Explanatory Notes Relating to the Global Minimum Tax Act

Preface

These explanatory notes are provided to assist in an understanding of legislative proposals relating to the Global Minimum Tax Act and other legislation. These explanatory notes describe the proposed amendments, clause by clause, for the assistance of Members of Parliament, taxpayers and their professional advisors.

The Honourable Chrystia Freeland, P.C., M.P.,
Deputy Prime Minister and Minister of Finance

These notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.

Table of Concordance

This Table of Concordance cross-references certain provisions of the Global Minimum Tax Act (the "Act"), included as Part 2 of the Budget Implementation Act, 2024, No. 1, with the source documents on which those provisions are based, being the provisions of the GloBE model rules, the GloBE commentary, the administrative guidance in respect of the GloBE model rules and the GloBE Information Return, all as approved by the Inclusive Framework and published by the OECD. (Terms used in this paragraph and defined in the Act have the meanings assigned in the Act.)

This Table of Concordance is intended only as an unofficial guide for users of the Act, and neither as a source of law nor interpretive aid. While every effort was made to achieve accuracy, only the Act is authoritative.

Explanatory Notes Relating to the Global Minimum Tax Act (the "Act" or "GMTA")

Clause 81

Clause 81 would implement the Global Minimum Tax Act (the "Act" or "GMTA"). The Act implements Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) (the "Model Rules") and accompanying commentary (the "Commentary") and administrative guidance (the "Administrative Guidance"), which collectively constitute the framework for a global minimum tax (known as "Pillar Two") developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the "Inclusive Framework").

In general terms, the Act is intended to ensure that large multinational enterprises (i.e., those meeting a certain revenue threshold) are subject to an effective tax rate of at least 15% on their profits in each jurisdiction in which they operate.

The Act is described in detail below.

Short Title

GMTA
1

Section 1 of the Act sets out its short title as the Global Minimum Tax Act.

Part 1 – Interpretation and Application

Part 1 of the Act provides a number of definitions and rules of application.  

Definitions

GMTA
2(1)

Subsection 2(1) of the Act sets out a number of definitions that apply for the purposes of the entire Act. Other definitions with a more limited scope appear elsewhere in the Act, closer to where they are relevant.

"acceptable financing accounting standard"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"adjusted covered taxes"

"Adjusted covered taxes" is defined, for the purposes of the Act, as having the same meaning as in subsection 22(1).

"adjustment year"

This definition identifies a previous fiscal year of an MNE group in respect of which the effective tax rate for a jurisdiction may be adjusted retrospectively, as a result of an adjustment to either the GloBE income or loss or adjusted covered taxes of a constituent entity of the MNE group that is located in the jurisdiction, or the jurisdictional adjusted covered taxes of the MNE group for the jurisdiction, in all cases because of the application of an ETR adjustment provision.

"aggregate asset gain"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant for an election under subsection 18(23).

"aggregate asset loss"

This definition is the converse of the definition "aggregate asset gain" and is relevant for an election under subsection 18(23).

"allocable share"

"Allocable share" is defined, for the purposes of the Act, as having the same meaning as in subsection 15(2).

"allocated adjustment top-up amount"

"Allocated adjustment top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 30(5).

"ancillary international shipping activity" 

"Ancillary international shipping activity" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(11). 

"ancillary international shipping costs"

"Ancillary international shipping costs" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(10). 

"ancillary international shipping income"

"Ancillary international shipping income" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(8). 

"ancillary international shipping revenue"

"Ancillary international shipping revenue" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(9). 

"authorized financing accounting standard"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"blended controlled foreign company tax regime"

This definition implements, in part, paragraphs 58.1 to 58.7 in the Commentary to Article 4.3.2.(c) of the Model Rules (as introduced by Section 2.10 of the February 2023 Administrative Guidance), concerning the special time-limited methodology for the allocation of taxes incurred under an aggregated or "blended" controlled foreign company tax regime, from one constituent entity to another.

The three criteria that must be satisfied for a regime to be considered a blended controlled foreign company tax regime are:

• the blending criterion – liability for tax under the regime is determined by reference to an aggregate of the income, losses and creditable taxes of multiple (though not necessarily all) foreign subsidiary entities, which may be located in the same or multiple jurisdictions;
• the tax rate criterion – the threshold rate for applying a tax charge under the regime must be less than 15%; and
• the domestic exclusion criterion – no domestic entities may be included in the aggregation.

An example of a regime that is expected to satisfy these criteria is the current United States global intangible low-taxed income (GILTI) regime.

For more information, see the note to subsection 24(4).

"consolidated financial statements"

This definition implements the corresponding definition in Article 10.1. of the Model Rules, as clarified by paragraphs 8.1 to 8.4 in the Commentary to the definition "Consolidated Financial Statements" and paragraphs 8.6 to 8.7 in the Commentary to the definition "Controlling Interest" in Article 10.1. of the Model Rules (as introduced by Section 1.2 of the February 2023 Administrative Guidance).

"constituent entity"

"Constituent entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 11(1).

"constituent entity-owner"
This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"controlled foreign company tax regime"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"controlling interest"

This definition, in conjunction with paragraph (2)(b), implements the definition "Controlling Interest" in Article 10.1. of the Model Rules.

"cooperative"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"core international shipping activity" 

"Core international shipping activity" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(6). 

"core international shipping costs"

"Core international shipping costs" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(5). 

"core international shipping income"

"Core international shipping income" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(3). 

"core international shipping revenue"

"Core international shipping revenue" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(4). 

"corporation"

This definition clarifies that references to the term "corporation" include any company, arrangement, association, organization or body, provided that company, arrangement, association, organization or body is incorporated and whether or not it would be a corporation in the ordinary sense.

