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

CHAPTER 4 - COMPUTATION OF ADJUSTED COVERED TAXES  

PART 4-3 - ALLOCATION OF COVERED TAXES FROM ONE CONSTITUENT ENTITY TO ANOTHER CONSTITUENT ENTITY  

SECTION 4-55   ALLOCATION OF AMOUNTS FROM CONSTITUENT ENTITY-OWNER TO CFC  

4-55(1)    
An amount in respect of Covered Taxes for a Fiscal Year is allocated from a Constituent Entity-owner of a Constituent Entity of an MNE Group to the Constituent Entity if:

(a)    the Constituent Entity-owner is subject to a Controlled Foreign Company Tax Regime; and

(b)    the amount is:

(i) accrued in the financial accounts of the Constituent Entity-owner for the Fiscal Year; and

(ii) so accrued in respect of Covered Taxes imposed under the Controlled Foreign Company Tax Regime on the Constituent Entity-owner ' s share of the Constituent Entity ' s income.

Blended CFC Tax Regimes

4-55(2)    
Subsection (3) applies for a Fiscal Year if:

(a)    the Controlled Foreign Company Tax Regime mentioned in subsection (1) is a Blended CFC Tax Regime; and

(b)    the Fiscal Year:

(i) begins on or before 31 December 2025; and

(ii) ends on or before 30 June 2027.

4-55(3)    
The amount allocated under subsection (1) for the Fiscal Year is the amount computed in accordance with the following formula:

Blended CFC Allocation Key	×	Allocable Blended CFC Tax
Sum of all Blended CFC Allocation Keys

where:

Allocable Blended CFC Tax
means the total amount, in respect of Covered Taxes imposed under the Blended CFC Tax Regime, that is recorded in the financial accounts of the Constituent Entity-owner for the Fiscal Year.

Blended CFC Allocation Key
means the Blended CFC Allocation Key of the Constituent Entity computed under subsection (4) .

Sum of all Blended CFC Allocation Keys
means the amount computed under subsection (5) .

4-55(4)    
For the purposes of subsection (3) , the Blended CFC Allocation Key of a Constituent Entity of the MNE Group is the amount computed in accordance with the following formula (treating a negative result as zero):

Attributable Income of Entity Applicable Rate × (Applicable Rate − GloBE Jurisdictional ETR)

where:

Applicable Rate
is the lowest rate that, if it were the corporate tax rate applicable in the jurisdiction in which the Constituent Entity is located, would result in the tax charge in that jurisdiction in respect of the Constituent Entity being sufficient to prevent a tax charge on the Constituent Entity-owner under the Blended CFC Tax Regime in respect of its share of the income of the Constituent Entity for the Fiscal Year.

Attributable Income of Entity
means the Constituent Entity-owner ' s share of the Constituent Entity ' s income, as determined under the Blended CFC Tax Regime in computing the Covered Taxes mentioned in subparagraph (1)(b)(ii) .

GloBE Jurisdictional ETR
is the rate that would be the Effective Tax Rate for the Fiscal Year of the MNE Group for the jurisdiction in which the Constituent Entity is located, if the sum of the Adjusted Covered Taxes for the Fiscal Year of each Constituent Entity of the MNE Group located in that jurisdiction were:

(a) computed without regard to any Covered Taxes imposed under the Blended CFC Tax Regime; and

(b) if that jurisdiction imposes a Qualified Domestic Minimum Top-up Tax - increased by an amount equal to the tax payable under the Qualified Domestic Minimum Top-up Tax for the Fiscal Year, in respect of the Constituent Entities of the MNE Group that are located in that jurisdiction, to the extent the Blended CFC Tax Regime allows a foreign tax credit for that tax payable on the same terms as any other creditable Covered Tax.

4-55(5)    
For the purposes of subsection (3) , compute the Sum of all Blended CFC Allocation Keys as follows:

(a)    first, identify each Entity that:

(i) is an Entity in which the Constituent Entity-owner holds an Ownership Interest; and

(ii) is located in the jurisdiction in which the Constituent Entity mentioned in subsection (3) is located; and

(iii) is not a Constituent Entity of the MNE Group;

(b)    next, compute the sum of the following:

(i) the Blended CFC Allocation Key of each Constituent Entity of the MNE Group located in the jurisdiction;

(ii) the Blended CFC Allocation Key of each Entity identified under paragraph (a) , assuming that each such Entity were a Constituent Entity of the MNE Group.