Global Minimum Tax Act (S.C. 2024, c. 17, s. 81)

Marginal note:Qualified domestic minimum top-up tax safe harbour

44 The top-up amount of a particular constituent entity of an MNE group or particular joint venture entity in respect of an MNE group (referred to in this section as the “particular entity”) is deemed to be nil for a fiscal year, if

• (a) the particular entity is

  • (i) located in a jurisdiction that has a qualified domestic minimum top-up tax for the fiscal year, or

  • (ii) a stateless entity the top-up amount of which is subject to such a tax in a jurisdiction;

• (b) the jurisdiction’s qualified domestic minimum top-up tax has qualified domestic minimum top-up tax safe harbour status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework and published on the website of the OECD;

• (c) the filing constituent entity of the MNE group is permitted to elect, in accordance with chapter 5.1 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) July 2023, published by the OECD on July 13, 2023, as amended from time to time, the qualified domestic minimum top-up tax safe harbour for the fiscal year in respect of the particular entity; and

• (d) the filing constituent entity of the MNE group elects to apply the qualified domestic minimum top-up tax safe harbour for the fiscal year in respect of the particular entity.

Marginal note:Simplified calculations safe harbour

45 The top-up amount of each standard constituent entity of an MNE group that is located in a jurisdiction for a particular fiscal year is deemed to be the amount that would be its top-up amount if the top-up percentage that is relevant in calculating that top-up amount were nil, if

• (a) all of the standard constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year are non-material constituent entities;

• (b) the filing constituent entity of the MNE group elects the simplified calculations safe harbour for the jurisdiction for a particular fiscal year; and

• (c) at least one of the following tests is met, in respect of the MNE group, for the jurisdiction in the particular fiscal year:

  • (i) the de minimis threshold test described in subsection 47(3), where

    • (A) the reference to “total revenues of the MNE group for the jurisdiction for the year” in paragraph 47(3)(a) is read as a reference to “total of all amounts each of which is the simplified revenue of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”, and

    • (B) the reference to “profit (loss) before income tax of the MNE group for the jurisdiction for the year” in paragraph 47(3)(b) is read as a reference to “total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”,

  • (ii) the simplified effective tax rate test described in subsection 47(4), where

    • (A) paragraphs 47(4)(a), (b) and (c) are read as “at least 15%”, and

    • (B) the simplified effective tax rate of the non-material constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year under subsection 47(5) is the amount that it would be if

      • (I) the reference to “qualifying income tax expense” in the description of A in that subsection were read as a reference to “simplified tax”, and

      • (II) the reference to “the profit (loss) before income tax of the MNE group for the jurisdiction for the fiscal year” in the description of B in that subsection were read as a reference to “the total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”, or

  • (iii) the routine profits test described in subsection 47(6), where

    • (A) the reference to “qualified substance-based income exclusion” in paragraph 47(6)(a) is read as a reference to “substance-based income exclusion”, and

    • (B) the references to “profit (loss) before income tax of the MNE group for the jurisdiction for the year” in paragraphs 47(6)(a) and (b) are read as references to “total of all amounts each of which is the simplified income of a non-material constituent entity of the MNE group that is located in the jurisdiction for the fiscal year”.

Marginal note:Non-material constituent entities

46 If the filing constituent entity of an MNE group elects in respect of a non-material constituent entity for a fiscal year, for the purposes of section 45

• (a) the simplified income and simplified revenue of the non-material constituent entity are equal to the portion of the total revenues of the MNE group for the jurisdiction in which the non-material constituent entity is located, as determined in accordance with the relevant country-by-country reporting regulations, that is attributable to the non-material constituent entity for the fiscal year; and

• (b) the simplified tax of the non-material constituent entity is equal to the portion of the income tax accrued (current year) of the MNE group for the jurisdiction in which the non-material constituent entity is located, as determined in accordance with the relevant country-by-country reporting regulations, that is attributable to the non-material constituent entity for the fiscal year.

SUBDIVISION BTransitional Safe Harbours

Marginal note:Definitions — transitional CbCR safe harbour

• 47 (1) The following definitions apply in this section.

  deduction/non-inclusion arrangement

  deduction/non-inclusion arrangement means an arrangement entered into after December 15, 2022 under which a particular constituent entity of an MNE group directly or indirectly provides credit to, or otherwise makes an investment in, another constituent entity of the MNE group that results in an expense or loss in the financial statements of any constituent entity, to the extent that

  • (a) there is no commensurate increase in the revenue or gain in the financial statements of the particular constituent entity;

  • (b) the particular constituent entity is not reasonably expected over the life of the arrangement to have a commensurate increase in its taxable income; and

