Global Minimum Tax Act (S.C. 2024, c. 17, s. 81)

Marginal note:Interpretation

• 3 (1) This Part, Part 2 and relevant provisions of Part 5 implement the GloBE Model Rules, the GloBE Commentary and the administrative guidance in respect of the GloBE Model Rules approved by the Inclusive Framework and published by the OECD from time to time and, unless the context otherwise requires, these Parts and provisions are to be interpreted consistently with those sources, as amended from time to time.

• Marginal note:Designation of additional interpretive guidance

  (2) The Governor in Council may from time to time by regulation designate additional sources in respect of which the interpretation of this Act should be consistent.

Marginal note:Binding on His Majesty

4 This Act is binding on His Majesty in right of Canada or a province.

Marginal note:Location of entities

• 5 (1) Subject to subsection 6(1), an entity, other than a flow-through entity, is located

  • (a) in a jurisdiction if the entity is tax resident in that jurisdiction based on its place of management or creation, or based on similar criteria; and

  • (b) in any other case, in the jurisdiction where it was created.

• Marginal note:Location of flow-though entities

  (2) A flow-through entity

  • (a) is located in the jurisdiction where it was created, if

    • (i) the flow-through entity is the ultimate parent entity of an MNE group, or

    • (ii) the flow-through entity

      • (A) is an entity described in paragraph 14(3)(c), and

      • (B) has a direct or indirect ownership interest in at least one constituent entity of the MNE group that

        • (I) has a top-up amount, and

        • (II) is not located in the jurisdiction where the flow-through entity was created; and

  • (b) in any other case, is a stateless entity.

• Marginal note:Location of permanent establishments

  (3) In determining the jurisdiction where a permanent establishment is located,

  • (a) if the permanent establishment is described in paragraph (a) of the definition permanent establishment in subsection 2(1), it is located in the jurisdiction where it is treated as a permanent establishment and is taxed under the applicable tax treaty;

  • (b) if the permanent establishment is described in paragraph (b) of that definition, it is located in the jurisdiction where it is subject to net basis taxation based on its business presence;

  • (c) if the permanent establishment is described in paragraph (c) of that definition, it is located in the jurisdiction where it is situated; and

  • (d) if the permanent establishment is described in paragraph (d) of that definition, it is a stateless permanent establishment.

• Marginal note:Stateless entity — notional jurisdiction

  (4) A stateless entity or stateless permanent establishment is deemed to be located in a notional jurisdiction in which no other entity or permanent establishment is located.

• Marginal note:Change of location

  (5) If an entity’s location changes during a fiscal year, it is deemed to be located, for the fiscal year, in the jurisdiction where it was located at the beginning of that fiscal year.

Marginal note:Dual-located entity — tie-breaker rule

• 6 (1) If a constituent entity would, in the absence of this section, be located in more than one jurisdiction for a fiscal year under subsection 5(1), the following rules apply:

  • (a) if the jurisdictions are party to a tax treaty that is in force and the constituent entity is deemed to be resident in only one of the jurisdictions for purposes of the treaty, the entity is located in that jurisdiction for the fiscal year; and

  • (b) in any other case,

    • (i) if the constituent entity has, for the fiscal year, a greater amount of covered taxes (determined without reference to any taxes under a controlled foreign company tax regime) in one of the jurisdictions than in the other jurisdictions, the constituent entity is located in that jurisdiction for the fiscal year,

    • (ii) if subparagraph (i) does not apply and the constituent entity has a greater substance-based income exclusion amount for one of the jurisdictions than for the other jurisdictions, the constituent entity is located in that jurisdiction for the fiscal year, and

    • (iii) if subparagraphs (i) and (ii) do not apply, the constituent entity is, for the fiscal year,

      • (A) if it is an ultimate parent entity of an MNE group, located in the jurisdiction where it was created, and

      • (B) in any other case, a stateless entity.

• Marginal note:Substance-based income exclusion amount

  (2) For the purposes of subparagraph (1)(b)(ii), a constituent entity’s substance-based income exclusion amount for a jurisdiction for a fiscal year is

  • (a) if a substance-based income exclusion amount is calculated for the jurisdiction for the fiscal year, the amount that would be determined for that constituent entity under subsection 32(1) if the constituent entity were the only constituent entity that is located in that jurisdiction and if the reference to “standard constituent entity” in that subsection were read as a reference to “constituent entity”; and

  • (b) in any other case, nil.

