a)    the investment is not held by the Constituent Entity as a genuine economic interest;

(b)    the Constituent Entity is protected, to any extent, from a diminution of the investment amount;

(c)    in the jurisdiction in which the Constituent Entity is located, compliance with the GloBE Rules, as implemented in that jurisdiction, is a condition of the transfer, through the particular Tax Transparent Entity in which the investment subsists, of the benefit of tax credits in respect of that investment.

4-38(3)    
To calculate the adjusted investment amount of a Constituent Entity in respect of a qualified flow-through ownership interest for a Fiscal Year, reduce the investment amount by the sum of all amounts covered by subsection 4-37(5) for all previous Fiscal Years in respect of the qualified flow-through ownership interest. However, the adjusted investment amount may not be less than zero.