  • (c) the expense or loss is not solely in respect of qualifying tier one capital issued pursuant to regulatory requirements applicable to the banking sector. (accord de déduction/non-inclusion)

  duplicate loss arrangement

  duplicate loss arrangement means an arrangement entered into after December 15, 2022 that results in an expense or loss being included in the financial statements of a constituent entity of an MNE group, to the extent that

  • (a) the expense or loss is also included as an expense or loss in the financial statements of another constituent entity of the MNE group; or

  • (b) the arrangement also gives rise to a duplicate amount that is deductible for purposes of determining the taxable income of another constituent entity of the MNE group that is located in a different jurisdiction from the first constituent entity. (accord de duplication de perte)

  duplicate tax recognition arrangement

  duplicate tax recognition arrangement means an arrangement entered into after December 15, 2022 that results in each of two or more constituent entities of an MNE group including all or any portion of the same income tax expense in its adjusted covered taxes or qualifying income tax expense, unless the arrangement

  • (a) also results in the income subject to tax being included in the relevant financial statements of each of those constituent entities; or

  • (b) would, in the absence of this paragraph, be a duplicate tax recognition arrangement solely because, in computing the simplified effective tax rate of the standard constituent entities of the MNE group that are located in a jurisdiction in a fiscal year under subsection (5), no adjustments are required in respect of income tax expenses that would otherwise be allocated to another constituent entity in determining its adjusted covered taxes. (accord de duplication de dépense fiscale)

  net unrealized fair value loss

  net unrealized fair value loss means the total of all amounts each of which is the loss of a standard constituent entity of an MNE group that is located in a jurisdiction arising from changes in fair value of ownership interests (other than portfolio holdings), as reduced by the total amount of gains of such entities arising from such changes. (perte nette non réalisée de la juste valeur)

  profit (loss) before income tax

  profit (loss) before income tax, of an MNE group for a jurisdiction for a fiscal year, means profit (loss) before income tax in the jurisdiction as reported on the MNE group’s qualified country-by-country report (or that would have been so reported if the MNE group had been required to file a country-by-country report), that is attributable to standard constituent entities, adjusted to

  • (a) exclude any net unrealized fair value loss in the jurisdiction that exceeds €50 million; and

  • (b) add back any amount recorded as a reduction in income in the financial accounts of a standard constituent entity that is attributable to an impairment of goodwill related to any transaction entered into after November 30, 2021, for the purposes of applying

    • (i) the routine profits test under subsection (6), and

    • (ii) the simplified effective tax rate test under subsection (4), if the financial accounts of the standard constituent entity do not also have a reversal of a deferred tax liability, or recognition or increase of a deferred tax asset, in respect of the impairment of goodwill. (bénéfice (perte) avant impôts)

  qualified country-by-country report

  qualified country-by-country report, in respect of an MNE group, means a country-by-country report for a jurisdiction for a fiscal year that

  • (a) is filed in accordance with the relevant country-by-country reporting regulations (as defined in section 43);

  • (b) is prepared on the basis of qualified financial statements of the standard constituent entities of the MNE group for the jurisdiction for the fiscal year; and

  • (c) in the case of a multi-parented MNE group, includes the information of all constituent entities of the multi-parented MNE group. (déclaration pays par pays admissible)

  qualified financial statements

  qualified financial statements, of the standard constituent entities of an MNE group that are located in a jurisdiction for a particular fiscal year, means the financial accounts or financial statements of the standard constituent entities, if

  • (a) the financial accounts or financial statements are

    • (i) used to prepare the consolidated financial statements of the ultimate parent entity for the particular fiscal year,

    • (ii) prepared in accordance with an acceptable financial accounting standard or authorized financial accounting standard, if the information contained in those statements is maintained based on that accounting standard and is reliable,

    • (iii) if a standard constituent entity is not included in the consolidated financial statements of the MNE group on a line-by-line basis solely due to size or materiality grounds, the financial accounts of the standard constituent entity that are used for preparation of the MNE group’s country-by-country report, or

    • (iv) if a standard constituent entity is a permanent establishment that does not have separate financial accounts described in subparagraph (i) or separate financial statements described in subparagraph (ii), the separate financial statements prepared by the main entity for the permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes; and

  • (b) either

    • (i) the financial accounts or statements do not incorporate purchase price accounting adjustments, or

    • (ii) where the financial accounts or financial statements of one or more of the standard constituent entities incorporate purchase price accounting adjustments, it is the case that

      • (A) the MNE group has not submitted a country-by-country report for a fiscal year beginning after December 31, 2022 and before the particular fiscal year that was based on the standard constituent entity’s financial accounts or financial statements without the purchase price accounting adjustments, or

      • (B) the standard constituent entity was required by law or regulation to change its financial accounts or financial statements to include purchase price accounting adjustments for a fiscal year beginning after December 31, 2022 and that precedes or is the particular fiscal year. (états financiers admissibles)

  qualified person

  qualified person means

  • (a) in respect of an ultimate parent entity that is a flow-through entity, a holder described in any of paragraphs 20(1)(a) to (c); and

  • (b) in respect of an ultimate parent entity that is subject to a deductible dividend regime, a dividend recipient described in any of paragraphs 21(1)(a) to (c). (personne admissible)

  qualified substance-based income exclusion amount

  qualified substance-based income exclusion amount, of an MNE group for a jurisdiction for a fiscal year, means the substance-based income exclusion amount of the MNE group for the jurisdiction for the fiscal year determined without regard to the eligible payroll costs and eligible tangible asset amount of any standard constituent entity of the MNE group that is located in the jurisdiction that, for the purposes of the group’s qualified country-by-country report

  • (a) is not regarded as a constituent entity of the MNE group; or

  • (b) is not regarded as located in the jurisdiction. (montant de l’exclusion de revenus fondée sur la substance admissible)

  qualifying income tax expense

  qualifying income tax expense means the income tax expense as reported on the qualified financial statements of a standard constituent entity of an MNE group, adjusted to exclude

  • (a) any amount that does not relate to covered taxes; and

  • (b) any amount that relates to uncertain tax positions. (charges d’impôts admissibles)

  total revenues

  total revenues, of an MNE group for a jurisdiction for a fiscal year, means total revenues in the jurisdiction as reported on the MNE group’s qualified country-by-country report (or that would have been so reported if the MNE group had been required to file a country-by-country report), that are attributable to standard constituent entities, adjusted to include the revenues of constituent entities of the MNE group that are held for sale and are not already included. (recettes totales)

• Marginal note:Election — transitional CbCR safe harbour

  (2) If the filing constituent entity of an MNE group elects the transitional safe harbour for a jurisdiction for a particular fiscal year, the top-up amount of each standard constituent entity of the MNE group that is located in the jurisdiction for the particular fiscal year is deemed to be nil, if

  • (a) the particular fiscal year begins before January 1, 2027 and ends before July 1, 2028;

  • (b) either

    • (i) a qualified country-by-country report in respect of the MNE group has been filed in relation to the jurisdiction for the particular fiscal year, or

    • (ii) if the MNE group is not required to file a country-by-country report, the filing constituent entity files a GIR, in respect of the MNE group for the particular fiscal year, and completes section 2.2.1.3(a) of the GIR, in relation to the jurisdiction for the particular fiscal year, using the data from qualified financial statements that would have been reported as total revenues and profit (loss) before income tax in a qualified country-by-country report;

  • (c) the election has been made in respect of the jurisdiction for each preceding fiscal year in which a constituent entity of, or joint venture entity in respect of, the MNE group that is located in the jurisdiction is subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax;

  • (d) an election under subsection 37(1) has not been made by the MNE group in respect of the jurisdiction for the particular fiscal year;

  • (e) at least one of the following tests is met, in respect of the MNE group, for the jurisdiction in the particular fiscal year:

    • (i) the de minimis threshold test,

    • (ii) the simplified effective tax rate test, or

    • (iii) the routine profits test;

  • (f) all of the data used to perform the computations under subsections (3) to (6) for all of the standard constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year (other than any non-material constituent entities or permanent establishments) comes from qualified financial statements described in subparagraph (a)(i) of the definition qualified financial statements in subsection (1), or from qualified financial statements described in subparagraph (a)(ii) of that definition; and

  • (g) any payment received or receivable by a particular standard constituent entity located in the jurisdiction for the fiscal year from another constituent entity of the MNE group that is treated as an expense in the qualified financial statements of the other constituent entity for the fiscal year is included, for the purposes of applying the transitional safe harbour, in the total revenues and profit (loss) before income tax of the MNE group for the jurisdiction where the particular standard constituent entity is located for the fiscal year.

• Marginal note:De minimis threshold test

  (3) The de minimis threshold test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if

  • (a) the total revenues of the MNE group for the jurisdiction for the year is less than €10 million; and

  • (b) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is less than €1 million.

• Marginal note:Simplified effective tax rate test

  (4) The simplified effective tax rate test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if the simplified effective tax rate of the standard constituent entities of the MNE group that are located in that jurisdiction is

  • (a) in the case of a fiscal year beginning before January 1, 2025, at least 15%;

  • (b) in the case of a fiscal year beginning in 2025, at least 16%; or

  • (c) in the case of a fiscal year beginning after December 31, 2025, at least 17%.

• Marginal note:Simplified effective tax rate

  (5) The simplified effective tax rate of the standard constituent entities of an MNE group that are located in a jurisdiction in a fiscal year is the result (expressed as a percentage rounded to four decimal points) of the formula

  A ÷ B

  where

  A

  is the total of all amounts each of which is the qualifying income tax expense of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year; and

  B

  is the profit (loss) before income tax of the MNE group for the jurisdiction for the fiscal year.

• Marginal note:Routine profits test

  (6) The routine profits test is met, in respect of an MNE group for a jurisdiction in a fiscal year, if

  • (a) the qualified substance-based income exclusion amount for the jurisdiction for the year is equal to or greater than the profit (loss) before income tax of the MNE group for the jurisdiction for the year; or

  • (b) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is nil or reflects an overall loss.

• Marginal note:Application to joint ventures

  (7) For the purposes of applying this section to a joint venture or joint venture group

  • (a) subsection (2) is to be read without reference to its paragraph (b);

  • (b) references to “MNE group” are to be read as references to “joint venture group”, other than in the expression “filing constituent entity of an MNE group”, paragraphs (2)(c) and (d) and subsection (8);

  • (c) references to “standard constituent entity” are to be read as references to “joint venture entity”, other than in subsection (8);

  • (d) references to “MNE group’s qualified country-by-country report” are to be read as references to “joint venture group’s qualified financial statements”;

  • (e) in applying the definition qualified financial statements in subsection (1) in relation to the joint venture group

    • (i) the reference to “ultimate parent entity” in subparagraph (a)(i) of that definition is to be read as a reference to “joint venture”, and

    • (ii) the reference to “the financial accounts of the standard constituent entity that are used for preparation of the MNE group’s country-by-country report” in subparagraph (a)(iii) of that definition is to be read as a reference to “the financial accounts of the joint venture entity that would be used if a qualified country-by-country report had been prepared in respect of the joint venture group”; and

  • (f) the definition qualified substance-based income exclusion amount in subsection (1) is to be read as “means the substance-based income exclusion amount of the joint venture group for the jurisdiction for the fiscal year”.

• Marginal note:Application to minority-owned constituent entities

  (8) For the purposes of this section, a minority-owned constituent entity is treated as a standard constituent entity of an MNE group.

• Marginal note:Tax-neutral ultimate parent entities

  (9) No election may be made under subsection (2) in respect of the jurisdiction where the ultimate parent entity of an MNE group is located for a fiscal year if

  • (a) the ultimate parent entity is a flow-through entity; and

  • (b) it is not the case that all the ownership interests in the ultimate parent entity are held by qualified persons.

• Marginal note:Tax-neutral ultimate parent entities — adjustments

  (10) If an ultimate parent entity of an MNE group is a flow-through entity or subject to a deductible dividend regime,

  • (a) the profit (loss) before income tax of the MNE group for the jurisdiction where the ultimate parent entity is located is to be adjusted to exclude any profit (loss) before income tax of the ultimate parent entity to the extent that such amount is

    • (i) attributable to an ownership interest held by a qualified person, or

    • (ii) distributed in respect of an ownership interest held by a qualified person; and

  • (b) the qualifying income tax expense of any constituent entity of the MNE group is adjusted to exclude any taxes in respect of the profit (loss) before income tax that is excluded under paragraph (a).

• Marginal note:Investment entities as standard constituent entities

  (11) For the purposes of this section, an investment entity or insurance investment entity is treated as a standard constituent entity of an MNE group for a fiscal year, if

  • (a) the investment entity is included in the MNE group;

  • (b) all the constituent entities of the MNE group with direct ownership interests in the investment entity or insurance investment entity are located in the same jurisdiction as the investment entity or insurance investment entity; and

  • (c) no election under subsection 41(1) or 42(2) is in effect in respect of the investment entity or insurance investment entity for the fiscal year.

• Marginal note:Investment entities — amounts reflected in owners’ jurisdiction

  (12) If subsection (11) does not apply in respect of an investment entity or insurance investment entity that is a constituent entity of an MNE group for a fiscal year, for the purposes of applying subsections (3) to (6), the profit (loss) before income tax and total revenues of the MNE group attributable to, and qualifying income tax expense of, the investment entity or insurance investment entity are to be reflected in the jurisdictions where its direct constituent entity-owners are located, in proportion to their respective ownership interest in the investment entity or insurance investment entity.

• Marginal note:Location of investment entities

  (13) For the purposes of this section, an investment entity or insurance investment entity is considered to be located in the jurisdiction where it is resident for the purposes of a qualified country-by-country report.

• Marginal note:Hybrid arbitrage arrangements

  (14) For the purposes of applying subsections (3) to (6) in respect of an MNE group for a jurisdiction for a fiscal year,

  • (a) the profit (loss) before income tax of the MNE group for the jurisdiction for the year is to exclude any expense or loss arising as a result of

    • (i) a deduction/non-inclusion arrangement, or

    • (ii) a duplicate loss arrangement; and

  • (b) the qualifying income tax expense of a standard constituent entity of the MNE group that is located in the jurisdiction for the fiscal year is to exclude any income tax expense arising as a result of a duplicate tax recognition arrangement.