Global Minimum Tax Act (S.C. 2024, c. 17, s. 81)
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Act current to 2024-06-20
PART 2Global Minimum Tax (continued)
DIVISION 9Transition Rules
SUBDIVISION ATax Attributes on Transition
Marginal note:Transition — deferred tax assets and liabilities
48 (1) Subject to subsections (2), (3) and (5), in determining the total deferred tax adjustment amount of a constituent entity of an MNE group that is located in a jurisdiction for the GloBE transition year of the MNE group in respect of the jurisdiction and each subsequent fiscal year in which the constituent entity is included in the MNE group,
(a) each deferred tax asset and deferred tax liability that is reflected in the constituent entity’s financial accounts at the beginning of the GloBE transition year is to be taken into account to the extent of
(i) if the constituent entity can demonstrate that a deferred tax asset is attributable to a loss of the constituent entity that would have been taken into account in determining its GloBE income or loss had the GloBE income or loss been determined for the prior fiscal year in which the loss arose, the amount that the deferred tax asset would be if the rate of tax that applied in determining the deferred tax asset were the minimum rate,
(ii) if a deferred tax asset is in respect of a tax credit, the lesser of
(A) the amount of the deferred tax asset, and
(B) the amount determined by the formula
A ÷ B × C
where
- A
- is the amount of the deferred tax asset,
- B
- is the applicable tax rate in the fiscal year immediately preceding the GloBE transition year, and
- C
- is the minimum rate, and
(iii) in any other case, the lesser of
(A) the amount of the deferred tax asset or deferred tax liability, as the case may be, and
(B) the amount that the deferred tax asset or deferred tax liability would be if the tax rate applicable in determining the deferred tax asset or deferred tax liability were the minimum rate;
(b) if a deferred tax asset referred to in paragraph (a) is in respect of a credit and the tax rate applicable to the constituent entity in a subsequent fiscal year (referred to in this paragraph as the “re-application year”) is different from the applicable tax rate in the fiscal year immediately preceding the GloBE transition year,
(i) the formula in clause (a)(ii)(B) must be re-applied to the outstanding balance of the tax credit in the constituent entity’s financial accounts at the beginning of the re-application year to determine the revised deferred tax asset,
(ii) the change in the amount of the deferred tax asset resulting from the re-application of the formula must not be treated as deferred tax expense included in the computation of the total deferred tax adjustment amount of the constituent entity in the re-application year or any other fiscal year, and
(iii) the deferred tax expense for the re-application year and subsequent fiscal years must be determined based on the amount of the reversal of the revised deferred tax asset; and
(c) paragraph 25(2)(a) and subsection 25(6) do not apply in respect of the deferred tax assets and deferred tax liabilities referred to in paragraph (a).
Marginal note:Excluded deferred tax assets
(2) In applying subsection (1), a deferred tax asset that is reflected in a constituent entity’s financial accounts at the beginning of the GloBE transition year of the MNE group in respect of the jurisdiction in which the constituent entity is located is not to be taken into account in determining the constituent entity’s total deferred tax adjustment amount if the deferred tax asset arises
(a) as a result of a transaction that occurs on or after December 1, 2021 and before the GloBE transition year; and
(b) in respect of
(i) an amount that
(A) is taken into account in computing the constituent entity’s income or profits in respect of which an entity is subject to an income or profits tax imposed by the government of the jurisdiction in which the constituent entity is located, and
(B) would not be taken into account in computing the constituent entity’s GloBE income or loss for the GloBE transition year if the amount arose in the GloBE transition year, or
(ii) an amount that
(A) is not included in the constituent entity’s income or profits in respect of which an entity is subject to an income or profits tax imposed by the government of the jurisdiction in which the constituent entity is located, and
(B) would be included in computing the constituent entity’s GloBE income or loss for the GloBE transition year if the amount arose in the GloBE transition year.
Marginal note:Valuation adjustments and accounting recognition adjustments
(3) In applying subsection (1), the impact of any valuation adjustment or accounting recognition adjustment with respect to the amount of a deferred tax asset is not to be taken into account.
Marginal note:Asset transfers before transferor transition year — conditions
(4) Subsection (5) applies in respect of an asset if
(a) an entity (referred to in this section as the “transferor”) transfers the asset — on or after December 1, 2021, and before the earlier of the QDMTT transition year and the GloBE transition year (referred to in this section as the “transferor transition year”) of its MNE group in respect of the jurisdiction in which it is located — to another entity (referred to in this section as the “transferee”);
(b) the asset is not manufactured, nor of a class or description sold, in the course of carrying on a trade by the transferor or the transferee; and
(c) had this Act applied immediately before the transfer, the transferor and transferee would have been constituent entities of the same MNE group.
