Singapore legislation
Regulation 42
Regulation 42
Qualified flow-through tax benefits
Subregulation 1
Where an election in regulation 34(1) is effective in relation to a constituent entity of an MNE group for a financial year, the adjusted covered taxes of the constituent entity for the financial year must be adjusted —
to treat the amount of any qualified flow-through tax benefits from a qualified ownership interest received by the constituent entity in the financial year as a positive amount of tax expense, to the extent that they have been excluded;
to treat the amount of any other flow-through tax benefits (that are not qualified) from the qualified ownership interest received by the constituent entity in the financial year as a negative amount of tax expense, to the extent that they have not already been so taken into account; and
to treat the amount of any qualified refundable tax credit, and any proceeds and distributions from the qualified ownership interest received by the constituent entity in the financial year, as negative tax expenses, but only to the extent that the total value of the amount and of the proceeds and distributions for the financial year and any prior financial year does not exceed the total value of the amount mentioned in sub‑paragraph (a) for the financial year and any prior financial year.
Subregulation 2
The amount of qualified flow-through tax benefits from a qualified ownership interest received by a constituent entity in a financial year is —
if the constituent entity applies the proportional amortisation method for accounting purposes, or irrevocably elects to adopt the proportional amortisation method for the purpose of this regulation —
where the total value of the proceeds, distributions and flow‑through tax benefits from the qualified ownership interest received in the financial year does not exceed the amortisation expense for the financial year under the proportional amortisation method — the amount of the flow‑through tax benefits received in the financial year; and
where the total value of the proceeds, distributions and flow‑through tax benefits from the qualified ownership interest received in the financial year exceeds the amortisation expense for the financial year under the proportional amortisation method — the amount of the flow‑through tax benefits received in the financial year reduced by the amount of such excess but not below nil; and
in any other case — the amount of the flow-through tax benefits received in the financial year, but only to the extent that the total value of the proceeds, distributions and flow-through tax benefits from the qualified ownership interest received in the financial year and all previous financial years does not exceed the investment in the qualified ownership interest.
Subregulation 3
The filing entity of an MNE group may make an election in accordance with the GloBE rules to adopt the proportional amortisation method in relation to a qualified ownership interest received by a constituent entity of the MNE group in a financial year for the purpose of paragraph (2)(a).
Subregulation 4
An election must be made in the later of the following:
the financial year in which the constituent entity acquired the qualified ownership interest;
the first in-scope year of the constituent entity.
Subregulation 5
In this regulation —
Definition
“flow-through tax benefits” means tax credits (not being qualified refundable tax credits) and the value of tax deductible losses made available to the owner of qualified ownership interest;
Definition
“proportional amortisation method” means a method of accounting under which —
the investment in the qualified ownership interest is amortised over the term of the investment with the amortisation expense for a financial year based on the proportion of the flow‑through tax benefits received in the financial year over the flow-through tax benefits expected to be provided over the term of the investment; and
the difference between the flow‑through tax benefits received and the amortisation expense for the financial year is reflected as a tax expense;
Definition
“qualified ownership interest” means an investment in a flow‑through entity by a constituent entity of an MNE group where —
the flow-through entity is not a reverse hybrid entity with respect to the income, expenditure, profit or loss attributable to the constituent entity;
the investment is treated as equity —
for tax purposes in the jurisdiction where the constituent entity is located; and
under an authorised financial accounting standard in the jurisdiction where the flow‑through entity operates;
the flow-through entity is not a constituent entity of the MNE group;
it is reasonable to expect, at the time of making the investment, that the return on the investment would be negative if not for the availability of flow‑through tax benefits;
the constituent entity has a genuine economic interest in the flow-through entity and is not protected from loss on the investment; and
flow-through tax benefits under the investment are available to the constituent entity whether or not the MNE group is subject to MTT or a qualified IIR.