Global Minimum Tax Act — G-3.3 48
Transition — deferred tax assets and liabilities 48 (1) Subject to subsections (2), (3) and (5), in determining the total deferred tax adjustment amount of a constituent entity of an MNE group that is located in a jurisdiction for the GloBE transition year of the MNE group in respect of the jurisdiction and each subsequent fiscal year in which the constituent entity is included in the MNE group, (a) each deferred tax asset and deferred tax liability that is reflected in the constituent entity’s financial accounts at the beginning of the GloBE transition year is to be taken into account to the extent of (i) if the constituent entity can demonstrate that a deferred tax asset is attributable to a loss of the constituent entity that would have been taken into account in determining its GloBE income or loss had the GloBE income or loss been determined for the prior fiscal year in which the loss arose, the amount that the deferred tax asset would be if the rate of tax that applied in determining the deferred tax asset were the minimum rate, (ii) if a deferred tax asset is in respect of a tax credit, the lesser of (A) the amount of the deferred tax asset, and (B) the amount determined by the formula A ÷ B × C where A is the amount of the deferred tax asset, B is the applicable tax rate in the fiscal year immediately preceding the GloBE transition year, and C is the minimum rate, and (iii) in any other case, the lesser of (A) the amount of the deferred tax asset or deferred tax liability, as the case may be, and (B) the amount that the deferred tax asset or deferred tax liability would be if the tax rate applicable in determining the deferred tax asset or deferred tax liability were the minimum rate; (b) if a deferred tax asset referred to in paragraph (a) is in respect of a credit and the tax rate applicable to the constituent entity in a subsequent fiscal year (referred to in this paragraph as the “re-application year”) is different from the applicable tax rate in the fiscal year immediately preceding the GloBE transition year, (i) the formula in clause (a)(ii)(B) must be re-applied to the outstanding balance of the tax credit in the constituent entity’s financial accounts at the beginning of the re-application year to determine the revised deferred tax asset, (ii) the change in the amount of the deferred tax asset resulting from the re-application of the formula must not be treated as deferred tax expense included in the computation of the total deferred tax adjustment amount of the constituent entity in the re-application year or any other fiscal year, and (iii) the deferred tax expense for the re-application year and subsequent fiscal years must be determined based on the amount of the reversal of the revised deferred tax asset; and (c) paragraph 25 (2)(a) and subsection 25 (6) do not apply in respect of the deferred tax assets and deferred tax liabilities referred to in paragraph (a). Excluded deferred tax assets (2) In applying subsection (1), a deferred tax asset that is reflected in a constituent entity’s financial accounts at the beginning of the GloBE transition year of the MNE group in respect of the jurisdiction in which the constituent entity is located is not to be taken into account in determining the constituent entity’s total deferred tax adjustment amount if the deferred tax asset arises (a) as a result of a transaction that occurs on or after December 1, 2021 and before the GloBE transition year; and (b) in respect of (i) an amount that (A) is taken into account in computing the constituent entity’s income or profits in respect of which an entity is subject to an income or profits tax imposed by the government of the jurisdiction in which the constituent entity is located, and (B) would not be taken into account in computing the constituent entity’s GloBE income or loss for the GloBE transition year if the amount arose in the GloBE transition year, or (ii) an amount that (A) is not included in the constituent entit