Singapore legislation
Regulation 45
Regulation 45
Adjustments to qualifying deferred tax expense
Subregulation 1
The following adjustments must be made to the qualifying deferred tax expense of a constituent entity of an MNE group for any financial year, but only after making any adjustments under regulation 44E:
any amount of that expense in respect of an item excluded from the computation of the GloBE income or loss for that financial year of the constituent entity is excluded;
any amount of that expense that reflects a disallowed accrual or an unclaimed accrual for that financial year is excluded;
the impact in the financial year of a valuation adjustment or accounting recognition adjustment with respect to a deferred tax asset is excluded;
any amount of that expense in the financial year arising from a re‑measurement with respect to a change in the rate of tax is excluded;
any amount of that expense in the financial year that reflects the generation or use of tax credits is excluded;
any amount of unclaimed accrual for a previous financial year (that was excluded under sub‑paragraph (b) for that previous financial year) that is paid in the financial year is added;
any amount not reflected in a deferred tax asset that is attributable to a loss for the financial year, being an amount not so reflected only as a result of the recognition criteria not being met, is subtracted;
any amount of that expense in respect of an amount of qualifying foreign tax credit as determined under paragraph (2) for the financial year is included, but only to the extent that the qualifying foreign tax credit is used to offset a tax on income included in the computation of GloBE income or loss;
any recaptured deferred tax liability under regulation 46 that is paid in the financial year is added;
any amount of deferred tax expense that relates to a gain or loss in respect of the disposal of local tangible assets (as defined in regulation 32(6)) in the financial year for which an election in regulation 32(1) is made for the constituent entity is excluded;
any amount of a special foreign tax asset for that financial year is subtracted, and any amount of a special foreign tax asset used for that financial year is added, but in each case only to the extent that the special foreign tax asset is used to offset a tax on income included in the computation of GloBE income or loss.
Subregulation 2
The amount of a qualifying foreign tax credit is the lower of —
the qualifying foreign tax credit; and
the amount of any domestic loss used to offset any relevant foreign income that would allow the constituent entity to offset the qualifying foreign tax credit against tax on domestic profits, multiplied by the applicable tax rate in the jurisdiction where the constituent entity is located.
Subregulation 3
Where a constituent entity of an MNE group has a deferred tax asset calculated on the basis of a tax rate of less than 15% that is attributable to a loss that would have been taken into account in determining its GloBE income or loss for a financial year, the amount of the deferred tax asset may be adjusted to the amount it would be had the tax rate been 15%, and the amount of the adjustment is subtracted from the qualifying deferred tax expense of that constituent entity for that financial year.
Subregulation 4
Where a deferred tax expense of a constituent entity of an MNE group for a financial year relates to covered taxes where the tax rate is greater than 15%, the amount of that deferred tax expense must be adjusted to the amount it would be had the tax rate been 15%.
Subregulation 4A
The guidance in Chapter 1 of the June 2024 Administrative Guidance applies for the purpose of determining whether an amount of qualifying deferred tax expense reflects an unclaimed accrual, and that guidance is to apply with the necessary modifications for that purpose (for example, a reference to an Unclaimed Accrual Five-Year Election is to an election mentioned in regulation 46A(1)(b)).
Subregulation 5
In this regulation —
Definition
“disallowed accrual”, in relation to a financial year, means —
any movement in deferred tax expense which would be (if not for regulation 11) reflected in the FANIL of a constituent entity of an MNE group for the financial year which relates to an uncertain tax position; or
any movement in deferred tax expense which would be (if not for regulation 11) reflected in the FANIL of a constituent entity of an MNE group for the financial year which relates to distributions from another constituent entity of the MNE group;
Definition
“qualifying foreign tax credit”, in relation to a constituent entity of an MNE group, means a tax credit in the jurisdiction in which that constituent entity is located for foreign income tax paid by that constituent entity or another constituent entity, where that jurisdiction —
requires domestic losses to be offset against relevant foreign income before a tax credit can be applied against tax on foreign income; and
permits a foreign tax credit to be offset against tax on domestic profits to the extent that domestic losses have been offset against relevant foreign income for a previous financial year;
Definition
“relevant foreign income”, in relation to a constituent entity of an MNE group, means —
income of a controlled foreign company of the constituent entity on which the constituent entity is taxed as a result of a controlled foreign company tax regime (as defined in regulation 44(7));
income of a hybrid entity in which the constituent entity holds an ownership interest, where the hybrid entity is located in a different jurisdiction from the constituent entity;
income of a reverse hybrid entity in which the constituent entity holds an ownership interest, where the reverse hybrid entity is located in a different jurisdiction from the constituent entity; or (d)income of a permanent establishment of the constituent entity, where the permanent establishment is located in a different jurisdiction from the constituent entity;
Definition
“special foreign tax asset”, in relation to a constituent entity of an MNE group, means the amount of domestic loss used by the constituent entity to offset (in whole or in part) relevant foreign income, multiplied by the lower of 15% and the applicable tax rate in the jurisdiction in which that constituent entity is located for the financial year in which the domestic loss was used, where that jurisdiction —
requires the domestic loss to be offset against relevant foreign income before a tax credit can be applied against tax on foreign income; (b)limits the extent to which foreign tax credits can be applied against tax for a financial year; and
permits a re-characterisation of domestic income as foreign income to allow foreign tax credits to be used to a greater extent where the domestic loss has been used to offset (in whole or in part) relevant foreign income for a previous financial year;
Definition
“unclaimed accrual”, in relation to a constituent entity of an MNE group for a financial year, means an increase in a deferred tax liability in respect of which the filing entity of that MNE group has elected under regulation 46A not to include in the qualifying deferred tax expense of that constituent entity for that financial year.
Subregulation 6
Paragraph (1)(a) to (e) does not apply in relation to deferred tax assets or liabilities arising before the transition year.
Subregulation 7
In making the adjustments in paragraph (1), no item may be taken into account more than once.