Finance (No. 2) Act 2023 · Updated to 29 Dec 2023 · Chapter 6
172. The GloBE Loss Election
Feedback & supportA Filing Constituent Entity may make a GloBE
Filing Constituent Entity
“Filing Constituent Entity” means an Entity filing the return in accordance with section 201 or 202;
Loss Election for a jurisdiction in lieu of applying the rules provided under section 171.
Where a GloBE Loss Election is made for a jurisdiction, a GloBE Loss Deferred Tax Asset is established in each
GloBE Loss Deferred Tax Asset
“GloBE Loss Deferred Tax Asset” means the amount computed in accordance with section 172;
Financial Year in which there is a Net GloBE Loss for the jurisdiction.
Financial Year
“Financial Year” means an accounting period with respect to which the Ultimate Parent Entity of the Multinational Enterprise Group prepares its Consolidated Financial Statements and in the case of Consolidated Financial Statements as defined in paragraph (d) of the definition of “Consolidated Financial Statements”, Financial Year means the calendar year;
The Net GloBE Loss of a jurisdiction is the nil or negative amount, if any, computed in accordance with the following formula:
Net GloBE Loss
“Net GloBE Loss” means the amount as determined in accordance with subsection 172(3);
A - B where
A is the GloBE Income of all Constituent
Entities; and
B is the GloBE Losses of all Constituent
Entities.
The GloBE Loss Deferred Tax Asset is an amount equal to the Net GloBE Loss in a Financial Year for the jurisdiction multiplied by the Minimum Rate.
The balance of the GloBE Loss Deferred Tax Asset is carried forward to subsequent Financial Years, reduced by the amount of GloBE Loss Deferred Tax Asset used in a Financial Year.
The GloBE Loss Deferred Tax Asset must be used in any subsequent Financial Year in which there is Net GloBE
Income for the jurisdiction in an amount equal to the lower of the Net GloBE Income multiplied by the Minimum Rate or the amount of available GloBE Loss Deferred Tax Asset.
Net GloBE Income
“Net GloBE Income” means the amount as determined in accordance with subsection 174(4);
Where the GloBE Loss Election is subsequently revoked, any remaining GloBE Loss Deferred Tax Asset is reduced to zero, effective as of the first day of the first Financial Year in which the GloBE Loss Election is no longer applicable and subsequently, the deferred tax assets and liabilities for the jurisdiction, if any, will be taken into account as if they had been calculated under sections 171 and 196 for the prior
Financial Year.
The GloBE Loss Election must be filed with the first information return of the Multinational Enterprise Group for the first Financial Year in which the Multinational Enterprise
information return
“information return” means a return in the prescribed form as provided for under section 201;
Group has a Constituent Entity located in the jurisdiction for which the election is made.
Group
“Group” means— (a) a collection of Entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those Entities are— (i) included in the Consolidated Financial Statements of the Ultimate Parent Entity; or Finance (No. 2) (ii) excluded from the Consolidated Financial Statements of the Ultimate Parent Entity solely on size or materiality grounds, or on the grounds that the Entity is held for sale; or (b) an Entity that is located in one jurisdiction and has one or more Permanent Establishments located in other jurisdictions provided that the Entity is not a part of another Group mentioned in paragraph (a);
GloBE Loss Election shall not be made for a jurisdiction with an Eligible Distribution Tax System under section 191.
Eligible Distribution Tax System
“Eligible Distribution Tax System” means a corporate income tax system that— (a) imposes an income tax on the corporation with the tax generally payable only when the corporation distributes profits to shareholders, is deemed to distribute profits to shareholders, or incurs certain non-business expenses; (b) imposes tax at a rate equal to or in excess of the Minimum Rate; and (c) was in force on or before 1 July 2021;
A Flow-through Entity that is an Ultimate Parent
Entity
“Entity” means— (a) any legal person (other than a natural person); or (b) an arrangement that prepares separate financial accounts, such as a partnership or trust;
Entity of a Multinational Enterprise Group may make a
Multinational Enterprise Group
“Multinational Enterprise Group” means any Group that includes at least one Entity or Permanent Establishment that is not located in the jurisdiction of the Ultimate Parent Entity; Finance (No. 2)
GloBE Loss Election under this section and when such an election is made, the GloBE Loss Deferred Tax Asset shall be calculated in accordance with subsections (1) to (9).
Notwithstanding subsection (10), the GloBE Loss
Deferred Tax Asset shall be calculated with reference to the
GloBE Loss of the Flow-through Entity after reduction in accordance with subsection 189(2).