Document ID: chunk:federal_register_of_legislation:F2024L01740:front:0:p137
Version: federal_register_of_legislation:F2024L01740
Segment Type: other
Provision Reference: 
Character Range: 344062–346787

and the disposing Entity recognises the corresponding amount of income in its financial accounts; or
 (ii) an Entity (the acquiring Entity) records the carrying value of the asset in its financial accounts at cost and a deferred tax asset based on the difference between that carrying value and its tax basis; and
 (b) the transaction occurs, or is deemed to occur, in the period that:
 (i) starts on 1 December 2021; and
 (ii) ends immediately before the disposing Entity's Transition Year; and
 (c) the asset was not inventory; and
 (d) if the disposing Entity and the acquiring Entity are not the same Entity—immediately before the transaction, the disposing Entity and the acquiring Entity would have been Constituent Entities of the same MNE Group, assuming that this instrument had been in force immediately before the transaction.
 (2) For the purposes of applying this instrument in relation to Constituent Entities of the MNE Group:
 (a) treat the asset as having been acquired for an amount equal to the disposing Entity's carrying value of the asset immediately before the transaction; and
 (b) treat the carrying value of the asset at the beginning of the Transition Year as being the carrying value mentioned in paragraph (a), adjusted for the following items (to the extent they are incurred, or would have been recognised, before the Transition Year):
 (i) subsequent capitalised expenditure incurred in respect of the asset after the transaction;
 (ii) amortisation and depreciation of the asset, assuming that any increase in the carrying value resulting from the transaction had not occurred; and
 (c) disregard the amount of a deferred tax asset or deferred tax liability that arises as a result of the transaction, except to the extent specified in subsection (3).
 (3) This subsection covers an amount of deferred tax asset up to the lesser of the following:
 (a) the amount equal to:
 (i) the Minimum Rate;
  multiplied by:
 (ii) the difference between the tax basis in the asset and the carrying value of the asset mentioned in paragraph (2)(b);
 (b) the sum of the following:
 (i) the amount of Tax paid in respect of the transaction by the disposing Entity;
 (ii) the amount of Covered Taxes paid in respect of the transaction that are allocated to the disposing Entity under Part 4‑3;
 (iii) the amount of a deferred tax asset arising in relation to the asset that would have been taken account of under paragraph 9‑5(2)(b) but was reversed or was not created by the disposing Entity because gain from the transaction was included in the taxable income of the disposing Entity.
 (4) In working out amounts under paragraph (3)(b):
 (a) adjust the carrying value of the asset and the value of deferred