Marginal note:Asset transfers before transferor transition year — consequences
(5) Subject to subsection (9), if this subsection applies in respect of an asset
(a) the carrying value of the asset at the beginning of the transferor transition year is deemed to be equal to the carrying value of the asset to the transferor immediately before the transfer referred to in paragraph (4)(a), adjusted for
(i) any subsequent capitalized expenditure incurred in respect of the asset before the transferor transition year, and
(ii) the portion of any amortization and depreciation of the asset that would have been recognized before the transferor transition year if any increase in the carrying value resulting from the transfer had not occurred; and
(b) in applying subsection (1),
(i) any deferred tax assets and deferred tax liabilities in respect of the asset that are reflected in any entity’s financial accounts and that result from the transfer are not to be taken into account in determining the total deferred tax adjustment amount of any constituent entity, except to the extent provided under subparagraph (ii), and
(ii) a deferred tax asset of the transferee that is described in subparagraph (i) may be taken into account but, for this purpose, the amount of that deferred tax asset is deemed to be equal to the lesser of the amount actually recorded in the transferee’s financial accounts as a result of the transfer and the total of the following amounts, adjusted for any capitalized expenditure, amortization and depreciation in respect of the asset that are referred to in subparagraphs (a)(i) and (ii):
(A) the portion of the current tax expense for a fiscal year of the transferor in respect of covered taxes that is demonstrated to have resulted from the transfer, and
(B) the portion of the current tax expense for a fiscal year of any other entity in respect of covered taxes that is demonstrated to have resulted from the transfer and that would have been allocated to the transferor under section 24 if
(I) the transfer had occurred in the transferor transition year, and
(II) section 24 were read without reference to paragraph 24(4)(c).
Marginal note:Deemed transfer
(6) For the purposes of subsection (4), an asset is deemed to be transferred by a transferor to a transferee on or after December 1, 2021, and before the transferor transition year, if a transaction or arrangement is entered into during that period in respect of the asset that
(a) would not, in the absence of this subsection, be regarded as a transfer of the asset by a transferor to a transferee on or after December 1, 2021, and before the transferor transition year; and
(b) is accounted for by one or more parties involved in the transaction or arrangement in the same or a similar manner to a change in ownership of the asset, or as giving rise to an asset.
Marginal note:Interpretation — single-entity transactions
(7) For greater certainty, the transaction or arrangement referred to in subsection (6) may involve only one entity — including where it results in an increase to the carrying value of an asset, or in the creation or increase of a deferred tax asset — in which case the transferor and transferee referred to in subsection (5) are the same entity.
Marginal note:Interpretation — pre-existing deferred tax assets and liabilities
(8) For greater certainty, for the purposes of subparagraph (5)(b)(i), any deferred tax assets or deferred tax liabilities in respect of an asset reflected in the transferee’s financial accounts immediately after the transfer and that were reflected in the transferor’s financial accounts immediately before the transfer are not deferred tax assets or deferred tax liabilities resulting from the transfer.
Marginal note:Election — non-application of paragraph (5)(a) and subparagraph (5)(b)(ii)
(9) Paragraph (5)(a) and subparagraph (5)(b)(ii) do not apply in respect of an asset transferred by a transferor to a transferee that is a constituent entity of an MNE group, if
(a) the filing constituent entity of the MNE group elects; and
(b) the following condition is met:
A + B ≥ C × D
where
- A
- is the sum of the amounts described in clauses (5)(b)(ii)(A) and (B) in respect of the transfer of the asset,
- B
- is the amount of any deferred tax asset in respect of a tax loss of the transferor that is demonstrated to have been reversed or to not have been created solely because any gain arising from the transfer of the asset was included in the taxable income of the transferor,
- C
- is the minimum rate, and
- D
- is the difference between local tax basis in the asset to the transferee immediately after the transfer and the carrying value of the asset at the beginning of the transferor transition year as would be determined under paragraph (5)(a) in the absence of this subsection.
SUBDIVISION BTransitional Rates for the Substance-based Income Exclusion
Marginal note:Transitional rates for the substance-based income exclusion
49 (1) For the purposes of applying subsection 32(1) in respect of a fiscal year beginning before 2032, the reference in that provision to “5% of the eligible payroll costs” is to be read as
(a) “10% of the eligible payroll costs” if the fiscal year begins in 2023;
(b) “9.8% of the eligible payroll costs” if the fiscal year begins in 2024;
(c) “9.6% of the eligible payroll costs” if the fiscal year begins in 2025;
(d) “9.4% of the eligible payroll costs” if the fiscal year begins in 2026;
(e) “9.2% of the eligible payroll costs” if the fiscal year begins in 2027;
(f) “9% of the eligible payroll costs” if the fiscal year begins in 2028;
(g) “8.2% of the eligible payroll costs” if the fiscal year begins in 2029;
(h) “7.4% of the eligible payroll costs” if the fiscal year begins in 2030;
(i) “6.6% of the eligible payroll costs” if the fiscal year begins in 2031; and
(j) “5.8% of the eligible payroll costs” if the fiscal year begins in 2032.
