Finance (No. 2) Act 2023 · Updated to 29 Dec 2023 · Chapter 6
173. Post-filing Adjustments and Tax Rate Changes
Feedback & supportAn adjustment to a Constituent Entity’s liability for
Constituent Entity
“Constituent Entity” means— (a) any Entity that is included in a Group; or (b) any Permanent Establishment of a Main Entity that is within paragraph (a) and which is treated as separate from the Main Entity and any other Permanent Establishment of that Main Entity, but does not include an Excluded Entity;
Covered Taxes for a previous Financial Year recorded in the financial accounts shall be treated as an adjustment to Covered
Covered Taxes
“Covered Taxes” means— (a) taxes recorded in the financial accounts of a Constituent Entity with respect to its income or profits or its share of the income or profits of a Constituent Entity in which it owns an Ownership Interest; (b) taxes on distributed profits, deemed profit distributions, and non-business expenses imposed under an Eligible Distribution Tax System; (c) taxes imposed in lieu of a generally applicable corporate income tax; and (d) taxes levied by reference to retained earnings and corporate equity, including a Tax on multiple components based on income and equity, Finance (No. 2) but does not include any amount of— (a) Multinational Top-up Tax accrued by a Parent Entity under a Qualified Income Inclusion Rule; (b) Qualified Domestic Top-up Tax accrued by a Constituent Entity; (c) taxes attributable to an adjustment made by a Constituent Entity as a result of the application of a set of rules equivalent to Articles 2.4 to 2.6 of the GloBE Model Rules (including any provisions of the GloBE Model Rules associated with those articles) that are included in the domestic law of a jurisdiction and that are implemented and administered in a way that is consistent with the outcomes provided for under the GloBE Model Rules provided that such jurisdiction does not provide any benefits that are related to such rules; (d) a Disqualified Refundable Imputation Tax; (e) taxes paid by an insurance company in respect of returns to policy holders;
Taxes in the Financial Year in which the adjustment is made, unless the adjustment relates to a Financial Year in which there is a decrease in Covered Taxes 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;
In the case of a decrease in Covered Taxes included in the Constituent Entity’s Adjusted Covered Taxes for a previous
Adjusted Covered Taxes
“Adjusted Covered Taxes” means an amount as determined under section 169;
Financial Year, the Effective Tax Rate and Multinational
Effective Tax Rate
“Effective Tax Rate” means, in respect of a Multinational Enterprise Group, the sum of the Adjusted Covered Taxes of each Constituent Entity located in the jurisdiction divided by the Net GloBE Income of the jurisdiction for the Financial Year;
Top-up Tax for such Financial Year shall be recalculated under subsection 181(1).
Finance (No. 2)
Subject to the recalculations provided under subsection 181(1), the Adjusted Covered Taxes determined for the Financial Year shall be reduced by the amount of the decrease in Covered Taxes and GloBE Income determined for the Financial Year and any intervening Financial Years shall be adjusted as necessary and appropriate.
A Filing Constituent Entity may make an Annual
Filing Constituent Entity
“Filing Constituent Entity” means an Entity filing the return in accordance with section 201 or 202;
Election to treat an immaterial decrease in Covered Taxes as an adjustment to Covered Taxes in the Financial Year in which the adjustment is made.
An immaterial decrease in Covered Taxes is an aggregate decrease of less than one million euro in the Adjusted Covered
Taxes determined for the jurisdiction for a Financial Year.
The amount of deferred tax expense resulting from a reduction to the applicable domestic tax rate shall be treated as an adjustment to a Constituent Entity’s liability for Covered Taxes claimed under section 169 for a previous
Financial Year when such reduction results in the application of a rate that is less than the Minimum Rate.
The amount of deferred tax expense, when paid, that has resulted from an increase to the applicable domestic tax rate shall be treated as an adjustment under subsections (1)
to (5) to a Constituent Entity’s liability for Covered Taxes claimed under section 169 for a previous Financial Year when such amount was originally recorded at a rate less than the
Minimum Rate.
The adjustment under subsection (7) is limited to an amount that is equal to an increase of deferred tax expense up to such deferred tax expense recast at the Minimum Rate.
Where more than one million euro of the amount accrued by a Constituent Entity as current tax expense and included in Adjusted Covered Taxes for a Financial Year is not paid within three years of the last day of such year, the Effective
Tax Rate and Multinational Top-up Tax for the Financial Year in which the unpaid amount was claimed as a Covered Tax must be recalculated in accordance with subsection 181(1) by excluding such unpaid amount from Adjusted Covered Taxes.
Multinational Top-up Tax
“Multinational Top-up Tax” means tax computed for the jurisdiction or Constituent Entity in accordance with sections 175 to 179;