"covered taxes"

"Covered taxes" is defined, for the purposes of the Act, as having the same meaning as in subsection 23(1).

"deductible dividend"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"deductible dividend regime"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"deemed distribution tax"

"Deemed distribution tax" is defined, for the purposes of the Act, as having the same meaning as in subsection 37(2).

"deemed distribution tax recapture account"

This definition implements the corresponding definition in Article 10.1. of the Model Rules. The details of this account are set out in subsection 37(1).

"departing constituent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"disallowed accrual"

This definition implements the corresponding definition in Article 4.4.6. of the Model Rules.

"disposition recapture ratio"

"Disposition recapture ratio" is defined, for the purposes of the Act, as having the same meaning as in subsection 37(6).

"disqualified refundable imputation tax"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"domestic top-up amount"

"Domestic top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 52(1).

"dual-listed arrangement"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"effective tax rate"

"Effective tax rate" is defined, for the purposes of the Act, as having the same meaning as in subsection 29(1).

"eligible distribution tax system"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"eligible employee"

"Eligible employee" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(8).

"eligible payroll costs"

"Eligible payroll costs" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(2).

"eligible tangible asset"

"Eligible tangible asset" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(14).

"eligible tangible asset amount"

"Eligible tangible asset amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(9).

"entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules, as clarified by paragraph 17.1 in the Commentary to the definition "Entity" in Article 10.1. of the Model Rules (as introduced by Section 1.2 of the February 2023 Administrative Guidance).

"ETR adjustment provision"

This definition implements the definition "ETR Adjustment Article" in Article 10.1. of the Model Rules and refers to the various provisions in the Act under which an MNE group's effective tax rate for a jurisdiction may be adjusted retrospectively.

"excess negative tax expense"

"Excess negative tax expense" is defined, for the purposes of the Act, as having the same meaning as in subsection 29(4).

"excess negative tax expense top-up amount"

"Excess negative tax expense top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 31(2).

"excess profit"

"Excess profit" is defined, for the purposes of the Act, as having the same meaning as in subsection 30(4).

"excluded costs"

"Excluded costs" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(3).

"excluded dividends"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

Under subsection 18(3), excluded dividends are excluded in computing GloBE income or loss.

Paragraph (b) of this definition implements paragraph 37 in the Commentary to Article 3.2.1.(b) and paragraph 85 in the Commentary to the definition "Ownership Interest" in Article 10.1. of the Model Rules (as introduced by Section 2.3 of the February 2023 Administrative Guidance). Paragraph (b) clarifies that any amount in respect of the debt component of a compound financial instrument, or that is treated as an expense of another group entity, does not qualify as an excluded dividend and is therefore included in GloBE income or loss.

"excluded entity"

"Excluded entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 13(1).

"excluded equity gain or loss"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"excluded taxes"

"Excluded taxes" is defined, for the purposes of the Act, as having the same meaning as in subsection 23(2).

"filing constituent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"financial accounting income"

"Financial accounting income" is defined, for the purposes of the Act, as having the same meaning as in subsection 17(1).

"financial accounting revenue"

"Financial accounting revenue" is defined, for the purposes of the Act, as having the same meaning as in subsection 33(3).

"fiscal year"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"fiscally transparent"

This definition implements Article 10.2.2. of the Model Rules, except that it omits the reference to the "direct" owner, with the result that an entity can be considered fiscally transparent in relation to an indirect owner.

"five-year election"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"flow-through entity"

This definition implements the part of Article 10.2.1. of the Model Rules that defines "Flow-through Entity".

"flow-through tax benefits"

"Flow-through tax benefits" is defined, for the purposes of the Act, as having the same meaning as in subsection 28(1).

"general government"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"GIR"

This definition implements the definition "GloBE Information Return" in Article 10.1. of the Model Rules, and Articles 8.1.4., 8.1.5. and 8.1.7. of the Model Rules as expounded by Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (Pillar Two), published by the OECD on July 13, 2023 (as amended from time to time), which clarifies the required contents in accordance with the standardized GIR and the dissemination approach for providing GIR information to implementing jurisdictions. Paragraph (a) of the definition concerns a GIR filed with the Minister by a constituent entity located in Canada, and paragraph (b) concerns a GIR filed in a jurisdiction other than Canada. The GIR is to be used for the purposes of reporting the computations under Parts 2 and3 of the Act (and will be used for the purposes of reporting the computations under the UTPR).

"GloBE Commentary"

This definition refers to Tax Challenges Arising from the Digitalisation of the Economy – Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two), published by the OECD on March 14, 2022, as amended from time to time.

"GloBE income"

"GloBE income" for a fiscal year is the amount of a constituent entity's GloBE income or loss, where that amount is positive.

"GloBE income or loss"

"GloBE income or loss" is defined, for the purposes of the Act, as having the same meaning as in section 16.

"GloBE loss"

"GloBE loss" for a fiscal year is the amount of a constituent entity's GloBE income or loss, where that amount is negative (i.e., a loss) for the fiscal year.

"GloBE Model Rules"

This definition refers to the Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), published by the OECD on December 20, 2021.

"GloBE reorganization"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"GloBE transition year"

This definition implements, in part, the definition "Transition Year" from Article 10.1. of the Model Rules as expounded in paragraphs 118.49.1 and 118.49.2 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by the portion of section 4 of the July 2023 Administrative Guidance entitled "Transition Years").