• Marginal note:Dual-located entity — deeming rule

  (3) If a constituent entity that would, in the absence of subsection (1), be located in more than one jurisdiction (each referred to in this subsection as a “relevant jurisdiction”), is located in only one of those jurisdictions (referred to in this subsection as the “location jurisdiction”) because of subsection (1) and is not subject to tax under a qualified IIR in the location jurisdiction,

  • (a) where Canada is a relevant jurisdiction (but is not the location jurisdiction) and Canada is not restricted from taxing the constituent entity under Part 2 because of an applicable tax treaty, the entity is deemed to be located in Canada for the purposes of clause 14(1)(b)(i)(B) and subparagraph 14(3)(a)(i); and

  • (b) where Canada is not a relevant jurisdiction, and the constituent entity is subject to tax in a relevant jurisdiction under a qualified IIR because of a provision under the laws of that relevant jurisdiction that is equivalent in effect to paragraph (a), the entity is deemed to be located in that relevant jurisdiction for the purposes of subsection 14(3).

Application

Marginal note:Currency conversion — GloBE calculations

• 7 (1) Subject to subsection (2), if an amount that is relevant to the determination of the top-up amount, or of any amount or result relevant to the determination of the top-up amount, of a constituent entity of an MNE group for a fiscal year is denominated in a currency other than the reporting currency of the consolidated financial statements of the ultimate parent entity of the MNE group and is not converted to that reporting currency in the course of preparing the consolidated financial statements, that amount is to be converted to that reporting currency using the foreign currency translation principles of the financial accounting standard that would have been used to convert the amount to the reporting currency if that conversion were undertaken in the course of preparing the consolidated financial statements.

• Marginal note:Euro-denominated thresholds

  (2) For the purposes of determining if any materiality or other threshold in this Act that is denominated in the currency of the European Monetary Union is satisfied or exceeded by an amount in respect of a group, entity or jurisdiction for a particular fiscal year, if the amount is denominated in another currency, the amount is to be converted from that currency to the currency of the European Monetary Union using the average of the daily rates of exchange, in respect of the two currencies for the month of December included in the fiscal year immediately preceding the particular fiscal year, as quoted by

  • (a) the European Central Bank;

  • (b) the Bank of Canada, if the European Central Bank does not quote a daily rate of exchange in respect of the two currencies; or

  • (c) another source that is acceptable to the Minister, if neither the European Central Bank nor the Bank of Canada quote a daily rate of exchange in respect of the two currencies.

• Marginal note:If subsections (1) and (2) do not apply

  (3) Except as specifically otherwise provided, if an amount is relevant to a determination or computation that is required for the purposes of this Act in respect of an entity included in an MNE group or in respect of the MNE group for a fiscal year

  • (a) the currency in which that amount is to be denominated for use in the determination or computation is the reporting currency of the consolidated financial statements of the ultimate parent entity of the MNE group; and

  • (b) if that amount is not denominated in the reporting currency, it is to be converted, for use in the determination or computation, to the reporting currency using the average for the fiscal year of the daily rates of exchange quoted by the Bank of Canada or, if there is no daily rate quoted by the Bank of Canada for a particular day, a daily rate of exchange acceptable to the Minister, in respect of the two currencies.

Marginal note:Negative amounts

8 Except as specifically otherwise provided, if an amount or a number is required under this Act to be determined or calculated by or in accordance with an algebraic formula and the amount or number determined or calculated would, but for this section, be a negative amount or number, it is deemed to be nil.

Scope

Marginal note:Definition of qualifying MNE group

• 9 (1) A qualifying MNE group for a particular fiscal year means an MNE group that meets the following conditions:

  • (a) revenue reported in the consolidated financial statements of the ultimate parent entity of the MNE group is equal to or greater than the revenue threshold of the MNE group in at least two of the four fiscal years immediately preceding the particular fiscal year; and

  • (b) the MNE group is not composed exclusively of excluded entities for the particular fiscal year.

• Marginal note:Definition of revenue threshold

  (2) The revenue threshold of an MNE group for a fiscal year means the amount determined by the formula

  A × B ÷ 365

  where

  A

  is €750 million; and

  B

  is the number of days in the fiscal year.

• Marginal note:Revenue — pre-merger years

  (3) For the purposes of the definition qualifying MNE group in subsection (1) and subsection (4), if an MNE group is formed as a result of a merger in a particular fiscal year between a group, or an entity that is not included in a group immediately before the merger (referred to in this subsection as an “ungrouped entity”), and one or more other groups or ungrouped entities, then for any fiscal year preceding the particular fiscal year (referred to in this subsection as the “preceding year”)

  • (a) all amounts that are the revenue or a portion of the revenue reported in the consolidated financial statements of the ultimate parent entity of any of those groups or in the financial statements of any of those ungrouped entities, as the case may be, and that correspond to any period included in the preceding year (with the revenue apportioned between periods, if necessary, on a just and reasonable basis) are to be aggregated; and

  • (b) the aggregate amount determined under paragraph (a) is deemed to be the revenue reported in the consolidated financial statements of the ultimate parent entity of the MNE group for the preceding year.

• Marginal note:Qualifying MNE group — demerger

  (4) If there is a demerger of an MNE group that was a qualifying MNE group in the fiscal year immediately preceding the fiscal year in which the demerger occurs and any of the groups resulting from the demerger is an MNE group (referred to in this subsection as a “demerged MNE group”), the condition in paragraph (a) of the definition qualifying MNE group in subsection (1) is deemed to be satisfied in respect of the demerged MNE group for

  • (a) the first fiscal year of the demerged MNE group ending after the demerger occurs (referred to in this paragraph as the “first post-demerger year”), if the revenue reported in the consolidated financial statements of the ultimate parent entity of the demerged MNE group for the first post-demerger year is greater than or equal to the amount determined by the formula

    A × B ÷ 365

    where

    A

    is €750 million, and

    B

    is the number of days in the first post-demerger year; and

  • (b) any fiscal year (referred to in this paragraph as the “tested year”) among the three fiscal years of the demerged MNE group immediately following the first post-demerger year, if the revenue reported in the consolidated financial statements of the ultimate parent entity of the demerged MNE group for at least two out of the tested year and any other fiscal years of the demerged MNE group ending before the tested year and after the demerger (the tested year and each of those other years referred to in this paragraph as a “post-demerger year”) is greater than or equal to the amount determined by the formula

    A × C ÷ 365

    where

    C

    is the number of days in the post-demerger year.

• Marginal note:Merger — meaning

  (5) For the purposes of subsection (3), a merger is any arrangement under which

  • (a) all or substantially all of the entities of two or more groups are brought under common control such that those entities form a single group immediately following the conclusion of the arrangement; or

  • (b) one or more entities that are not included in any group are brought under common control with another entity, or one or more groups of entities, such that all those entities form a single group immediately following the conclusion of the arrangement.

• Marginal note:Demerger — meaning

  (6) For the purposes of subsection (4), a demerger is any arrangement under which the entities of a group are separated into two or more groups.

• Marginal note:Interpretation — fiscal year

  (7) For the purposes of paragraph (1)(a) and subsection (3), if an MNE group formed as a result of a merger does not have four actual fiscal years preceding the merger, the contiguous periods of equal length to the earliest of its actual fiscal years, the latest of which immediately precedes that earliest actual fiscal year, are deemed to be fiscal years of the MNE group.

Marginal note:Definition of MNE group

• 10 (1) An MNE group means a group that includes at least one entity or permanent establishment that is not located in the jurisdiction in which the ultimate parent entity of the group is located.

• Marginal note:Definition of group

  (2) A group means

  • (a) an ultimate parent entity and one or more other entities each of whose assets, liabilities, income, expenses and cash flows, by reason of ownership or control, either

    • (i) are included in the consolidated financial statements of the ultimate parent entity, or

    • (ii) would be included in the consolidated financial statements of the ultimate parent entity but for an exclusion on size or materiality grounds, or on the grounds that the entity is held for sale; or

  • (b) an entity that

    • (i) is not part of a group described in paragraph (a), and

    • (ii) has one or more permanent establishments that are not located in the jurisdiction in which the entity is located.

Marginal note:Definition of constituent entity

• 11 (1) A constituent entity, in respect of a group, means

  • (a) an entity, other than an excluded entity, that is included in the group; or

  • (b) a permanent establishment of a main entity that is described in paragraph (a).

• Marginal note:Permanent establishment — separate treatment

  (2) Except as expressly otherwise provided, a permanent establishment that is a constituent entity under paragraph (1)(b) is treated as a constituent entity separate from its main entity and any other permanent establishment of that main entity.

• Marginal note:Definition of standard constituent entity

  (3) A standard constituent entity, of an MNE group, means a constituent entity other than

  • (a) an investment entity;

  • (b) an insurance investment entity; or

  • (c) a minority-owned constituent entity.