Finance (No. 2) Act 2023 · Updated to 29 Dec 2023 · Chapter 8
186. Transfer of assets and liabilities
Feedback & supportIn the case of a disposition or acquisition of assets and liabilities, a disposing Constituent Entity will include the gain or loss on disposition in the computation of its GloBE
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;
Income or Loss and an acquiring Constituent Entity will determine its GloBE Income or Loss using the acquiring
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;
Constituent Entity’s carrying value of the acquired assets and liabilities determined under the accounting standard used in preparing Consolidated Financial Statements of the
Ultimate Parent Entity.
Ultimate Parent Entity
“Ultimate Parent Entity” means either— (a) an Entity that— (i) owns directly or indirectly a Controlling Interest in any other Entity; and (ii) is not owned, with a Controlling Interest, directly or indirectly by another Entity; or (b) the Main Entity of a Group 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;
If the disposition or acquisition of assets and liabilities is part of a GloBE Reorganisation, subsection (1) shall not apply and—
GloBE Reorganisation
“GloBE Reorganisation” means a transformation or transfer of assets and liabilities such as in a merger, demerger, liquidation, or similar transaction where— (a) the consideration for the transfer is, in whole or in significant part, equity interests issued by the acquiring Constituent Entity or by a person connected with the acquiring Constituent Entity, or, in the case of a liquidation, equity interests of the target or, when no consideration is provided, where the issuance of an equity interest would have no economic significance; Finance (No. 2) (b) the disposing Constituent Entity’s gain or loss on those assets is not subject to tax, in whole or in part; and (c) the tax laws of the jurisdiction in which the acquiring Constituent Entity is located require the acquiring Constituent Entity to compute taxable income after the disposition or acquisition using the disposing Constituent Entity’s tax basis in the assets, adjusted for any Non-qualifying Gain or Loss on the disposition or acquisition;
a disposing Constituent Entity will exclude any gain or loss on the disposition from the computation of its GloBE Income or Loss; and
an acquiring Constituent Entity will determine its
GloBE Income or Loss after the acquisition using the disposing Entity’s carrying values of the acquired assets and liabilities upon disposition.
If a disposition or acquisition of assets and liabilities is part of a GloBE Reorganisation in which a disposing
Constituent Entity recognises Non-qualifying Gain or Loss, subsections (1) and (2) shall not apply and—
Non-qualifying Gain or Loss
“Non-qualifying Gain or Loss” means the lesser of the gain or loss of the disposing Constituent Entity arising in connection with a GloBE Reorganisation that is subject to tax in the disposing Constituent Entity’s location and the financial accounting gain or loss arising in connection with the GloBE Reorganisation; Finance (No. 2)
the disposing Constituent Entity will include gain or loss on the disposition in its GloBE Income or Loss computation to the extent of the Non-qualifying
Gain or Loss; and
an acquiring Constituent Entity will determine its
GloBE Income or Loss after the acquisition using the disposing Entity’s carrying value of the acquired assets and liabilities upon disposition adjusted consistent with local tax rules to account for the
Non-qualifying Gain or Loss.
At the election of the Filing Constituent Entity, a Constituent Entity of a Multinational Enterprise Group that is required or permitted to adjust the basis of its assets and the amount of its liabilities to fair value for tax purposes in the jurisdiction in which it is located, shall—
Filing Constituent Entity
“Filing Constituent Entity” means an Entity filing the return in accordance with section 201 or 202;
include in the computation of its GloBE Income or
Loss an amount of gain or loss in respect of each of its assets and liabilities that is equal to the difference between the carrying value for financial accounting purposes of the asset or liability immediately before and the fair value of the asset or liability immediately after the date of the event that triggered the tax adjustment (hereinafter referred to as “the triggering event”) and decreased or increased by the Non-qualifying Gain or Loss, if any, arising in connection with the triggering event;
use the fair value for financial accounting purposes of the asset or liability immediately after the triggering event to determine GloBE Income or
Loss in Financial Years ending after the triggering event; and
include the net total of the amounts determined in paragraph (a) in the Constituent Entity’s GloBE
Income or Loss in one of the following manner:
the net total of the amounts is included in the Financial Year in which the triggering event occurs; or
an amount equal to the net total of the amounts divided by five is included in the Financial Year in which the triggering event occurs and in each of the immediate four subsequent Financial Years, unless the
Constituent Entity leaves the Multinational
Enterprise Group in a Financial Year within this period, in which case the remaining amount will be wholly included in that
Financial Year.
Finance (No. 2)