Document ID: chunk:federal_register_of_legislation:F2024L01740:front:0:p102
Version: federal_register_of_legislation:F2024L01740
Segment Type: other
Provision Reference: 
Character Range: 255160–257891

7‑3—Eligible Distribution Tax Systems
Note: Taxes on distributed profits, deemed profit distributions and non‑business expenses imposed under an Eligible Distribution Tax System are Covered Taxes (see paragraph 4‑40(1)(b)).

7‑40  Deemed distribution tax election
 (1) A Filing Constituent Entity for an MNE Group may make an election for the MNE Group under this subsection that applies to:
 (a) a specified jurisdiction that has an Eligible Distribution Tax System; and
 (b) each Constituent Entity of the MNE Group that is located in the jurisdiction.
 (2) An election under subsection (1) is an Annual Election.

7‑45  Meaning of Eligible Distribution Tax System
  An Eligible Distribution Tax System is a corporate income tax system that:
 (a) generally imposes an income tax on the amount of the profits, or certain non‑business expenses, of a corporation only on or after the time that the corporation:
 (i) distributes those profits to its shareholders; or
 (ii) is deemed to distribute those profits to its shareholders; or
 (iii) incurs those expenses; and
 (b) imposes Tax at a rate equal to or in excess of the Minimum Rate; and
 (c) was in force on or before 1 July 2021.

7‑50  Effect of election—amount in respect of deemed distribution tax added to Adjusted Covered Taxes
 (1) This section applies if an election under subsection 7‑40(1) applies to:
 (a) a jurisdiction that has an Eligible Distribution Tax System; and
 (b) Constituent Entities of an MNE Group that are located in the jurisdiction; and
 (c) a Fiscal Year.
 (2) For the purposes of paragraph 5‑5(2)(a), increase the sum of the Adjusted Covered Taxes for the Fiscal Year of each Constituent Entity of the MNE Group located in the jurisdiction by the lesser of the following:
 (a) the amount by which that sum would need to be increased to raise the Effective Tax Rate of the MNE Group for the jurisdiction for the Fiscal Year to the Minimum Rate;
 (b) the amount of Tax that would have been due under the Eligible Distribution Tax System if the Constituent Entities of the MNE Group located in the jurisdiction had distributed all of their income that was subject to the Eligible Distribution Tax System during the Fiscal Year.
 (3) At the end of the Fiscal Year:
 (a) a Deemed Distribution Tax Recapture Account is established for the Fiscal Year for the jurisdiction for the MNE Group; and
 (b) the balance of the Deemed Distribution Tax Recapture Account is the amount of the increase under subsection (2).

7‑55  Deemed Distribution Tax Recapture Account
 (1) This section applies if, at the end of a Fiscal Year (the current year), there are one or more Deemed Distribution Tax Recapture Accounts for a jurisdiction for an MNE Group for earlier