Global Minimum Tax Act — G-3.3 18
e constituent entity’s financial accounting income, and (C) not included in the computation of the constituent entity’s income for tax purposes, or (ii) the particular amount is (A) attributable to fluctuations in the exchange rate between the accounting functional currency and another currency that is not the tax functional currency, (B) included in the constituent entity’s financial accounting income, and (C) not included in the computation of the constituent entity’s income for tax purposes. Policy disallowed expenses (10) GloBE income or loss, of a constituent entity for a fiscal year, excludes (a) expenses recorded by the constituent entity for illegal payments, including bribes and kickbacks; (b) an expense recorded by the constituent entity for a fine or penalty equal to or greater than €50,000; and (c) expenses recorded by the constituent entity for fines or penalties, the total of which amounts is equal to or greater than €50,000, if the fines or penalties are in respect of the same conduct, or for continuing conduct. Prior period errors and changes in accounting principles (11) If there has been a change in the opening equity of a constituent entity at the start of a fiscal year, the constituent entity’s GloBE income or loss for the fiscal year includes the amount of that change if the change is attributable to (a) a correction of an error in the accounts for a previous fiscal year that affected the income or expenses included in the computation of GloBE income or loss for that year, except to the extent the correction of that error resulted in a material decrease in a liability for covered taxes subject to paragraph 27 (1)(b); or (b) a change in accounting principle or policy that affects income or expenses included in the computation of GloBE income or loss. Pension expense (12) GloBE income or loss, of a constituent entity for a fiscal year, includes the positive or negative amount determined by the formula (A + B) × (−1) where A is (a) the amount, expressed as a negative number, that is recorded in the constituent entity’s financial accounting income for the fiscal year as pension liability expense in respect of a pension fund, or (b) the amount that is recorded in the constituent entity’s financial accounting income for the fiscal year as income in respect of a pension fund; and B is the amount of pension contributions made by the constituent entity to the pension fund in the fiscal year. Arm’s length requirement — certain transactions (13) GloBE income or loss of a particular constituent entity of an MNE group for a fiscal year is to be adjusted to ensure that a transaction is reflected in accordance with the arm’s length principle if (a) the particular constituent entity is party to the transaction with another constituent entity of the MNE group that is located in the same jurisdiction; (b) either (i) the recorded value of the transaction is not the same in each of the constituent entities’ financial accounts, or (ii) the transaction is not recorded, in the particular constituent entity’s financial accounts, in accordance with the arm’s length principle; and (c) where subparagraph (b)(ii) applies, any of the following conditions is met: (i) only one of the constituent entities is a minority-owned constituent entity, (ii) only one of the constituent entities is an investment entity or insurance investment entity, (iii) the transaction is a sale or other transfer of an asset that results in a loss that is included in computing the GloBE income or loss of one of the constituent entities for the fiscal year. Arm’s length requirement — accounting and tax (14) If a transaction between two or more constituent entities of an MNE group (referred to in this subsection as the “counterparties”) that are not located in the same jurisdiction is not recorded in the same amount, not recorded in accordance with the arm’s length principle or not recorded at all in the financial accounts of the counterparties for a fiscal year