"governmental entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

A governmental entity is identified by reference to six criteria, all of which must be met by an entity for governmental entity status to be attained. These criteria may be grouped into two categories: one containing the four technical criteria in paragraphs (a), (d), (e) and (f), which relate to the ownership, accountability and financial benefits of the entity; and another containing the two functional criteria in paragraphs (b) and (c), which are concerned with the functions and operations of the entity. In undertaking the necessary analysis in relation to the latter criteria, reference may be had to the Commentary to the definition "Governmental Entity" in Article 10.1. of the Model Rules and to Section 1.4 of the February 2023 Administrative Guidance.

"group"

"Group" is defined, for the purposes of the Act, as having the same meaning as in subsection 10(2).

"group entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"high-tax counterparty"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"hybrid entity"

This definition implements Article 10.2.5. of the Model Rules.

"IFRS"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"IIR"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"included revaluation method gain or loss"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"inclusion ratio"

"Inclusion ratio" is defined, for the purposes of the Act, as having the same meaning as in subsection 15(3).

"Inclusive Framework"

"Inclusive Framework" means the jurisdictions of the OECD/Group of 20 Inclusive Framework on Base Erosion and Profit Shifting.

"insurance investment entity"

This definition implements the corresponding definition from Article 10.1. of the Model Rules.

The term "insurance investment entity" derives its meaning in part from the definitions "investment fund" and "real estate investment vehicle", with alterations made to account for the insurance context. In particular, any reference in either of those definitions to a function or arrangement in respect of the entity that inherently requires that the entity has a group of owner-investors (e.g., pooling of assets, spreading of risks, distributions governed by investment quantum, wide holding) are omitted. This is because, in instances where an investment entity is captive to a single insurer or insurance group, it will necessarily have few or even only one owner and would therefore not be capable of satisfying such requirements.

In addition, the "purpose" condition in respect of the entity is adapted in paragraph (b) to the insurance context, by requiring that the income or gains that the entity is designed or established to generate be generated for ends particular to the insurance industry (namely, the protection against risks or funding of liabilities). Finally, a novel ownership condition is introduced in paragraph (c) of the definition, requiring that the entity be entirely owned by regulated members of the insurance group.

"intermediate parent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"international organization"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"international shipping"

This definition implements, in part, the definition of "International Shipping Income" in Article 3.3.2. of the Model Rules.

"international traffic"

This definition implements the corresponding definition from paragraph 152 in the Commentary to Article 3.3.2. of the Model Rules.

"intragroup financing arrangement"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"investment entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"investment fund"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"joint venture"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

The interpretation rule in subsection 2(7) is relevant in interpreting the expression "subject to a qualified IIR or qualified UTPR" in subparagraph (c)(i) of this definition.

"joint venture entity"

This definition refers to a joint venture or a joint venture subsidiary of a joint venture group.

"joint venture group"

This definition implements the definition "JV Group" in Article 10.1. of the Model Rules.

"joint venture subsidiary"

This definition implements the definition "JV Subsidiary" in Article 10.1. of the Model Rules.

"jurisdictional adjusted covered taxes"

"Jurisdictional adjusted covered taxes" is defined, for the purposes of the Act, as having the same meaning as in subsection 29(3).

"jurisdictional excess negative tax expense top-up amount"

"Jurisdictional excess negative tax expense top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 31(4).

"jurisdictional GloBE income or loss"

"Jurisdictional GloBE income or loss" is defined, for the purposes of the Act, as having the same meaning as in subsection 33(4).

"jurisdictional GloBE revenue"

"Jurisdictional GloBE revenue" is defined, for the purposes of the Act, as having the same meaning as in subsection 33(2).

"jurisdictional top-up amount"

"Jurisdictional top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 30(2).

"local tangible asset"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"local taxation year"

This definition defines the period for which a constituent entity's accounts are ordinarily made up for income tax purposes in the jurisdiction where it is located.

"look-back period"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant in relation to an election under subsection 18(23).

"loss year"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant in relation to an election under subsection 18(23).

"low-tax entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant in the context of the anti-avoidance rule for intragroup financing arrangements in subsection 18(18).

"low-tax jurisdiction"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is used in the definitions "low-tax entity" and "high-tax counterparty".

"main entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"marketable price floor"

This definition implements the corresponding definition from paragraph 112.1(b) in the Commentary to Article 3.2.4. of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

"marketable transferable tax credit"

This definition implements the corresponding definition from paragraph 112.1 in the Commentary to Article 3.2.4. of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

"material competitive distortion"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"minimum rate"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"Minister"

This definition allows for the abbreviation of the Minister of National Revenue title throughout the Act.

"minority-owned constituent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"minority-owned parent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"minority-owned subgroup"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.  Paragraph (b) of this definition also implements, in part, Article 5.6.2. of the Model Rules.

"minority-owned subsidiary"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"MNE group"

"MNE group" is defined, for the purposes of the Act, as having the same meaning as in subsection 10(1).

"multi-parented MNE group"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"mutual insurance company"

This definition implements, in part, paragraph 91 in the Commentary to Article 7.5. of the Model Rules (as revised by Section 3.6 of the February 2023 Administrative Guidance).

"negative tax expense constituent entity"

"Negative tax expense constituent entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 31(3).

"net asset gain"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant in relation to an election under subsection 18(23).

"net asset loss"

This definition implements the corresponding definition in Article 10.1. of the Model Rules and is relevant in relation to an election under subsection 18(23).

"net GloBE income"

This definition has the same meaning as in subsection 29(2).

"net GloBE loss"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"net income or loss from international shipping"

The term "net income or loss from international shipping" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(2).

"non-marketable transferable tax credit" 

This definition implements the corresponding definition from paragraph 14.2 in the Commentary to Article 4.1.3.(c) of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

"non-profit organization"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"non-qualifying gain or loss"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"OECD"

This definition allows for the abbreviation of the Organisation for Economic Co-operation and Development throughout the Act.

"OECD Model Tax Convention"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"originator" 

This definition implements the corresponding definition from paragraph 111 in the Commentary to Article 3.2.4. of the Model Rules (as revised by Section 2 of the July 2023 Administrative Guidance).

"origination year" 

This definition implements the corresponding definition from paragraph 112.1(a) in the Commentary to Article 3.2.4. of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

"other comprehensive income"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"owner"

This definition refers to the entity that has a direct or indirect ownership interest in another entity.

"ownership interest"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"partially-owned parent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"passive income"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"patronage dividend"

This definition is relevant for the computation, under subsection 21(1), of GloBE income or loss of an ultimate parent entity that is subject to a deductible dividend regime. For more information, see the Commentary to Articles 7.2.1. and 7.2.4. of the Model Rules.

"pension fund"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"pension services entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"permanent establishment"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

Notably, the reference to "a place of business, including a deemed place of business" includes a permanent establishment based on the provision of services in a jurisdiction (often referred to as a "services PE"), as provided for example under Article V(9) of the Canada-United States Tax Convention.

"person"

This definition captures the ordinary meaning of the term "person" (including natural persons) but also includes the listed entities and arrangements (corporations, partnerships and trusts) whether or not those entities and arrangements are persons in the ordinary sense.

"portfolio holding"

This definition implements the definition "Portfolio Shareholding" in Article 10.1. of the Model Rules and is mainly relevant for the purposes of determining whether an amount can be included in a constituent entity's excluded dividends or excluded equity gains or losses. Notably, for the purpose of determining whether an ownership interest is a portfolio holding, voting rights are taken into consideration (in addition to rights to profits, capital and reserves). For more information, see the Commentary to Article 3.2.1.(b) of the Model Rules.

"prescribed"

This definition provides the meaning of the term "prescribed" in the Act, when used in relation to forms (paragraph (a)), the making of elections (paragraph (b)) and in all other cases (paragraph (c)).

"QDMTT transition year"

This definition implements, in part, the definition "Transition Year" from Article 10.1. of the Model Rules, as expounded in paragraphs 118.49.1 and 118.49.2 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by the portion of Section 4 of the July 2023 Administrative Guidance entitled "Transition Years").

"qualified ancillary international shipping income"

The term "qualified ancillary international shipping income" is defined, for the purposes of the Act, as having the same meaning as in subsection 19(7).

"qualified debt release amount"

This definition implements paragraphs 86.1 to 86.7 in the Commentary to Article 3.2.1. of the Model Rules (as introduced by Section 2.4 of the February 2023 Administrative Guidance). For more information, see the note to subsection 18(25).

"qualified domestic minimum top-up tax"

A "qualified domestic minimum top-up tax", for a fiscal year, is defined, for the purposes of the Act, as a law of a jurisdiction (including Canada) that is on the list of qualified domestic minimum top-up taxes for that fiscal year on the OECD website, or the list of jurisdictions with "transitional qualified status" for that fiscal year on the OECD website (which are to be treated as qualified domestic minimum top-up taxes on an interim basis, pending a full peer review of the jurisdiction's law by the Inclusive Framework). Where a jurisdiction's law does not appear on either of these lists at the beginning of a fiscal year, it will nonetheless be considered a qualified domestic minimum top-up tax for that fiscal year if it is subsequently included on one of those lists applicable for that fiscal year.

"qualified flow-through ownership interest"

"Qualified flow-through ownership interest" is defined, for the purposes of the Act, as having the same meaning as in subsection 28(1).

"qualified IIR"

A "qualified IIR" is defined as a law of a jurisdiction (including Canada) that is listed as a "qualified IIR", or a jurisdiction with "transitional qualified status", on the OECD website.

For more information, see the note to the analogous definition "qualified domestic minimum top-up tax".

"qualified imputation tax"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"qualified refundable tax credit"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"qualified UTPR"

A "qualified UTPR" is defined as a law of a jurisdiction (including Canada) that is listed as a "qualified UTPR", or a jurisdiction with "transitional qualified status", on the OECD website.

For more information, see the note to the analogous definition "qualified domestic minimum top-up tax".

"qualifying MNE group"

"Qualifying MNE group" is defined, for the purposes of the Act, as having the same meaning as in subsection 9(1).

"qualifying non-profit subsidiary"

This definition, in combination with subparagraph 13(1)(a)(vii) of the definition "excluded entity", implements paragraphs 54.1 to 54.7 in the Commentary to Article 1.5.2. of the Model Rules (as introduced by Section 1.6 of the February 2023 Administrative Guidance).

"qualifying tier one capital"

This definition implements the definition "Additional Tier One Capital" in Article 10.1. of the Model Rules and paragraph 142 in the Commentary to Article 3.2.10. of the Model Rules (as introduced by Section 3.3 of the February 2023 Administrative Guidance). That paragraph of the Commentary effectively expands the definition in the Model Rules of "Additional Tier One Capital" issued by companies in the banking sector to include "Restricted Tier One Capital" issued by companies in the insurance sector under similar prudential regulation.

Under subsection 18(20), qualifying tier one capital is essentially treated as a debt instrument in computing GloBE income or loss.

"real estate investment vehicle"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"recapture account loss carry-forward"

"Recapture account loss carry-forward" is defined, for the purposes of the Act, as having the same meaning as in subsection 37(3).

"recapture exception accrual"

This definition implements the corresponding definition in Article 4.4.5. of the Model Rules.

"regulation"

"Regulation" is defined as meaning any regulation made under the Act.

"relevant parent entity"

"Relevant parent entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 14(3).

"revenue threshold"

"Revenue threshold" is defined, for the purposes of the Act, as having the same meaning as in subsection 9(2).

