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

SUBDIVISION CInternational Shipping Net Income or Loss Exclusion

Marginal note:Exclusion of international shipping net income or loss

• 19 (1) In computing a constituent entity’s GloBE income or loss for a fiscal year, the constituent entity’s net income or loss from international shipping for that fiscal year is excluded.

• Marginal note:Definition of net income or loss from international shipping

  (2) Net income or loss from international shipping, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + B

  where

  A

  is the constituent entity’s core international shipping income for the fiscal year; and

  B

  is the constituent entity’s qualified ancillary international shipping income for the fiscal year.

• Marginal note:Definition of core international shipping income

  (3) Core international shipping income, of a constituent entity for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the constituent entity’s core international shipping revenue for the fiscal year; and

  B

  is the constituent entity’s core international shipping costs for the fiscal year.

• Marginal note:Definition of core international shipping revenue

  (4) Core international shipping revenue, of a constituent entity for a fiscal year, means the constituent entity’s revenue for the fiscal year obtained in consideration for the entity’s performance of core international shipping activities.

• Marginal note:Definition of core international shipping costs

  (5) Core international shipping costs, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + (B × C ÷ D)

  where

  A

  is the total costs incurred by the constituent entity for the fiscal year that are directly attributable to the entity’s performance of core international shipping activities;

  B

  is the total costs incurred by the constituent entity for the fiscal year that are indirectly attributable to the entity’s performance of core international shipping activities;

  C

  is the constituent entity’s core international shipping revenue for the fiscal year; and

  D

  is the constituent entity’s total revenue for the fiscal year from all sources.

• Marginal note:Definition of core international shipping activity

  (6) Core international shipping activity means an activity, if

  • (a) the strategic or commercial management of the performance of that activity by the constituent entity is effectively carried on within the jurisdiction in which the constituent entity is located; and

  • (b) the activity is any of the following:

    • (i) international shipping, whether the ship is owned, leased or otherwise at the disposal of the constituent entity,

    • (ii) arranging for another person to carry out international shipping under a slot-chartering arrangement,

    • (iii) leasing a ship to be used for international shipping on charter fully equipped, crewed and supplied,

    • (iv) leasing a ship to be used for international shipping on a bareboat charter basis to another constituent entity of the MNE group,

    • (v) the participation in a pool, joint business or international operating agency for international shipping,

    • (vi) the sale of a ship used for international shipping, provided that the ship has been held for use by the constituent entity for at least one year.

• Marginal note:Definition of qualified ancillary international shipping income

  (7) Qualified ancillary international shipping income, of a constituent entity that is located in a jurisdiction for a fiscal year, means

  • (a) the constituent entity’s ancillary international shipping income, if

    A ≤ B ÷ 2

    where

    A

    is the total of all amounts, each of which is the ancillary international shipping income of a group entity that is located in the jurisdiction for the fiscal year, and

    B

    is the total of all amounts, each of which is the core international shipping income of a group entity that is located in the jurisdiction for the fiscal year; or

  • (b) in any other case, the amount determined by the formula

    B ÷ 2 × C ÷ A

    where

    C

    is the constituent entity’s ancillary international shipping income for the fiscal year.

• Marginal note:Definition of ancillary international shipping income

  (8) Ancillary international shipping income, of a constituent entity for a fiscal year, means the amount determined by the formula

  A − B

  where

  A

  is the constituent entity’s ancillary international shipping revenue for the fiscal year; and

  B

  is the constituent entity’s ancillary international shipping costs for the fiscal year.

• Marginal note:Definition of ancillary international shipping revenue

  (9) Ancillary international shipping revenue, of a constituent entity for a fiscal year, means the constituent entity’s revenue for the fiscal year obtained in consideration for the entity’s performance of ancillary international shipping activities.

