Malaysia legislation
Section 191
Section 191
(2)
An election under this section shall apply to all
Constituent Entities located in the jurisdiction.
(3)
An annual Deemed Distribution Tax Recapture Account is established for each Financial Year in which the election in this section applies.
(4)
A Deemed Distribution Tax Recapture Account is increased by the amount of the Deemed Distribution Tax as determined in accordance with the definition of “Deemed
Distribution Tax” for the jurisdiction for the Financial Year for which it was established.
(5)
At the end of each succeeding Financial Year, the outstanding balances of Deemed Distribution Tax Recapture
Accounts established for prior Financial Years are reduced in chronological order and to the extent thereof, but not below zero—
(a)
first by Taxes paid by the Constituent Entities during the Financial Year in relation to actual or deemed distributions;
(b)
then by the amount of any Net GloBE Loss of the jurisdiction multiplied by the Minimum Rate; and
(c)
then by any amount of Recapture Account Loss
Carry-forward applied to the current Financial Year pursuant to subsections (6) to (8).
(6)
A Recapture Account Loss Carry-forward shall be established for the jurisdiction when the amount described in paragraph (5)(b) exceeds the outstanding balance of the
Deemed Distribution Tax Recapture Accounts.
Act 851
(7)
The Recapture Account Loss Carry-forward shall be in an amount equal to such excess and shall be taken into account in subsequent Financial Years as a reduction to Deemed
Distribution Tax Recapture Accounts in such Financial Years.
(8)
When such amount is taken into account in a subsequent
Financial Year, the Recapture Account Loss Carry-forward must be reduced by that amount.
(9)
If there is an outstanding balance of a Deemed Distribution
Tax Recapture Account maintained in accordance with subsections (3) to (5) on the last day of the fourth Financial
Year after the Financial Year for which such account was established, the Effective Tax Rate and Multinational Top-up
Tax for the Financial Year for which the account was established must be recalculated under subsection 181(1) by treating the balance of the Deemed Distribution Tax Recapture Account as a reduction to the Adjusted Covered Taxes previously determined for such year.
(10)
Taxes paid during the Financial Year in relation to actual or deemed distributions are not included in Adjusted
Covered Taxes to the extent they reduce a Deemed Distribution
Tax Recapture Account under subsections (3) to (5).
(11)
In the Financial Year that a Departing Constituent
Entity leaves the Multinational Enterprise Group or transfers substantially all of its assets outside the Multinational
Enterprise Group or outside the jurisdiction—
(a)
the Effective Tax Rate and Multinational Top-up
Tax for each preceding year for which a Deemed
Distribution Tax Recapture Account is outstanding is re-calculated in accordance with the principles of subsection 181(1) by treating the balance of the
Deemed Distribution Tax Recapture Account as a reduction to the Adjusted Covered Taxes previously determined for such year; and
(b)
any amount of incremental Multinational Top-up Tax resulting from such recalculation shall be multiplied by the Disposition Recapture Ratio to determine the Additional Current Multinational Top-up Tax for the purposes of subsection 177(1).
Finance (No. 2)
(12)
The Disposition Recapture Ratio is determined for each Departing Constituent Entity in accordance with the following formula:
A
B where
A is the GloBE Income of the Constituent
Entity, being the sum of GloBE Income of the Departing Constituent Entity determined in accordance with Chapter 5 of this Part for each Financial Year corresponding to the
Deemed Distribution Tax Recapture Accounts for the jurisdiction; and
B is the Net Income of the Jurisdiction as determined in accordance with subsection 174(4) for each Financial Year corresponding to the Deemed Distribution
Tax Recapture Accounts for the jurisdiction.
(13)
For the purposes of this section—
“Deemed Distribution Tax” means the lesser of—
(a)
the amount necessary to increase the Effective Tax
Rate computed under section 175 for the jurisdiction for the Financial Year to the Minimum Rate; or
(b)
the amount of distribution tax that would have been due if the Constituent Entities located in the jurisdiction had distributed all of their income that is subject to the Eligible Distribution Tax Regime during such year;
“Deemed Distribution Tax Recapture Account” means an account maintained in accordance with subsections (3)
to (5);
Act 851
“Departing Constituent Entity” means a Constituent Entity that is subject to an election under subsections 191(1) and (2)
and that leaves the Multinational Enterprise Group or transfers substantially all of its assets to a person that is not a Constituent Entity of the same Multinational Enterprise
Group located in the same jurisdiction;
“Disposition Recapture Ratio” means a ratio as determined in subsection (12).
Effective Tax Rate Computation for Investment Entities