"reverse hybrid entity"

This definition implements Article 10.2.1.(b) of the Model Rules.

"revocation year"

This definition is relevant in relation to the revocation of a five-year election or an election under section 26. "Revocation year" means the first fiscal year for which such an election is no longer in effect as a result of a revocation by an MNE group.

"short-term portfolio holding"

This definition implements the definition "Short-term Portfolio Shareholding" in Article 10.1. of the Model Rules. For more information, see the Commentary to Article 3.2.1.(b) of the Model Rules.

"standard constituent entity"

"Standard constituent entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 11(3).

"stapled structure"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"stateless constituent entity"

This definition implements the corresponding definition in Article 10.1. of the Model Rules, which refers to a constituent entity described in Article 10.3.2.(b) or 10.3.3.(d) of the Model Rules.

"substance-based income exclusion amount"

The term "substance-based income exclusion amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 32(1).

"substitute loss carry-forward recapture amount"

This definition, in combination with the definition "substitute loss carry-forward tax credit" and subsections 25(3) and (4), implements paragraphs 82.1 to 82.4 in the Commentary to Article 4.4.1.(e) of the Model Rules (as introduced by Section 2.8 of the February 2023 Administrative Guidance), which pertain to loss-making parent entities of controlled foreign companies.

In general terms, this definition represents domestic tax losses that a constituent entity uses against controlled foreign company income included in that constituent entity's taxable income, to the extent such losses become eligible for recapture in future years by virtue of the recharacterization of domestic income as foreign-source income (and the resulting entitlement to use otherwise unusable foreign tax credits in respect of that recharacterized foreign-source income) under the income tax laws of the jurisdiction where the constituent entity is located.

This definition, in effect, extends the treatment granted to substitute loss carry-forward tax credits under the Act to instances where the constituent entity's location jurisdiction has adopted this alternative recapture mechanism.

For more information, see the note to the definition "substitute loss carry-forward tax credit".

"substitute loss carry-forward tax credit"

This definition, in combination with the definition of "substitute loss carry-forward recapture amount" and subsections 25(3) and (4), implements paragraphs 82.1 to 82.4 in the Commentary to Article 4.4.1.(e) of the Model Rules (as introduced by Section 2.8 of the February 2023 Administrative Guidance), which pertain to loss-making parent entities of controlled foreign companies.

In general terms, a "substitute loss carry-forward tax credit" is a tax credit available to a constituent entity in respect of foreign tax paid by one of its controlled foreign companies in respect of the controlled foreign company's income, where:

• The income is included in the constituent entity's taxable income under an applicable controlled foreign company tax regime in the constituent entity's location jurisdiction;
• The tax credit cannot be used in the year it is generated, solely because the income tax laws of the constituent entity's location jurisdiction require that domestic tax losses be offset against the controlled foreign company income inclusion in priority to the use of the foreign tax credit against the domestic tax that would otherwise be chargeable on that income in the absence of the domestic losses; and
• In such circumstances, the foreign tax credit is permitted, under the tax laws of the constituent entity's location jurisdiction, to be carried forward for use in future years against income included in GloBE income or loss.

Absent the special provisions applicable under the Act in relation to substitute loss carry-forward tax credits, the deferred tax expense associated with such unused foreign tax credits would be excluded from the total deferred tax adjustment amount (and thus from adjusted covered taxes) of the constituent entity by subparagraph 25(2)(a)(iii). This could provide inequitable results under the Act when compared with the treatment applicable in the case of tax regimes which defer the use of the domestic tax loss and instead allow the foreign tax credit to be used in the year it is generated.

The provisions in subsections 25(3) and (4) prevent adverse results by, in effect, allowing the inclusion of deferred tax expense associated with foreign tax credits in the total deferred tax adjustment amount in the circumstances described above, subject to certain limitations (e.g., the future-year income on which the tax is reduced using the tax credit must be included in the GloBE income or loss calculation).

"tax"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"tax transparent entity"

This definition implements Article 10.2.1.(a) of the Model Rules.

"tax transparent structure"

This definition implements Article 10.2.3. of the Model Rules.

"tax treaty"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

"top-up amount"

"Top-up amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 30(1).

"top-up percentage"

"Top-up percentage" is defined, for the purposes of the Act, as having the same meaning as in subsection 30(3).

"total deferred tax adjustment amount"

"Total deferred tax adjustment amount" is defined, for the purposes of the Act, as having the same meaning as in subsection 25(1).

"transitional special allocation year"

This definition implements, in part, paragraphs 58.1 to 58.7 in the Commentary to Article 4.3.2.(c) of the Model Rules (as introduced by Section 2.10 of the February 2023 Administrative Guidance), concerning the special time-limited methodology for the allocation of taxes – incurred under an aggregated or "blended" controlled foreign company tax regime – from one constituent entity to another.

For more information, see the notes to the definition "blended controlled foreign company tax regime" and subsection 24(4).

"ultimate parent entity"

"Ultimate parent entity" is defined, for the purposes of the Act, as having the same meaning as in subsection 12(1).

"unclaimed accrual"

This definition implements the corresponding definition in Article 4.4.7. of the Model Rules.

"unrelated purchaser" 

This definition implements elements of paragraph 112.1(b) in the Commentary to Article 3.2.4. of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

"UTPR"

This definition implements the corresponding definition in Article 10.1. of the Model Rules.

Interpretation – permanent establishment

GMTA
2(2)

This subsection provides interpretive rules relating to permanent establishments and main entities.