• Marginal note:Definition of ancillary international shipping costs

  (10) Ancillary international shipping costs, of a constituent entity for a fiscal year, means the amount determined by the formula

  A + (B × C ÷ D)

  where

  A

  is the total costs incurred by the constituent entity for the fiscal year that are directly attributable to the entity’s performance of ancillary international shipping activities;

  B

  is the total costs incurred by the constituent entity for the fiscal year that are indirectly attributable to the entity’s performance of ancillary international shipping activities;

  C

  is the constituent entity’s ancillary international shipping revenue for the fiscal year; and

  D

  is the constituent entity’s total revenue for the fiscal year from all sources.

• Marginal note:Definition of ancillary international shipping activity

  (11) Ancillary international shipping activity means an activity, if

  • (a) the strategic or commercial management of the performance of that activity by the constituent entity is effectively carried on within the jurisdiction in which the constituent entity is located;

  • (b) the activity is performed primarily in connection with international shipping; and

  • (c) the activity is any of the following:

    • (i) leasing a ship on a bareboat charter basis to another shipping enterprise, other than another constituent entity of the MNE group, if

      • (A) the lease has not been in effect for a period exceeding three years, and

      • (B) it is established by subsequent events or otherwise that the lease is not part of a series of leases, or of leases and other transactions, that results in the leases being in effect for an aggregate period exceeding three years,

    • (ii) selling tickets for the transportation of passengers or cargo by ship between ports in a single jurisdiction, if

      • (A) the transportation is carried out by a shipping enterprise other than the constituent entity or another constituent entity of the MNE group, and

      • (B) the ship proceeds to, or has come from, a port in a different jurisdiction,

    • (iii) leasing and short-term storage of a container, or detention charges for the late return of a container,

    • (iv) the provision of services by engineers, maintenance staff, cargo handlers, catering staff or customer services personnel to another shipping enterprise, other than another constituent entity of the MNE group, engaged in international shipping,

    • (v) holding assets necessary for the constituent entity to carry on the business of international shipping.

SUBDIVISION DUltimate Parent Entities Subject to Tax Transparency or Deductible Dividend Regimes

Marginal note:GloBE income — flow-through ultimate parent entity

• 20 (1) The GloBE income, for a fiscal year, of an ultimate parent entity that is a flow-through entity excludes any amount that would, in the absence of this subsection, be included in computing the entity’s GloBE income or loss for the fiscal year and that is attributable to an ownership interest in the entity (referred to in this subsection as the “attributable amount”), if

  • (a) one of the following conditions is met:

    • (i) the holder of the ownership interest is subject to tax, for a taxable period ending within 12 months of the end of the fiscal year, on the full attributable amount at a nominal rate that is equal to, or exceeds, the minimum rate, or

    • (ii) it can reasonably be expected that

      (A + B) ≥ C × D

      where

      A

      is the amount that would, in the absence of this subsection and paragraph 22(4)(a), be adjusted covered taxes payable by the ultimate parent entity in respect of the attributable amount for the fiscal year,

      B

      is the tax payable by the holder in respect of the attributable amount for a taxable period ending within 12 months of the end of the fiscal year,

      C

      is the attributable amount, and

      D

      is the minimum rate;

  • (b) the holder is a natural person who

    • (i) is tax resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity; or

  • (c) the holder is a governmental entity, international organization, non-profit organization or pension fund that

    • (i) is resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity.

• Marginal note:Resident — interpretation

  (2) For the purposes of subparagraph (1)(c)(i) and paragraph 21(1)(c),

  • (a) an entity (other than a governmental entity) is resident in the jurisdiction where it is created and managed; and

  • (b) a governmental entity is resident in the jurisdiction of the government of which it is a part or that owns it.

• Marginal note:GloBE loss — flow-through ultimate parent entity

  (3) The GloBE loss, for a fiscal year, of an ultimate parent entity that is a flow-through entity is the amount determined by the formula

  A − B

  where

  A

  is the amount that would, in the absence of this subsection, be the ultimate parent entity’s GloBE loss for the year; and

  B

  is the portion of the loss amount referred to in the description of A that is attributable to an ownership interest in the entity, to the extent the holder of the ownership interest is allowed to use its share of the loss in computing the holder’s income for tax purposes.

• Marginal note:Permanent establishment — flow-through ultimate parent entity

  (4) Subsections (1) to (3) apply to a permanent establishment in the same manner as they apply to an ultimate parent entity that is a flow-through entity, if

  • (a) the ultimate parent entity carries on its business, in whole or in part, through the permanent establishment; or

  • (b) the following conditions are met:

    • (i) a flow-through entity carries on its business, in whole or in part, through the permanent establishment, and

    • (ii) the ultimate parent entity holds its interest in the flow-through entity directly or through a tax transparent structure.

Marginal note:GloBE income — deductible dividend regime

• 21 (1) The GloBE income, for a fiscal year, of an ultimate parent entity that is subject to a deductible dividend regime and distributes a deductible dividend within 12 months of the end of the fiscal year excludes the amount of the dividend (except to the extent its exclusion would result in a GloBE loss for the year), if

  • (a) one of the following conditions is met:

    • (i) the dividend recipient is subject to tax, for a taxable period that ends within 12 months of the end of the fiscal year, on the full amount of the dividend at a nominal rate that is equal to, or exceeds, the minimum rate,

    • (ii) it can reasonably be expected that

      (A + B) ≥ C × D

      where

      A

      is the amount that would, in the absence of this subsection and paragraph 22(4)(b), be adjusted covered taxes payable by the ultimate parent entity in respect of the dividend or the profits out of which the dividend is paid,

      B

      is the tax payable in respect of the dividend by the dividend recipient for a taxable period ending within 12 months of the end of the fiscal year,

      C

      is the amount of the dividend, and

      D

      is the minimum rate, or

    • (iii) it is the case that

      • (A) the dividend recipient is a natural person,

      • (B) the dividend recipient is subject to tax in respect of the dividend for a taxable period that ends within 12 months of the end of the fiscal year, and

      • (C) the dividend is a patronage dividend from a supply cooperative;

  • (b) the dividend recipient is a natural person who

    • (i) is tax resident in the jurisdiction where the ultimate parent entity is located, and

    • (ii) does not hold ownership interests that in the aggregate entitle the holder to more than 5% of the profits or assets of the ultimate parent entity; or

  • (c) the dividend recipient is resident in the jurisdiction where the ultimate parent entity is located and is

    • (i) a governmental entity,

    • (ii) an international organization,

    • (iii) a non-profit organization, or

    • (iv) a pension fund that is not a pension services entity.

• Marginal note:Exclusion for covered taxes

  (2) If subsection (1) applies to exclude a particular amount from the GloBE income of an ultimate parent entity, the entity’s GloBE income also excludes the amount of the entity’s covered taxes that are, because of the exclusion of the particular amount from its GloBE income, excluded from the entity’s adjusted covered taxes under paragraph 22(4)(b).

• Marginal note:Back-to-back deductible dividends

  (3) Subsections (1) and (2) apply, with such modifications as the context requires, to a group entity for a fiscal year in respect of a particular deductible dividend distributed by the group entity directly or indirectly to the ultimate parent entity, to the extent that

  • (a) the group entity is located in the same jurisdiction as the ultimate parent entity;

  • (b) the group entity is subject to the deductible dividend regime;

  • (c) the ultimate parent entity’s ownership interests in the group entity are held directly or through a chain of group entities that meet the conditions in paragraphs (a) and (b);

  • (d) the ultimate parent entity distributes, within 12 months of the end of the fiscal year, the amount it received in respect of the particular deductible dividend; and

  • (e) the distribution by the ultimate parent entity is a deductible dividend in respect of which a condition in any of paragraphs (1)(a) to (c) is met.

• Marginal note:Deeming rule — patronage dividends

  (4) For the purposes of clause (1)(a)(iii)(B), a patronage dividend from a supply cooperative is deemed to be subject to tax to the extent that it reduces a cost or expense that is otherwise deductible in computing the recipient’s income for tax purposes.