Marginal note:Idem
(2) For the purposes of applying subsection 32(1) in respect of a fiscal year beginning before 2032, the reference in that provision to “5% of the eligible tangible asset amount” is to be read as
(a) “8% of the eligible tangible asset amount” if the fiscal year begins in 2023;
(b) “7.8% of the eligible tangible asset amount” if the fiscal year begins in 2024;
(c) “7.6% of the eligible tangible asset amount” if the fiscal year begins in 2025;
(d) “7.4% of the eligible tangible asset amount” if the fiscal year begins in 2026;
(e) “7.2% of the eligible tangible asset amount” if the fiscal year begins in 2027;
(f) “7% of the eligible tangible asset amount” if the fiscal year begins in 2028;
(g) “6.6% of the eligible tangible asset amount” if the fiscal year begins in 2029;
(h) “6.2% of the eligible tangible asset amount” if the fiscal year begins in 2030;
(i) “5.8% of the eligible tangible asset amount” if the fiscal year begins in 2031; and
(j) “5.4% of the eligible tangible asset amount” if the fiscal year begins in 2032.
PART 3Domestic Minimum Top-up Tax
Marginal note:Interpretation
50 This Part comprises provisions that
(a) are intended to implement a qualified domestic minimum top-up tax that has qualified domestic minimum top-up tax safe harbour status (including transitional qualified status); and
(b) are to be interpreted consistently with the requirements outlined in the GloBE Commentary.
Marginal note:Domestic minimum top-up tax
51 (1) A particular person must pay a tax in respect of a constituent entity of an MNE group for a fiscal year in an amount equal to the domestic top-up amount of the constituent entity for the fiscal year, if
(a) the constituent entity is located in Canada for the fiscal year;
(b) the MNE group is a qualifying MNE group for the fiscal year; and
(c) the particular person
(i) is the constituent entity, or
(ii) if the constituent entity is not a person, would, under the relevant assumptions, include in its income for the purposes of Part I of the Income Tax Act income of the constituent entity for the fiscal year.
Marginal note:Relevant assumptions
(2) For the purposes of subparagraph (1)(c)(ii), the relevant assumptions are that
(a) the constituent entity referred to in that subparagraph has income for the fiscal year that would be included in computing its income for the purposes of Part I of the Income Tax Act if it were a person resident in Canada; and
(b) the person referred to in paragraph (1)(c) is resident in Canada for the purposes of the Income Tax Act.
Marginal note:Definition of domestic top-up amount
52 (1) Subject to subsection 53(3), the domestic top-up amount, of a constituent entity of an MNE group that is located in Canada for a fiscal year, means the amount that would be the top-up amount of the constituent entity for the fiscal year determined under subsection 30(1), 34(2), 35(1) or 36(2) (as adjusted under any other applicable provision of Part 2), as the case may be, if that amount (and any amounts or results relevant to the determination of that amount) were required to be determined and
(a) the adjusted covered taxes of the constituent entities of the MNE group that are located in Canada were determined without reference to any covered taxes that would otherwise be allocable to those constituent entities under any of subsections 24(1) and (4) to (6) (except, in the case of subsection 24(6), any amount of those covered taxes imposed under the Income Tax Act);
(b) the total amount of tax payable for any fiscal year in respect of the constituent entities of the MNE group that are located in Canada, under a qualified domestic minimum top-up tax, were deemed to be nil;
(c) if the fiscal year is, or is subsequent to, the QDMTT transition year of the MNE group in respect of Canada but precedes the GloBE transition year of the MNE group in respect of Canada, all references in section 26 and subsections 48(1) and (2) to “GloBE transition year” were read as references to “QDMTT transition year”;
(d) if the fiscal year is, or is subsequent to, the GloBE transition year of the MNE group in respect of Canada and the QDMTT transition year of the MNE group in respect of Canada preceded the GloBE transition year,
(i) the following amounts in respect of the period before the start of the GloBE transition year (such period referred to in this paragraph as the “refresh period”) were deemed to be nil:
(A) for the purposes of subsection 25(6), all or any portion of a deferred tax liability (other than a recapture exception accrual) in respect of which
(I) a positive amount was included in determining the total deferred tax adjustment amount of the constituent entity for a fiscal year that is included in the refresh period, and
(II) subsection 25(6) did not apply in a fiscal year that is included in the refresh period, and
(B) any portion, of a GloBE loss deferred tax asset that arises under paragraph 26(b) in a fiscal year that is included in the refresh period, that does not reverse during the refresh period, and
(ii) all references in subsection 29(4) to “a fiscal year that precedes the particular fiscal year” were read as references to “a fiscal year that is, or is subsequent to, the GloBE transition year and precedes the particular fiscal year”; and
(e) any election made or revoked under section 44 or an equivalent provision of the laws of another jurisdiction were not taken into account.
Marginal note:Application — joint ventures
(2) For the purposes of this section and section 51, any reference to a constituent entity of an MNE group includes an entity that is a joint venture entity in respect of the MNE group.
- Date modified: