Global Minimum Tax Act (S.C. 2024, c. 17, s. 81)
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Act current to 2024-06-20
PART 1Interpretation and Application (continued)
Scope (continued)
Marginal note:Definition of ultimate parent entity
12 (1) An ultimate parent entity means
(a) an entity
(i) that has, directly or indirectly, a controlling interest in any other entity, and
(ii) in which no other entity has, directly or indirectly, a controlling interest; or
(b) the main entity of a group that is described in paragraph 10(2)(b).
Marginal note:Exclusion — sovereign wealth funds
(2) For the purposes of subsection (1), any governmental entity that satisfies the condition in subparagraph (b)(ii) of the definition governmental entity in subsection 2(1) is deemed not to have, directly or indirectly, a controlling interest in any other entity.
Marginal note:Definition of excluded entity
13 (1) An excluded entity, for a fiscal year, means
(a) an entity (referred to in this subsection as a “primary excluded entity”) that is throughout the fiscal year
(i) a governmental entity,
(ii) an international organization,
(iii) a non-profit organization,
(iv) a pension fund,
(v) an investment fund that is an ultimate parent entity,
(vi) a real estate investment vehicle that is an ultimate parent entity, or
(vii) a qualifying non-profit subsidiary;
(b) an entity if
(i) throughout the fiscal year ownership interests in the entity having a fair market value equal to at least 95% of the fair market value of all ownership interests in the entity are held directly, or indirectly through one or more excluded entities, by one or more primary excluded entities (other than a pension fund that is a pension services entity), and
(ii) all or substantially all the activities of the entity during the fiscal year consist of
(A) holding assets for the benefit of the one or more primary excluded entities,
(B) investing funds for the benefit of the one or more primary excluded entities,
(C) activities that are ancillary to those carried out by the one or more primary excluded entities, or
(D) any combination of clauses (A) to (C); or
(c) an entity if
(i) throughout the fiscal year ownership interests in the entity having a fair market value equal to at least 85% of the fair market value of all ownership interests in the entity are held directly, or indirectly through one or more excluded entities, by one or more primary excluded entities (other than a pension fund that is a pension services entity), and
(ii) all or substantially all of the entity’s financial accounting income for the fiscal year consists of excluded dividends or excluded equity gains or losses.
Marginal note:Excluded entity — constituent entity election
(2) For the purposes of subsection (1), if the relevant filing constituent entity elects in respect of a particular entity that would, in the absence of this subsection, be an excluded entity under paragraph (1)(b) or (c) for a fiscal year
(a) the particular entity is deemed not to be an excluded entity for the fiscal year; and
(b) the election is a five-year election.
PART 2Global Minimum Tax
DIVISION 1Liability for Tax
Marginal note:Top-up tax liability
14 (1) A person must pay a tax in respect of an MNE group for a fiscal year in the amount determined under subsection 15(1) if
(a) the MNE group is a qualifying MNE group for the fiscal year;
(b) one of the following conditions is met:
(i) the person is
(A) a relevant parent entity of the MNE group for the fiscal year, and
(B) located in Canada,
(ii) the person would, under the relevant assumptions, include in its income for the purposes of Part I of the Income Tax Act income for the fiscal year of a relevant parent entity that is
(A) located in Canada, and
(B) not a person; and
(c) the relevant parent entity referred to in subparagraph (b)(i) or (ii) has a direct or indirect ownership interest at any time in the fiscal year in one or more constituent entities of the MNE group that
(i) is not located in Canada, and
(ii) has a top-up amount for the fiscal year.
Marginal note:Relevant assumptions
(2) For the purposes of subparagraph (1)(b)(ii), the relevant assumptions are that
(a) the relevant parent 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 that subparagraph is resident in Canada for the purposes of the Income Tax Act.
