Finance (No. 2) Act 2023 · Updated to 29 Dec 2023 · Chapter 7
181. Additional Current Multinational Top-up Tax
Feedback & supportIf the Effective Tax Rate and Multinational Top-up
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;
Tax for a prior Financial Year is required or permitted to be recalculated pursuant to the Effective Tax Rate Adjustment
Provisions—
the Effective Tax Rate and Multinational Top-up Tax for the prior Financial Year shall be recalculated in accordance with the rules of sections 174
to 180 after taking into account the adjustments to Adjusted Covered Taxes and GloBE Income or
Loss required by the relevant Effective Tax Rate
Adjustment Provisions; and
any amount of incremental Multinational Top-up Tax resulting from such recalculation shall be treated as
Additional Current Multinational Top-up Tax under section 177 arising in the current Financial Year.
If there is Additional Current Multinational Top-up Tax attributable to a recalculation under subsection (1) and the jurisdiction does not have Net GloBE Income for the current
Additional Current Multinational Top-up Tax
“Additional Current Multinational Top-up Tax” means the amount of tax determined in subsections 181(1) to (6) and any amount treated as Additional Current Multinational Top-up Tax determined under subsections 181(1) to (6), such as the amount determined under subsection 169(3) or section 191;
Financial Year, the GloBE Income of each Constituent Entity located in the jurisdiction for the purposes of subsection 162(2)
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;
shall be equal to the result of the Multinational Top-up Tax allocated to such Entity under sections 178 and 179
Multinational Top-up Tax
“Multinational Top-up Tax” means tax computed for the jurisdiction or Constituent Entity in accordance with sections 175 to 179;
divided by the Minimum Rate.
If there is Additional Current Multinational Top-up Tax attributable to the operation of subsections 169(3) and (4), the GloBE Income of each Constituent Entity located in the jurisdiction for the purposes of subsection 162(2) shall be equal to the result of the Multinational Top-up Tax allocated to such
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;
Entity under this paragraph divided by the Minimum Rate.
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;
The amount of Additional Current Multinational
Top-up Tax allocated to each Constituent Entity for the purposes of this section shall be allocated only to Constituent
Entities that record an Adjusted Covered Taxes amount that is less than zero and less than the GloBE Income or Loss of such Constituent Entity multiplied by the Minimum Rate.
Adjusted Covered Taxes
“Adjusted Covered Taxes” means an amount as determined under section 169;
The allocation shall be made pro rata based upon an amount determined for each of those Constituent Entities according to the following formula:
(A x B) – C where
A is the GloBE Income or Loss;
GloBE Income or Loss
“GloBE Income or Loss” means the Financial Accounting Net Income or Loss determined for the Constituent Entity for the Financial Year adjusted for the items described in sections 165 to 168 of each Constituent Entity;
B is the Minimum Rate; and
C is the Adjusted Covered Taxes.
If a Constituent Entity is allocated Additional Current
Multinational Top-up Tax pursuant to this section and section 178, such Constituent Entity shall be treated as a Low-Taxed Constituent Entity for the purposes of
Low-Taxed Constituent Entity
“Low-Taxed Constituent Entity” means a Constituent Entity of the Multinational Enterprise Group that is located in a Low-Tax Jurisdiction or a Stateless Constituent Entity that, in respect of a Financial Year, has GloBE Income and is subject to an Effective Tax Rate as determined under Chapter 7 of this Part in that Financial Year that is lower than the Minimum Rate;
Chapter 4 of this Part.
For the purposes of this section, “Effective Tax Rate
Adjustment Provisions” means the adjustment provisions under—
subsections 165(16) to (19);
subsections 171(4) to (6);
subsections 173(1) to (5) and (9); and
section 191.
Finance (No. 2)