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

SUBDIVISION FQualified Flow-Through Tax Benefits

Marginal note:Definitions

• 28 (1) The following definitions apply in this section.

  adjusted investment amount

  adjusted investment amount, of an owner in respect of a qualified flow-through ownership interest for a fiscal year (referred to in this definition as the “determination year”), means the amount determined by the formula

  A − B − C

  where

  A

  is the investment amount of the owner in respect of the ownership interest;

  B

  is the total of all amounts each of which is the qualified flow-through tax benefits of the owner in respect of the ownership interest for a fiscal year preceding the determination year; and

  C

  is the total of all amounts each of which is the other flow-through amounts of the owner in respect of the ownership interest for the determination year or any preceding fiscal year. (montant d’investissement ajusté)

  excess benefits

  excess benefits, of an owner in respect of a proportional amortization method interest for a particular fiscal year, means the amount determined by the formula

  A + B − C

  where

  A

  is

  • (a) if the amount determined for C is equal to the proportional investment reduction amount of the owner in respect of the interest for the particular fiscal year, the other flow-through amounts of the owner in respect of the interest for the particular fiscal year, and

  • (b) in any other case, the lesser of

    • (i) the other flow-through amounts of the owner in respect of the interest for the particular fiscal year, and

    • (ii) the amount determined by the formula

      D − E

      where

      D

      is the proportional amortization method investment remaining amount of the owner in respect of the interest for the fiscal year immediately preceding the particular fiscal year, and

      E

      is the qualified flow-through tax benefits of the owner in respect of the interest for the fiscal year immediately preceding the particular fiscal year;

  B

  is the flow-through tax benefits of the owner in respect of the interest for the particular fiscal year, to the extent that the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been increased (or to not have been reduced) solely because of the application of the proportional amortization method, or another financial accounting method that provides similar results as to current tax expense, in respect of the interest for the particular fiscal year; and

  C

  is the lesser of

  • (a) the amount determined for subparagraph (b)(ii) of the description of A, and

  • (b) the proportional investment reduction amount of the owner in respect of the interest for the particular fiscal year. (bénéfices excédentaires)

  expected tax benefits ratio

  expected tax benefits ratio, of an owner in respect of a proportional amortization method interest for a fiscal year, means the amount determined by the formula

  A ÷ B

  where

  A

  is the flow-through tax benefits of the owner in respect of the interest for the fiscal year; and

  B

  is the total amount of flow-through tax benefits that the owner reasonably expects, at the time when the interest is first acquired, to receive in respect of the interest. (ratio des avantages fiscaux attendus)

  flow-through tax benefits

  flow-through tax benefits, of an owner in respect of a qualified flow-through ownership interest for a fiscal year, means the total of all amounts each of which is

  • (a) the tax benefit, in respect of a tax credit (other than a qualified refundable tax credit or marketable transferable tax credit of the owner), received by the owner in respect of the ownership interest for the fiscal year; or

  • (b) the tax benefit, in respect of a tax loss, received by the owner in respect of the ownership interest for the fiscal year. (avantages fiscaux intermédiaires)

  investment amount

  investment amount, of an owner in respect of an ownership interest, means the total fair market value of all consideration provided by the owner for the ownership interest. (montant d’investissement)

  other flow-through amounts

  other flow-through amounts, of an owner in respect of a qualified flow-through ownership interest for a fiscal year, means the total of the following amounts received by the owner in respect of the ownership interest in the fiscal year:

  • (a) the tax benefits of qualified refundable tax credits and marketable transferable tax credits of the owner;

  • (b) distributions (including returns of capital); and

  • (c) proceeds from sales of all or part of the ownership interest. (autres montants intermédiaires)

  proportional amortization method interest

  proportional amortization method interest means a qualified flow-through ownership interest in respect of which the owner uses the proportional amortization method for financial accounting purposes. (participation selon la méthode d’amortissement proportionnelle)

  proportional amortization method investment remaining amount

  proportional amortization method investment remaining amount, of an owner in respect of a proportional amortization method interest for a fiscal year (referred to in this definition as the “determination year”), means the amount determined by the formula