Marginal note:Definition of relevant parent entity
(3) A relevant parent entity, of an MNE group for a fiscal year, means an entity that meets the following conditions:
(a) the entity is located in
(i) Canada, or
(ii) another jurisdiction where it is subject to tax under a qualified IIR (referred to in this subsection as a “Pillar Two jurisdiction”);
(b) the entity is neither
(i) an excluded entity for the purposes of this Act, nor
(ii) excluded from the application of the qualified IIR of the jurisdiction where it is located because of a provision in the law of that jurisdiction equivalent to subsection 13(1); and
(c) the entity is any of the following:
(i) the ultimate parent entity of the MNE group for the year,
(ii) a particular intermediate parent entity of the MNE group for the year, if
(A) the ultimate parent entity of the MNE group is not located in Canada or a Pillar Two jurisdiction, and
(B) no other intermediate parent entity of the MNE group that is located in Canada or a Pillar Two jurisdiction has, directly or indirectly, a controlling interest in the particular intermediate parent entity,
(iii) a partially-owned parent entity of the MNE group for the year that is not wholly owned, directly or indirectly, by another partially-owned parent entity of the MNE group that is located in Canada or a Pillar Two jurisdiction.
Marginal note:Top-up tax payable
15 (1) The amount of the tax a person must pay in respect of an MNE group for a fiscal year is equal to the total of all amounts, each of which is an amount determined by the formula
A − B
where
- A
- is the allocable share, of the top-up amount of a constituent entity of the MNE group that is not located in Canada for the fiscal year, of
(a) the person, if subparagraph 14(1)(b)(i) applies, or
(b) the relevant parent entity referred to in subparagraph 14(1)(b)(ii), if that subparagraph applies; and
- B
- is the total of all amounts each of which is a portion of the top-up amount of the constituent entity for the fiscal year that is included in both
(a) the amount determined for A for the fiscal year, and
(b) the allocable share, of the top-up amount of the constituent entity for the fiscal year, of a relevant parent entity of the MNE group through which the person referred to in paragraph (a), or the relevant parent entity referred to in paragraph (b), of the description of A indirectly holds an ownership interest in the constituent entity.
Marginal note:Definition of allocable share
(2) The allocable share, of the top-up amount of a constituent entity of an MNE group for a fiscal year, of a relevant parent entity, means the amount determined by the formula
A × B
where
- A
- is the top-up amount of the constituent entity for the fiscal year; and
- B
- is the relevant parent entity’s inclusion ratio for the constituent entity for the fiscal year.
Marginal note:Definition of inclusion ratio
(3) The inclusion ratio, of a relevant parent entity for a constituent entity of an MNE group for a fiscal year, means the ratio determined by the formula
(A − B) ÷ A
where
- A
- is the GloBE income of the constituent entity for the fiscal year; and
- B
- is the GloBE income of the constituent entity for the fiscal year that would be attributable to ownership interests other than ownership interests held directly or indirectly by the relevant parent entity, under the principles of the financial accounting standard applicable in preparing the consolidated financial statements of the ultimate parent entity of the MNE group for the fiscal year, if the net income of the constituent entity were equal to its GloBE income and on the assumption that
(a) the relevant parent entity had prepared consolidated financial statements (referred to in this subsection as “hypothetical consolidated financial statements”) in accordance with that financial accounting standard,
(b) the relevant parent entity had a controlling interest in the constituent entity such that all of the income and expenses of the constituent entity were consolidated on a line-by-line basis with those of the relevant parent entity in the hypothetical consolidated financial statements,
(c) none of the GloBE income of the constituent entity were attributable to transactions with group entities of the MNE group, and
(d) no ownership interests, other than those held directly or indirectly by the relevant parent entity, were held by any group entity of the MNE group.
Marginal note:Flow-through and investment entities
(4) For the purposes of subsection (3), if a constituent entity of an MNE group is a flow-through entity, an investment entity or an insurance investment entity, none of the GloBE income of the constituent entity is to be regarded as attributable to ownership interests held by any entity that is not included in the MNE group.
Marginal note:Inclusion ratio — deemed GloBE income
(5) For the purposes of subsection (3), if the net GloBE income of the MNE group for a jurisdiction for a fiscal year is nil, the GloBE income of a constituent entity of the MNE group that is located in the jurisdiction for the fiscal year is deemed to be the amount determined by the formula
A + B
where
- A
- is the amount determined by the formula
C ÷ D
where
- C
- is the allocated adjustment top-up amount of the constituent entity for the fiscal year, and
- D
- is the minimum rate; and
- B
- is the amount determined by the formula
E ÷ D
where
- E
- is the excess negative tax expense top-up amount of the constituent entity for the fiscal year.
