Section 180

A Filing Constituent Entity of a Multinational Enterprise

Group may make an Annual Election not to apply the

Substance-based Income Exclusion for a jurisdiction by not computing the exclusion or claiming it in the computation of Multinational Top-up Tax for the jurisdiction in the information return filed for the Financial Year.

Finance (No. 2)

The Substance-based Income Exclusion amount for a jurisdiction is the sum of the payroll carve-out and the tangible asset carve-out for each Constituent Entity, except for Constituent Entities that are Investment Entities, in that jurisdiction.

The payroll carve-out for a Constituent Entity located in a jurisdiction is equal to five per cent of its Eligible

Payroll Costs of Eligible Employees that perform activities for the Multinational Enterprise Group in such jurisdiction, except Eligible Payroll costs that are—

The tangible asset carve-out for a Constituent Entity located in a jurisdiction is equal to five per cent of the carrying value of Eligible Tangible Assets located in such jurisdiction.

For this purpose, the tangible asset carve-out computation shall not include the carrying value of property including land or buildings that is held for sale, lease or investment.

The tangible asset carve-out computation shall not include the carrying value of tangible assets used in the generation of a Constituent Entity’s International Shipping Income and

Qualified Ancillary International Shipping Income such as ships and other maritime equipment and infrastructure.

The carrying value of tangible assets attributable to a Constituent Entity’s excess income over the limit for

Qualified Ancillary International Shipping Income under subsection 166(3) shall be included in the tangible asset carve-out computation.

Act 851

The computation of carrying value of Eligible Tangible

Assets for the purposes of subsections (5) to (8) shall be based on the average of the carrying value after deducting any accumulated depreciation, amortisation, or depletion and including any amount attributable to capitalisation of payroll expense at the beginning and ending of the

Reporting Financial Year as recorded for the purpose of preparing the Consolidated Financial Statements of the

Ultimate Parent Entity.

For the purposes of subsections (4) to (8), the

Eligible Payroll Costs and Eligible Tangible Assets of a Constituent Entity that is a Permanent Establishment are those included in its separate financial accounts as determined by subsections 167(1) and (2) and adjusted in accordance with subsection 167(3), provided that the

Eligible Employees and Eligible Tangible Assets are located in the jurisdiction where the Permanent Establishment is located.

The Eligible Payroll Costs and Eligible Tangible Assets of a Permanent Establishment are not taken into account for the Eligible Payroll Costs and Eligible Tangible Assets of the Main Entity.

The Eligible Payroll Costs and Eligible Tangible Assets of a Permanent Establishment whose income has been wholly or partly excluded in accordance with subsections 168(3)

and 189(4) are excluded from the Substance-based Income

Exclusion computations of the Multinational Enterprise Group in the same proportion.

For the purposes of subsections (4) to (8), Eligible

Payroll Costs and Eligible Tangible Assets of a Flow-through

Entity that are not allocated under subsections (10) to (12)

are allocated in the following manner: