Global Minimum Tax Act — G-3.3 17
Definition of financial accounting income 17 (1) Financial accounting income , for a constituent entity for a fiscal year, means, subject to subsections (2) to (6), (a) for a constituent entity other than a permanent establishment, the net income or loss determined for that constituent entity (i) in the preparation of the consolidated financial statements of the ultimate parent entity of the MNE group that includes the constituent entity, or (ii) under another acceptable financial accounting standard or authorized financial accounting standard, if (A) it is not reasonably practicable to determine the financial accounting income for the constituent entity based on the accounting standard used in the preparation of the consolidated financial statements of the ultimate parent entity, (B) the financial accounts of the constituent entity are maintained based on the other acceptable financial accounting standard or authorized financial accounting standard, (C) the information in those financial accounts is reliable, such that an auditor applying the generally accepted auditing standards of the jurisdiction in which the ultimate parent entity or constituent entity is located (or, in the case of a flow-through entity, the jurisdiction in which the entity was created) would reasonably conclude that the constituent entity has in place processes and controls that are likely to ensure that the information in the financial accounts is fair and accurate, and (D) that amount is adjusted to eliminate any permanent difference greater than €1 million that arises for the fiscal year because the other financial accounting standard is used instead of the financial accounting standard of the ultimate parent entity; and (b) for a constituent entity that is a permanent establishment, (i) if the permanent establishment is described in any of paragraphs (a) to (c) of the definition permanent establishment in subsection 2 (1), the amount that (A) is the net income or loss reflected in the separate financial accounts of the permanent establishment, if those financial accounts are prepared in accordance with an acceptable financial accounting standard or in accordance with an authorized financial accounting standard and subject to adjustments to prevent any material competitive distortions, or (B) if the permanent establishment does not have separate financial accounts described in clause (A), would be the net income or loss of that permanent establishment reflected in separate financial accounts prepared on a stand-alone basis in accordance with the accounting standard used in the preparation of the ultimate parent entity’s consolidated financial statements, and (ii) if the constituent entity is a permanent establishment described in paragraph (d) of the definition permanent establishment in subsection 2 (1), the net income or loss determined on the assumption that (A) the only income of the permanent establishment is its income that is exempted from tax in the jurisdiction where the main entity in respect of the permanent establishment is located and that is attributable to activities carried on outside the jurisdiction in which the main entity is located, and (B) the only expenses of the permanent establishment are its expenses that are attributable to the activities described in clause (A) and are not deducted for tax purposes in the jurisdiction in which the main entity is located. Permanent establishments — adjustment (2) The amount that would, in the absence of this subsection, be a permanent establishment’s financial accounting income is adjusted to reflect only the amounts of income and expense that are — or, if paragraph (c) applies, would be — attributable to the permanent establishment (regardless of whether such amount is subject to tax or deductible, as the case may be, in the jurisdiction in which the permanent establishment is located) in accordance with (a) if paragraph (a) of the definition permanent establishment in subsection 2 (1) app