DIVISION 2Computation of GloBE Income or Loss
GloBE Income or Loss
Marginal note:Definition of GloBE income or loss
16 GloBE income or loss, of a constituent entity for a fiscal year, means the constituent entity’s financial accounting income for the year, adjusted according to the rules in this Division and Divisions 5 and 7.
SUBDIVISION ADetermination of Financial Accounting Income
Marginal note:Definition of financial accounting income
17 (1) Financial accounting income, for a constituent entity for a fiscal year, means, subject to subsections (2) to (6),
(a) for a constituent entity other than a permanent establishment, the net income or loss determined for that constituent entity
(i) in the preparation of the consolidated financial statements of the ultimate parent entity of the MNE group that includes the constituent entity, or
(ii) under another acceptable financial accounting standard or authorized financial accounting standard, if
(A) it is not reasonably practicable to determine the financial accounting income for the constituent entity based on the accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity,
(B) the financial accounts of the constituent entity are maintained based on the other acceptable financial accounting standard or authorized financial accounting standard,
(C) the information in those financial accounts is reliable, such that an auditor applying the generally accepted auditing standards of the jurisdiction in which the ultimate parent entity or constituent entity is located (or, in the case of a flow-through entity, the jurisdiction in which the entity was created) would reasonably conclude that the constituent entity has in place processes and controls that are likely to ensure that the information in the financial accounts is fair and accurate, and
(D) that amount is adjusted to eliminate any permanent difference greater than €1 million that arises for the fiscal year because the other financial accounting standard is used instead of the financial accounting standard of the ultimate parent entity; and
(b) for a constituent entity that is a permanent establishment,
(i) if the permanent establishment is described in any of paragraphs (a) to (c) of the definition permanent establishment in subsection 2(1), the amount that
(A) is the net income or loss reflected in the separate financial accounts of the permanent establishment, if those financial accounts are prepared in accordance with an acceptable financial accounting standard or in accordance with an authorized financial accounting standard and subject to adjustments to prevent any material competitive distortions, or
(B) if the permanent establishment does not have separate financial accounts described in clause (A), would be the net income or loss of that permanent establishment reflected in separate financial accounts prepared on a stand-alone basis in accordance with the accounting standard used in the preparation of the ultimate parent entity’s consolidated financial statements, and
(ii) if the constituent entity is a permanent establishment described in paragraph (d) of the definition permanent establishment in subsection 2(1), the net income or loss determined on the assumption that
(A) the only income of the permanent establishment is its income that is exempted from tax in the jurisdiction where the main entity in respect of the permanent establishment is located and that is attributable to activities carried on outside the jurisdiction in which the main entity is located, and
(B) the only expenses of the permanent establishment are its expenses that are attributable to the activities described in clause (A) and are not deducted for tax purposes in the jurisdiction in which the main entity is located.
Marginal note:Permanent establishments — adjustment
(2) The amount that would, in the absence of this subsection, be a permanent establishment’s financial accounting income is adjusted to reflect only the amounts of income and expense that are — or, if paragraph (c) applies, would be — attributable to the permanent establishment (regardless of whether such amount is subject to tax or deductible, as the case may be, in the jurisdiction in which the permanent establishment is located) in accordance with
(a) if paragraph (a) of the definition permanent establishment in subsection 2(1) applies, the tax treaty applicable to the permanent establishment;
(b) if paragraph (b) of that definition applies, the law of the jurisdiction in which the permanent establishment is located; or
(c) if paragraph (c) of that definition applies, Article 7 of the OECD Model Tax Convention.
Marginal note:Permanent establishments — general rule
(3) Except as provided by subsection 18(26), the net income or loss of a permanent establishment (other than any portion of that amount that is excluded from the financial accounting income of the permanent establishment because of subsection (2)) is not to be taken into account in determining the GloBE income or loss of the main entity in respect of the permanent establishment.
Marginal note:No consolidation adjustments
(4) The financial accounting income of a constituent entity is to include income, expenses, gains and losses (other than amounts excluded from GloBE income or loss because of subsection (5)) arising from transactions between the constituent entity and any other group entity, other than any transactions to which an election under subsection 18(24) applies.
Marginal note:Profit and loss statement — general rule
(5) Unless otherwise required under this Act, no amount is included in computing the GloBE income or loss of a constituent entity if it is recognized outside of the profit and loss statement of the constituent entity’s financial statements.
Marginal note:Financial accounting income — flow-through entity
(6) If a constituent entity is a particular flow-through entity, the following rules apply in determining the financial accounting income for a fiscal year of the particular flow-through entity and any other group entities in respect of the net income or loss of the particular flow-through entity:
(a) amounts in respect of the particular flow-through entity’s net income or loss that are attributable to ownership interests of persons or entities that are not group entities and that hold their ownership interests in the particular flow-through entity directly, or through a tax transparent structure, are not to be included in computing the financial accounting income of any group entity, unless
(i) the particular flow-through entity is an ultimate parent entity, or
(ii) the particular flow-through entity is owned, directly or through a tax transparent structure, by an ultimate parent entity that is also a flow-through entity, in which case this paragraph does not apply to amounts in respect of the particular flow-through entity’s net income or loss to the extent those amounts are attributable to persons or entities that hold their ownership interests in the particular flow-through entity through that ultimate parent entity;
(b) if a particular group entity has an ownership interest in the particular flow-through entity, an amount that, in the absence of this paragraph — and, for greater certainty, after excluding amounts to which paragraph (a) applies and amounts allocated to a permanent establishment in accordance with paragraph (1)(b) — would be included in the financial accounting income of the particular flow-through entity is excluded from its financial accounting income and included in the financial accounting income of the particular group entity in accordance with the particular group entity’s ownership interest (determined having regard only to ownership interests held by group entities) in the particular flow-through entity, to the extent that
(i) the particular flow-through entity is not an ultimate parent entity,
(ii) the particular flow-through entity is fiscally transparent in relation to the particular group entity,
(iii) the particular group entity is not a flow-through entity, other than a reverse hybrid entity or an ultimate parent entity, and
(iv) the particular group entity holds its ownership interest in the particular flow-through entity
(A) directly, or
(B) indirectly, through one or more entities (each referred to in this clause as an “intermediate owner”), if
(I) each intermediate owner is fiscally transparent in relation to the particular group entity,
(II) where the particular group entity is not a flow-through entity or is a flow-through entity that is an ultimate parent entity, there is no intermediate owner that both
1 is not a flow-through entity, and
2 would meet the conditions in this subparagraph and subparagraph (ii) if the references in those subparagraphs to the “particular group entity” were read as references to that intermediate owner, and
(III) where the particular group entity is a reverse hybrid entity, there is no intermediate owner that would meet the conditions in this subparagraph and subparagraphs (ii) and (iii) if the references in those subparagraphs to the “particular group entity” were read as references to that intermediate owner;
(c) despite paragraph (b), if an amount of the net income or loss of the particular flow-through entity would, in the absence of this paragraph, be included under paragraph (b) in the financial accounting income of a particular group entity (referred to in this paragraph as the “lower-tier entity”) that is a reverse hybrid entity, and would also be included in the financial accounting income of another group entity (referred to in this paragraph as the “upper-tier entity”), that is not a flow-through entity or that is a flow-through entity that is an ultimate parent entity, in relation to an ownership interest the upper-tier entity holds in the particular flow-through entity through the lower-tier entity, the amount is
(i) included in the financial accounting income of the upper-tier entity, and
(ii) not included in the financial accounting income of the lower-tier entity; and
(d) any amount of the net income or loss of the particular flow-through entity that is not excluded in computing its financial accounting income because of paragraph (a) or (b), or subsection (3), is included in the financial accounting income of the particular flow-through entity.
Marginal note:Flow-through entity — ownership interests
(7) For the purpose of determining an entity’s financial accounting income under subsection (6), a reference to an ownership interest refers only to an ownership interest that carries rights to profit.
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