Global Minimum Tax Act — G-3.3 27
Adjustments to covered taxes for a prior year 27 (1) If, in a fiscal year (referred to in this subsection as the “current year”), there is an adjustment to the liability for covered taxes, recorded in the financial accounts, of a particular constituent entity of an MNE group for a prior fiscal year that are relevant in determining its adjusted covered taxes for the prior year, the following rules apply: (a) if the adjustment results in an increase in the liability, or an immaterial decrease in the liability, (i) where the adjustment relates to a change, in the particular constituent entity’s deferred tax expense arising in the prior year, to which subsection (2) applies, the particular constituent entity’s adjusted covered taxes for the fiscal year in which the deferred tax expense is reversed are to be increased to reflect the increase in the liability to the extent that it would not, in the absence of this subsection, already be reflected in the adjusted covered taxes of the particular constituent entity for any fiscal year, and (ii) in any other case, the particular constituent entity’s adjusted covered taxes for the current year are to be increased or reduced, as the case may be, to reflect the increase or immaterial decrease in the liability to the extent that it would not, in the absence of this subsection, already be reflected in the adjusted covered taxes of the particular constituent entity for any fiscal year; (b) if the adjustment results in a decrease (other than an immaterial decrease) in the liability, for the purposes of applying subsection 31 (1) in the current year (i) the particular constituent entity’s adjusted covered taxes for the prior year are to be reduced to reflect the decrease in the liability, (ii) the particular constituent entity’s GloBE income or loss for the prior year is to be adjusted to the extent (A) the decrease in the liability results from a reduction in the particular constituent entity’s GloBE income or an increase in its GloBE loss for the prior year, and (B) it is necessary to ensure there is no reduction in the MNE group’s effective tax rate (determined without reference to this subsection), in respect of the jurisdiction in which the particular constituent entity is located, for the prior year, and (iii) the GloBE income or loss, of the particular constituent entity and any other constituent entity of the MNE group that is located in the jurisdiction, for any fiscal year subsequent to the prior year, is to be adjusted, as necessary and appropriate, to reflect the decrease in the liability; (c) for the purposes of paragraphs (a) and (b), the adjustment results in an immaterial decrease if (i) the filing constituent entity of the MNE group elects under this paragraph in respect of the adjustment, (ii) the adjustment results in a decrease in the liability, and (iii) the amount determined by the following formula is less than €1 million: A − B where A is the total of all amounts each of which is an adjustment in the current year resulting in a decrease to the liability for covered taxes, recorded in the financial accounts, of any constituent entity that is located in the jurisdiction for the prior year that are relevant in determining its adjusted covered taxes for the prior year, and B is the amount that would be determined for A if the reference in the description of A to “decrease” were read as a reference to “increase”; and (d) to the extent the adjustment arises because a loss for tax purposes for any fiscal year following the prior year is carried back to reduce income for tax purposes for the prior year, the particular constituent entity is deemed to have a deferred tax asset that (i) arises in the current year, (ii) is equal to the portion of the loss for tax purposes that reduces income for tax purposes for the prior year multiplied by the minimum rate, and (iii) is treated as having been reversed in the prior year for the purposes of applying subsection 31 (1) in respect of th