Section 165 — AKTA KEWANGAN (NO. 2) 2023

(a)

Net Taxes Expense;

(b)

Excluded Dividends;

(c)

Excluded Equity Gain or Loss;

(d)

Included Revaluation Method Gain or Loss;

(e)

Gain or loss from disposition of assets and liabilities excluded under section 186;

(f)

Asymmetric Foreign Currency Gains or Losses;

(g)

Policy Disallowed Expenses;

(h)

Prior Period Errors and Changes in Accounting

Principles; and

(i)

Accrued Pension Expense.

(2)

At the election of the Filing Constituent Entity, a Constituent Entity may substitute the amount allowed as a deduction in the computation of its taxable income in its location for the amount expensed in its financial accounts for a cost or expense of such Constituent Entity that was paid with stock-based compensation.

(3)

If the stock-based compensation expense arises in connection with an option that expires without exercise, the Constituent Entity shall include the total amount previously deducted in the computation of its GloBE Income or Loss for the Financial Year in which the option expires.

(4)

The election in subsection (2) is a Five-Year Election and shall be applied consistently to the stock-based compensation of all Constituent Entities located in the same jurisdiction for the year in which the election is made and all subsequent

Financial Years.

Finance (No. 2)

(5)

If the election is made in a Financial Year after some of the stock-based compensation of a transaction has been recorded in the financial accounts, the Constituent Entity shall include in the computation of its GloBE Income or

Loss for that Financial Year an amount equal to the excess of the cumulative amount allowed as an expense in the computation of its GloBE Income or Loss in previous Financial Years over the cumulative amount that would have been allowed as an expense if the election had been in place in those

Financial Years.

(6)

If the election is revoked, the Constituent Entity shall include in the computation of its GloBE Income or Loss for the revocation year the amount deducted pursuant to the election that exceeds financial accounting expense accrued in respect of the stock-based compensation that has not been paid.

(7)

Any transaction between Constituent Entities located in different jurisdictions that is not recorded in the same amount in the financial accounts of both Constituent Entities or that is not consistent with the Arm’s Length Principle shall be adjusted so as to be in the same amount and consistent with the Arm’s Length Principle.

(8)

A loss from a sale or other transfer of an asset between two Constituent Entities located in the same jurisdiction that is not recorded consistent with the Arm’s Length Principle shall be recomputed based on the Arm’s Length Principle if that loss is included in the computation of GloBE Income or Loss.

(9)

Rules for allocating income or loss between a Main

Entity and its Permanent Establishments are as provided in section 167.

(10)

Qualified Refundable Tax Credits shall be treated as income in the computation of GloBE Income or Loss of a Constituent Entity.

(11)

Non-Qualified Refundable Tax Credits shall not be treated as income in the computation of GloBE Income or Loss of a Constituent Entity.

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(12)

With respect to assets and liabilities that are subject to fair value or impairment accounting in the Consolidated

Financial Statements, a Filing Constituent Entity may elect to determine gains and losses using the realisation principle for the purpose of computing GloBE Income.

(13)

The election in subsection (12) is a Five-Year Election and applies to—

(a)

all Constituent Entities located in the jurisdiction to which the election applies; and

(b)

all assets and liabilities of such Constituent Entities, unless the Filing Constituent Entity chooses to limit the election to tangible assets of such Constituent

Entities or to Constituent Entities that are Investment

Entities.

(14)

For the purposes of an election under subsection (12)—

(a)

all gains or losses attributable to fair value or impairment accounting with respect to an asset or liability shall be excluded from the computation of GloBE Income or Loss;

(b)

the carrying value of an asset or liability for the purpose of determining gain or loss shall be its carrying value adjusted for accumulated depreciation at the later of—

(i)

the first day of the election year; or

(ii)

the date the asset was acquired or liability was incurred.

(15)

If the election under subsection (12) is revoked, the GloBE Income or Loss of the Constituent Entities is adjusted by the difference at the beginning of the revocation year between the fair value of the asset or liability and the carrying value of the asset or liability determined pursuant to the election adjusted for accumulated depreciation.