  A − B

  where

  A

  is the investment amount of the owner in respect of the interest; and

  B

  is the total of all amounts each of which is the lesser of the following amounts for the determination year or a preceding fiscal year:

  • (a) the amount determined by the formula

    C + D

    where

    C

    is

    • (i) in the case of the determination year, nil, and

    • (ii) in any other case, the qualified flow-through tax benefits of the owner in respect of the interest for the fiscal year, and

    D

    is the other flow-through amounts of the owner in respect of the interest for the fiscal year, and

  • (b) the proportional investment reduction amount of the owner in respect of the interest for the fiscal year. (montant de l’investissement résiduel selon la méthode d’amortissement proportionnelle)

  proportional investment reduction amount

  proportional investment reduction amount, of an owner in respect of a proportional amortization method interest for a fiscal year, means the amount determined by the formula

  A × B

  where

  A

  is the investment amount of the owner in respect of the interest; and

  B

  is the expected tax benefits ratio of the owner in respect of the interest for the fiscal year. (montant de la réduction de l’investissement proportionnel)

  qualified flow-through ownership interest

  qualified flow-through ownership interest means, subject to subsection (5), an ownership interest in a particular tax transparent entity held by a constituent entity of an MNE group directly, or indirectly through one or more other tax transparent entities that are not constituent entities of the MNE group, if

  • (a) the assets, liabilities, income, expenses and cash flows of the particular tax transparent entity 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 ownership interest was acquired by the owner, the total return to be received by the owner (including distributions, the tax benefits of tax losses and the tax benefits of qualified refundable tax credits and marketable transferable tax credits of the owner received in respect of the ownership interest, but excluding the tax benefits of tax credits other than qualified refundable tax credits and marketable transferable tax credits of the owner) from its investment in the ownership interest could not reasonably have been expected to be greater than or equal to the investment amount of the owner in respect of the ownership interest. (titre de participation intermédiaire admissible)

  qualified flow-through tax benefits

  qualified flow-through tax benefits, of an owner in respect of a qualified flow-through ownership interest for a fiscal year in which the ownership interest is subject to an election under subsection 18(7), means

  • (a) if the ownership interest is a proportional amortization method interest, the least of

    • (i) the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year,

    • (ii) the proportional amortization method investment remaining amount of the owner in respect of the ownership interest for the fiscal year, and

    • (iii) the amount, if any, by which the proportional investment reduction amount, of the owner in respect of the ownership interest for the fiscal year, exceeds the other flow-through amounts of the owner in respect of the ownership interest for the fiscal year; and

  • (b) in any other case, the lesser of

    • (i) the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year, and

    • (ii) the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year. (avantages fiscaux intermédiaires admissibles)

  recapture amount

  recapture amount, of an owner in respect of a qualified flow-through ownership interest for a particular fiscal year, means the lesser of

  • (a) the amount determined by the formula

    A − B + C

    where

    A

    is the other flow-through amounts of the owner in respect of the ownership interest for the particular fiscal year,

    B

    is

    • (i) if the ownership interest is a proportional amortization method interest,

      • (A) where the amount determined for C in the formula in the definition excess benefits in this subsection is equal to the proportional investment reduction amount of the owner in respect of the ownership interest for the particular fiscal year, the amount determined for A, and

      • (B) in any other case, the proportional amortization method investment remaining amount of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

    • (ii) in any other case, the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

    C

    is

    • (i) where clause (i)(A) of the description of B applies, nil, and

    • (ii) in any other case, the qualified flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year immediately preceding the particular fiscal year, and

  • (b) the amount determined by the formula

    D − E

    where

    D

    is the total of all amounts each of which is the qualified flow-through tax benefits of the owner in respect of the ownership interest for a fiscal year preceding the particular fiscal year, and

    E

    is the total of all amounts each of which is the recapture amount of the owner in respect of the ownership interest for a fiscal year preceding the particular fiscal year. (montant de récupération)

  tax benefit

  tax benefit, of an owner in respect of a qualified flow-through ownership interest

  • (a) includes, in respect of a tax credit,

    • (i) a refund received by the owner in respect of the tax credit, and

    • (ii) any amount received by the owner in exchange for the transfer of the tax credit; and

  • (b) means, in respect of a tax loss attributed to the owner in respect of the ownership interest, the product obtained by multiplying the amount of the tax loss by the statutory income tax rate applicable to the owner in the jurisdiction where it is located. (avantage fiscal)

• Marginal note:Adjusted covered taxes — additions and reductions

  (2) If an owner holds a qualified flow-through ownership interest in another entity, the adjusted covered taxes of the owner for a fiscal year are deemed to be the amount that would, in the absence of section 8, be determined by the formula

  A + B − C

  where

  A

  is the adjusted covered taxes of the owner for the fiscal year, as determined without regard to any amount determined for B or C in respect of the ownership interest for the fiscal year;

  B

  is

  • (a) if the ownership interest is a proportional amortization method interest, the amount determined by the formula

    D − E

    where

    D

    is the qualified flow-through tax benefits, if any, of the owner in respect of the ownership interest for the fiscal year, and

    E

    is the amount by which the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been increased (or to not have been reduced) in respect of those qualified flow-through tax benefits solely because of the application of the proportional amortization method, or another financial accounting method that provides similar results as to current tax expense, in respect of the ownership interest for the fiscal year, and

  • (b) in any other case, the lesser of

    • (i) the qualified flow-through tax benefits, if any, of the owner in respect of the ownership interest for the fiscal year, and

    • (ii) the amount by which the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been reduced in the fiscal year because of those qualified flow-through tax benefits; and

  C

  is the amount determined by the formula

  F + G

  where

  F

  is

  • (a) if the ownership interest is a proportional amortization method interest, the excess benefits of the owner in respect of the ownership interest for the fiscal year, and

  • (b) in any other case, the amount by which the flow-through tax benefits of the owner in respect of the ownership interest for the fiscal year exceeds the adjusted investment amount of the owner in respect of the ownership interest for the fiscal year, except to the extent that the owner’s current tax expense in respect of covered taxes in its financial accounts can reasonably be considered to have been reduced in the fiscal year because of those flow-through tax benefits, and

  G

  is the recapture amount of the owner in respect of the ownership interest for the fiscal year.

• Marginal note:Proportional amortization method interest — election

  (3) A qualified flow-through ownership interest held by an owner that is a constituent entity of an MNE group that would not, in the absence of this subsection, be a proportional amortization method interest is irrevocably deemed to be a proportional amortization method interest if the filing constituent entity of the MNE group so elects in the later of

  • (a) the fiscal year in which the ownership interest is first acquired by the owner; and

  • (b) the first fiscal year in which

    • (i) the owner is subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax, and

    • (ii) the owner is a constituent entity of the MNE group.

• Marginal note:Deemed ownership interests — debt-accounted investments

  (4) For the purposes of this section, an investment, other than an ownership interest, in a particular tax transparent entity held by a particular constituent entity of an MNE group directly, or indirectly through one or more other tax transparent entities that are not constituent entities of the MNE group, is deemed to be an ownership interest held by the particular constituent entity in the particular tax transparent entity if the investment

  • (a) is treated as an equity interest under the income tax laws of the jurisdiction in which the particular constituent entity is located; and

  • (b) would be treated as an equity interest under an authorized financial accounting standard of the jurisdiction in which the particular tax transparent entity operates.

• Marginal note:Qualified flow-through ownership interest — anti-avoidance

  (5) An ownership interest in an entity held by an owner that would, in the absence of this subsection, be a qualified flow-through ownership interest is not a qualified flow-through ownership interest if

  • (a) the owner

    • (i) does not have a bona fide economic interest in the entity, or

    • (ii) is protected from the loss of its investment in the entity; or

  • (b) the tax laws of the jurisdiction in which the entity operates make receipt of the tax benefit in respect of any tax credits of the entity by the owner conditional on the owner or the developer of the project that originates the tax credits being subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax.