Finance (No. 2) Act 2023 · Updated to 29 Dec 2023 · Chapter 11
196. Transitional Tax Attributes
Feedback & supportWhen determining the Effective Tax Rate for a jurisdiction in a Transition Year, and for each subsequent year, the Multinational Enterprise Group shall take into account all of the deferred tax assets and deferred tax liabilities reflected or disclosed in the financial accounts of all of the Constituent Entities in a jurisdiction for the Transition
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;
Year.
Such deferred tax assets and liabilities must be taken into account at the lower of the Minimum Rate or the applicable domestic tax rate.
A deferred tax asset that has been recorded at a rate lower than the Minimum Rate may be taken into account at the Minimum Rate if the taxpayer can demonstrate that the deferred tax asset is attributable to a GloBE Loss.
Finance (No. 2)
For the purposes of this section, the impact of any valuation adjustment, or accounting recognition adjustment with respect to a deferred tax asset shall be disregarded.
The Deferred tax assets arising from items excluded from the computation of GloBE Income or Loss under
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;
Chapter 5 of this Part must be excluded from the computation under subsections (1) to (4) when such deferred tax assets are generated in a transaction that takes place after 30 November 2021.
In the case of a transfer of assets between
Constituent Entities after 30 November 2021 and before the commencement of a Transition Year, the basis in the acquired assets other than inventory shall be based upon the disposing Entity’s carrying value of the transferred assets upon disposition with the deferred tax assets and liabilities brought into GloBE Rules determined on that basis.
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;
For the purposes of this section, “Transition Year”
means, for a jurisdiction, the first Financial Year that the
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;
Multinational Enterprise Group comes within the scope of this Part in respect of that jurisdiction.
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)