Finance (No. 2)

(16)

Where there is Aggregate Asset Gain in a jurisdiction in a Financial Year, the Filing Constituent Entity may make, under this subsection, an Annual Election for that jurisdiction to adjust GloBE Income or Loss with respect to each previous

Financial Year in the Look-back Period in the manner described in paragraphs (18)(b) and (c) and shall spread any remaining Adjusted Asset Gain over the Look-back Period in the manner described in paragraphs (18)(d) and (e).

(17)

For the purposes of subsection (16) the Effective Tax

Rate and Multinational Top-up Tax, if any, for any previous

Financial Year must be re-calculated under subsection 181(1).

(18)

When an election is made under subsection (16)—

(a)

Covered Taxes with respect to any Net Asset Gain or Net Asset Loss in the Election Year shall be excluded from the computation of Adjusted Covered Taxes;

(b)

the Aggregate Asset Gain in the Election Year shall be carried-back to the earliest Loss Year and set-off rateably against any Net Asset Loss of any

Constituent Entity located in that jurisdiction;

(c)

if, for any Loss Year, the Adjusted Asset Gain exceeds the total amount of Net Asset Loss of all Constituent

Entities located in that jurisdiction, the Adjusted

Asset Gain shall be carried forward to the following

Loss Year, if any, and applied rateably against any

Net Asset Loss of any Constituent Entity located in that jurisdiction;

(d)

any Adjusted Asset Gain that remains after the application of paragraphs (b) and (c) shall be allocated evenly to each Financial Year in the Look-back Period;

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(e)

the Allocated Asset Gain for the relevant year shall be included in the computation of GloBE

Income or Loss for a Constituent Entity located in that jurisdiction in that year in accordance with the following formula:

A x B

C where

A is the Allocated Asset Gain for the relevant year;

B is the specified Constituent

Entity’s Net Asset Gain in the

Election Year; and

C is the Net Asset Gain of all specified Constituent Entities in the Election Year.

(19)

If there is no specified Constituent Entity for a relevant year the Adjusted Asset Gain allocated to that year will be allocated equally to each Constituent Entity in the jurisdiction in that year.

(20)

The computation of a Low-Tax Entity’s GloBE Income or Loss shall exclude any expense attributable to an Intragroup

Financing Arrangement that can reasonably be anticipated, over the expected duration of the arrangement to increase the amount of expenses taken into account in calculating the GloBE Income or Loss of the Low-Tax Entity without resulting in a commensurate increase in the taxable income of the High-Tax Counterparty.

(21)

An Ultimate Parent Entity may elect to apply its consolidated accounting treatment to eliminate income, expense, gains, and losses from transactions between Constituent

Entities that are located, and included in a tax consolidation group, in the same jurisdiction for the purpose of computing each such Constituent Entity’s Net GloBE Income or Loss.

Finance (No. 2)

(22)

The election under subsection (21) is a Five-Year

Election and upon making or revoking such election, appropriate adjustments shall be made for the purposes of the GloBE Rules such that there shall not be duplications or omissions of items of GloBE Income or Loss as a result of having made or revoked the election.

(23)

An insurance company shall—

(a)

exclude from the computation of GloBE Income or

Loss amounts charged to policy holders for Taxes paid by the insurance company in respect of returns to the policy holders; and

(b)

include in the computation of GloBE Income or Loss any returns to policy holders that are not reflected in Financial Accounting Net Income or Loss to the extent the corresponding increase or decrease in liability to the policy holders is reflected in its

Financial Accounting Net Income or Loss.

(24)

Amounts recognised as—

(a)

a decrease to the equity of a Constituent Entity attributable to distributions paid or payable in respect of Additional Tier One Capital or Restricted Tier

One Capital issued by the Constituent Entity shall be treated as an expense in the computation of its

GloBE Income or Loss; and

(b)

an increase to the equity of a Constituent Entity attributable to distributions received or receivable in respect of Additional Tier One Capital or Restricted

Tier One Capital held by the Constituent Entity shall be included in the computation of its GloBE

Income or Loss.

(25)

A Constituent Entity’s Financial Accounting Net

Income or Loss must be adjusted as necessary to reflect the requirements of the relevant provisions of Chapters 8 and 9

of this Part.

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(26)

For the purposes of this section—

“accounting functional currency” means the functional currency used to determine the Constituent Entity’s Financial

Accounting Net Income or Loss;

“Accrued Pension Expense” means the difference between the amount of pension liability expense included in the

Financial Accounting Net Income or Loss and the amount contributed to a Pension Fund for the Financial Year;

“Additional Tier One Capital” means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements applicable to the banking sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis;

“Allocated Asset Gain” means the Adjusted Asset Gain that is allocated to a Financial Year in the Look-back Period, for the relevant year;

“Arm’s Length Principle” means the principle under which transactions between Constituent Entities must be recorded by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances;

“Asymmetric Foreign Currency Gains or Losses” means foreign currency gains or losses of an entity whose accounting and tax functional currencies are different and that are—

(a)

included in the computation of a Constituent Entity’s taxable income or loss and attributable to fluctuations in the exchange rate between its accounting functional currency and its tax functional currency;

(b)

included in the computation of a Constituent Entity’s

Financial Accounting Net Income or Loss and attributable to fluctuations in the exchange rate between its tax functional currency and its accounting functional currency;

Finance (No. 2)

(c)

included in the computation of a Constituent Entity’s

Financial Accounting Net Income or Loss and attributable to fluctuations in the exchange rate between a third foreign currency and its accounting functional currency; and

(d)

attributable to fluctuations in the exchange rate between a third foreign currency and its tax functional currency, whether or not such foreign currency gain or loss is included in taxable income;

“Included Revaluation Method Gain or Loss” means the net gain or loss, increased or decreased by any associated

Covered Taxes, for the Financial Year in respect of all property, plant and equipment that arises under an accounting method or practice that—

(a)

periodically adjusts the carrying value of such property to its fair value;

(b)

records the changes in value in Other Comprehensive

Income; and

(c)

does not subsequently report the gains or losses recorded in Other Comprehensive Income through profit and loss;

“Low-Tax Entity” means a Constituent Entity located in a Low-Tax Jurisdiction or a jurisdiction that would be a Low-Tax Jurisdiction if the Effective Tax Rate for the jurisdiction were determined without regard to any income or expense accrued by that Entity in respect of an Intragroup

Financing Arrangement;

“Net Taxes Expense” means the net amount of—

(a)

any Covered Taxes accrued as an expense and any current and deferred Covered Taxes included in the income tax expense, including Covered Taxes on income that is excluded from the GloBE Income or Loss computation;

(b)

any deferred tax asset attributable to a loss for the

Financial Year;

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(c)

any Qualified Domestic Top-up Tax accrued as an expense;

(d)

any taxes arising pursuant to this Part accrued as an expense;

(e)

any Disqualified Refundable Imputation Tax accrued as an expense; and

(f)

taxes accrued by an insurance company in respect of returns to policyholders to the extent that subsection (23) applies in relation to those taxes;

“Policy Disallowed Expenses” means—

(a)

expenses accrued by the Constituent Entity for illegal payments, including bribes and kickbacks; and

(b)

expenses accrued by the Constituent Entity for fines and penalties that equal or exceed fifty thousand euro or an equivalent in the functional currency in which the Constituent Entity’s Financial Accounting

Net Income or Loss was calculated;

“Prior Period Errors and Changes in Accounting Principles”

means all changes in the opening equity at the beginning of the Financial Year of a Constituent Entity attributable to—

(a)

a correction of an error in the determination of

Financial Accounting Net Income in a previous

Financial Year that affected the income or expenses includible in the computation of GloBE Income or

Loss for such Financial Year, except to the extent such error correction resulted in a material decrease to a liability for Covered Taxes subject to section 173;

or

(b)

a change in accounting principle or policy that affects income or expenses includible in the computation of GloBE Income or Loss;

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“Restricted Tier One Capital” means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements applicable to the insurance sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis;

“specified Constituent Entity” means a Constituent Entity that has Net Asset Gain in the Election Year and was located in the jurisdiction in the relevant year;

“tax functional currency” means the functional currency used to determine the Constituent Entity’s taxable income or loss for a Covered Tax in the jurisdiction in which it is located;

“third foreign currency” means a currency that is not the

Constituent Entity’s tax functional currency or accounting functional currency.

International Shipping Income exclusion