Paragraph (a) provides that a reference to "constituent entity" in the Act may be read as a reference to a permanent establishment or to its main entity, depending on the context. This rule is intended to provide flexibility in applying a provision of the Act in relation to a main entity and its permanent establishment, where the provision refers to a "constituent entity" and not specifically to a main entity or permanent establishment. It is intended that, in these cases, the reference to "constituent entity" is to be read as a reference to the main entity or the permanent establishment, depending on which interpretation produces outcomes most consistent with the policy intent of the relevant provision and the policy of this Act and the Model Rules.

Paragraph (b) implements the portion of the definition "Controlling Interest" in Article 10.1. of the Model Rules concerning permanent establishments, by deeming a main entity to hold a controlling interest in its permanent establishment.

Interpretation – flow-through entity

GMTA
2(3)

This subsection provides an interpretive rule relevant in applying any provision of this Act in respect of a constituent entity that is a flow-through entity. It ensures that "constituent entity" may be read as a reference to a flow-through entity or to the flow-through entity's owner, depending on the context.

Similarly to paragraph 2(2)(a) (which applies in relation to a main entity and its permanent establishment), this rule is intended to provide the flexibility required to appropriately apply the provisions of this Act, in light of the policy of this Act and the Model Rules. For example, where an owner of a flow-through entity has been allocated a portion of the flow-through entity's net income or loss under paragraph 17(6)(b) for the purposes of computing the owner's financial accounting income, references in section 18 to amounts recorded or accrued by a "constituent entity" in its financial accounts are generally to be interpreted as including amounts recorded or accrued by the flow-through entity. This interpretation is necessary to ensure that the portion of the owner's GloBE income or loss that reflects net income or loss of the flow-through entity allocated to the owner is adjusted in accordance with the GloBE income or loss computation rules in section 18.

Interpretation – financial accounts

GMTA
2(4)

This subsection provides that a reference to "financial statements" or "financial accounts" is to those accounts or statements that underlie the computation of a constituent entity's financial accounting income (as defined under subsection 17(1)). This includes accounts or statements that may be hypothetical, in whole or in part – for example, in the context of paragraph (c) or (d) of the definition "consolidated financial statements" in subsection 2(1), or paragraph 17(1)(b) in the definition "financial accounting income".

Interpretation – connected

GMTA
2(5)

This subsection provides that persons or entities are "connected" if they are "closely related" within the meaning of that term in Article 5(8) of the OECD Model Tax Convention (as defined in subsection 2(1)). This subsection is relevant in interpreting the references to "connected" in the Act, such as in the definitions "GloBE reorganization", "investment fund" and "qualified debt release amount" in subsection 2(1), and implements portions of the Commentary to such of those definitions as are contained in Article 10.1. of the Model Rules.

Interpretation – trusts

GMTA
2(6)

This subsection provides that a reference to a trust includes an estate, and a reference to a trustee includes any legal representative having ownership or control of the trust property.

Interpretation – subject to qualified IIR, etc.

GMTA
2(7)

This subsection contains an interpretive rule clarifying the intended meaning of the references in the Act to a constituent entity or joint venture entity being "subject to" a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax (referred to in this note as the "qualified law"), as distinct from the meaning of the expression "subject to tax under" a qualified law.

A constituent entity or joint venture entity (referred to in this note as the "particular entity") will be considered "subject to" a qualified law if it is the case that a constituent entity (referred to in this note as the "subject entity") of an MNE group would be subject to tax under the qualified law in respect of any top-up amount of the particular entity that is greater than nil (or, if the qualified law is of a jurisdiction other than Canada, the equivalent to a top-up amount under that qualified law that is greater than nil). While the particular entity itself could be the subject entity (as may often be the case under a qualified domestic minimum top-up tax), this will often not be the case (for example, under a qualified IIR or qualified UTPR); indeed, the particular entity need not be potentially assessable for a tax liability under the qualified law and could even be located in a jurisdiction that has not implemented any qualified law.

By contrast, an entity is considered "subject to tax under" a qualified law if it is potentially assessable for a tax liability under that qualified law. This is a hypothetical test and is met even when there is no actual liability under the qualified law because, for instance, there is no jurisdiction for which the MNE group has an effective tax rate below 15%.

The parenthetical wording "or person liable on behalf of a constituent entity" in paragraph (a), and similar wording in paragraph (b), is directed at situations where a qualified law imposes liability for tax on a person or entity other than a constituent entity of the MNE group. For example, subparagraph 14(1)(b)(ii) of the Act imposes liability for top-up tax on certain persons that hold an interest in a relevant parent entity that is not a person (as defined in subsection 2(1)).

Deemed flow-through entity and tax transparent entity

GMTA
2(8)

This subsection implements Article 10.2.4. of the Model Rules.

Interpretation – election

GMTA
2(9)

This subsection clarifies that all elections, or revocations of elections, are made in the GIR of the MNE group.

Interpretation

GMTA
3(1)

Subsection 3(1) is an interpretive rule, reflecting that the Act is intended to implement a qualified IIR. In order for a jurisdiction's legislation to be recognized by the Inclusive Framework as implementing a qualified IIR, it must be implemented and administered in a way that is consistent with the outcomes provided for under the Model Rules and Commentary (as indicated in the definition "Qualified IIR" in Article 10.1. of the Model Rules). Further, Article 8.3.1. of the Model Rules requires that a jurisdiction's implementing legislation be applied in accordance with all Administrative Guidance published by the Inclusive Framework. Therefore, subsection 3(1) is intended to ensure that the Act is interpreted, applied and administered in a manner consistent with the outcomes provided under the Model Rules, Commentary and Administrative Guidance (referred to in this note, collectively, as the "Pillar Two Rules"), including any future revisions or additions to the Pillar Two Rules (as indicated by the ambulatory reference in subsection 3(1)).

In some cases, the Act may not contain specific provisions implementing a particular aspect of the Pillar Two Rules. This situation could arise because it is determined that no specific provisions are required in order to implement that particular aspect of the Pillar Two Rules, or because Parliament has not yet introduced specific provisions. In these cases, subsection 3(1) is intended to ensure that the Act is applied in accordance with that particular aspect of the Pillar Two Rules, regardless of when it was agreed or published by the Inclusive Framework (e.g., even if it was published after the Act was enacted).

In limited cases, a provision of the Act may differ substantively from the Pillar Two Rules. This could occur where a substantive difference is intended to resolve an ambiguity in the Pillar Two Rules or to produce outcomes that are understood to be better aligned with the policy intent of some aspect of the Pillar Two Rules. These cases are contemplated by the qualification "unless the context otherwise requires", in subsection 3(1). In determining whether a substantive difference is intended, regard should be had to, among other things, whether the difference would produce outcomes that are consistent with the policy intent of the Pillar Two Rules, and whether the Inclusive Framework publication introducing the relevant aspect of the Pillar Two Rules occurred before or after the introduction of the relevant provisions to the Act. If the Inclusive Framework publication occurred after the relevant provisions were introduced to the Act, there is a strong inference that the difference is unintended (and may be rectified through future amendments to the Act).

Where there are inconsistencies between the Model Rules, Commentary and Administrative Guidance, the Act is generally to be interpreted in accordance with the most recent of the relevant publications.

Finally, the reference in subsection 3(1) to "relevant provisions of Part 5" refers to the provisions in Part 5 pertaining to GIR filing obligations and any other provisions that implement aspects of the Pillar Two Rules.

Designation of additional interpretive guidance

GMTA
3(2)

This subsection establishes the Governor in Council's ability to designate, by regulation, additional sources of interpretive guidance for the purposes of the interpretive rule in subsection 3(1).

Binding on His Majesty

GMTA
4

Section 4 provides that the Act is binding on His Majesty in right of Canada or a province, which means that all the requirements of the Act, including requirements under regulations made under the Act, apply to federal, provincial and territorial governments, unless otherwise specified. This requirement is needed for various obligations in Part 5, such as compliance with garnishment orders.

Location of entities

GMTA
5(1)

This subsection implements Article 10.3.1. of the Model Rules.

Location of flow-through entities

GMTA
5(2)

This subsection implements Article 10.3.2. of the Model Rules.

Location of permanent establishments

GMTA
5(3)

This subsection implements Article 10.3.3. of the Model Rules.

Stateless entity – notional jurisdiction

GMTA
5(4)

This subsection implements paragraphs 174 and 175 in the Commentary to Article 10.3. of the Model Rules.

Change of location

GMTA
5(5)

This subsection implements Article 10.3.6. of the Model Rules.

Dual-located entity – tie-breaker rule

GMTA
6(1)

This subsection implements Article 10.3.4. of the Model Rules.

Substance-based income exclusion amount

GMTA
6(2)

This subsection implements the portion of Article 10.3.4.(b)(ii) of the Model Rules that concerns the calculation of the substance-based income exclusion amount for purposes of the dual-located entity tie-breaker rule.

Dual-located entity – deeming rule

GMTA
6(3)

This subsection implements Article 10.3.5. of the Model Rules. It ensures that the tie-breaker rules in subsection 6(1), which apply where a constituent entity would otherwise be located in more than one jurisdiction, do not operate to insulate the entity from top-up tax if one of those jurisdictions imposes a qualified IIR and the tie-breaker rules would otherwise apply to locate the entity in another jurisdiction that does not impose a qualified IIR. In that case, subsection 6(3) deems the entity to be located in the qualified IIR jurisdiction for the purposes of the charging provisions of the Act (though not for other purposes under the Act, such as the computation of top-up amounts), provided the qualified IIR jurisdiction is not restricted under an applicable tax treaty from applying its qualified IIR to the entity.

Because this subsection concerns the imposition – and not the computation – of top-up tax liability, it is only relevant with respect to constituent entities that are relevant parent entities (as defined in subsection 14(3)), notwithstanding that it contains no such limitation.

Currency conversion – GloBE calculations

GMTA
7(1)

Section 7 implements aspects of the Commentary (introduced by Section 1 of the July 2023 Administrative Guidance) pertaining to currency conversion and determines when and how currency conversions are to be undertaken for the purposes of the Act.

Subsection 7(1) provides that, if an amount that is relevant to the determination of a top-up amount is denominated in a currency other than the reporting currency of the consolidated financial statements of the ultimate parent entity, it is to be translated to that reporting currency using the foreign currency translation principles of the financial accounting standard applicable to those consolidated financial statements. This rule applies equally to "any amount or result relevant to the determination of the top-up amount", which is intended to include, among other things, all amounts relevant to the determination of the effective tax rate of an MNE group for a jurisdiction and the substance-based income exclusion amount.

Euro-denominated thresholds

GMTA
7(2)

Several financial materiality or other thresholds used in the Act are denominated in the currency of the European Monetary Union (i.e., euros). For example, the revenue threshold of an MNE group for a fiscal year (defined in subsection 9(2)) – which is relevant for determining if that MNE group is a qualifying MNE group – is determined by reference to a euro-denominated figure (€750 million).

Subsection 7(2) applies in any case in which the amount that must be determined in order to establish whether such a euro-denominated threshold is satisfied or exceeded for a particular fiscal year is denominated in a currency other than euros. In that case, this subsection requires that the amount be converted from that other currency to euros, using the average of the daily rates of exchange in respect of the two currencies for the month of December included in the fiscal year immediately preceding the particular fiscal year. The default source for such rates is to be the European Central Bank (ECB). If the ECB does not quote a daily rate of exchange for the relevant December, such rate is to be sourced from the Bank of Canada. If both of those sources fail to quote a rate, resort is had to a rate acceptable to the Minister of National Revenue.

If subsections (1) and (2) do not apply

GMTA
7(3)

Subsection 7(3) provides the rules for currency denomination and conversion where neither subsection 7(1) nor 7(2) applies. (Note that subsection 68(2) provides a specific rule addressing the conversion of any amount owing under the Act from its denominated currency to Canadian dollars for the purpose of making payments to the Minister. Thus, subsection 7(3) does not apply for that purpose either, as a result of the general limitation in its opening words.)

Paragraph 7(3)(a) states that any determination or computation required to be made for the purposes of the Act in respect of an entity included in an MNE group (or in respect of the MNE group itself) must be made using amounts denominated in the reporting currency of the consolidated financial statements of the ultimate parent entity of that MNE group.

Paragraph 7(3)(b) provides that if any of the amounts used in such a determination or computation are not denominated in the reporting currency described in paragraph (a), those amounts are to be converted to the reporting currency using the average of the daily rates of exchange in respect of the denominated currency and the reporting currency for the fiscal year to which that determination or computation relates. The default source for such rates is the Bank of Canada. If the Bank of Canada does not quote a daily rate of exchange for the two currencies for a particular day, resort is had to a daily rate, for that particular day, that is acceptable to the Minister of National Revenue.

Negative amounts

GMTA
8

This section provides that where algebraic formulas used in the Act yield a negative result, the result is deemed to be nil unless there is specific expression to the contrary.

Definition of qualifying MNE group

GMTA
9(1)

This subsection implements, in part, Article 1.1.1. of the Model Rules.

The phrase "revenue reported" in paragraph 9(1)(a) is intentionally broad and includes any item of a revenue nature (i.e., gross inflow of economic benefits from ordinary activities, before deducting costs of sales and other operating expenses) that is reported on the profit and loss (income) statement of the consolidated financial statements of the MNE group, irrespective of how it is described in those statements. In other words, revenue is not simply a reference to the line item labeled revenue (if there is one), but rather a description of the underlying character of the targeted item(s), however labeled.

Exceptionally, notwithstanding its income (as opposed to revenue) character, any positive amount of realized and/or unrealized net gains from investments is also included (requiring the deduction of investment losses from investment gains, where such amounts are reported separately, to determine if there is a positive net gain amount to be included).

In contexts such as the financial services industry, where no gross amounts from transactions may be recorded in the profit and loss statement, any item(s) considered to be similar to revenue should be included.

For the avoidance of doubt, income or gains reflected in the net asset or equity sections of the balance sheet are not considered to be revenue for this purpose.

For more information, see Section 3.1 of the December 2023 Administrative Guidance.

Paragraph 9(1)(b) provides that an MNE group, all of whose constituent entities are excluded entities (as defined in subsection 13(1)), is not a qualifying MNE group and thus is not subject either to tax under the Act or to the obligation to file a GIR.

Definition of revenue threshold

GMTA
9(2)

This subsection implements, in part, Articles 1.1.1. and 1.1.2. of the Model Rules.

Revenue – pre-merger years

GMTA
9(3)

This subsection implements Article 6.1.1.(a) and (b) of the Model Rules.

Where this subsection applies to an MNE group formed by a merger, the revenues for any pre-merger fiscal year of the various entities or groups that are included in the MNE group – as reflected in their respective group or entity financial statements – are aggregated and treated as the revenue of the MNE group for the pre-merger fiscal year for the purposes of determining if the €750 million revenue threshold in the definition "qualifying MNE group" in subsection (1) or (4) is met. Given that the accounting period used in these pre-merger group or entity financial statements may not be the same as the fiscal year of the MNE group, subsection 9(3) requires that a "just and reasonable" apportionment of revenue be made in respect of financial statements that straddle or only partially overlap pre-merger fiscal years.

To address the problem of subsection 9(3) requiring a determination of the MNE group's revenue for preceding "fiscal years" in cases where the first fiscal year of the MNE group only occurred after the merger (i.e., when the group first came into existence), subsection 9(7) effectively deems the MNE group to have pre-merger fiscal years of equal length to the MNE group's first actual fiscal year (extending backward from the beginning of that first fiscal year), for the sole purpose of applying the "qualifying MNE group" definition in subsections (1) and (4).

The phrase "formed as a result of a merger" in this subsection is not intended to mean that the MNE group necessarily did not exist prior to the merger. Given the wide meaning conferred on the term "merger" in subsection (5), an existing MNE group acquiring a single entity would be considered a merger even though, for all intents and purposes, the MNE group is still the same MNE group.

Qualifying MNE group – demerger

GMTA
9(4)

This subsection implements Article 6.1.1.(c) of the Model Rules.

When there is a demerger of a qualifying MNE group that results in one or more MNE groups (each referred to as a "demerged MNE group"), this subsection effectively replaces the usual condition in paragraph 9(1)(a) for determining if an MNE group is a qualifying MNE group – for the first fiscal year ending after the demerger and the following three fiscal years (each referred to as a "post-demerger year"). Rather than require that a demerged MNE group satisfy the usual condition in paragraph 9(1)(a) – that it meets the €750 million revenue threshold for at least two out of its four preceding fiscal years – under paragraph 9(4)(a), the demerged MNE group is instead deemed to meet the condition in paragraph 9(1)(a) for its first post-demerger year if the demerged MNE group meets the €750 million revenue threshold in that year. For the second, third and fourth post-demerger years, paragraph 9(4)(b) provides a different test, requiring that the €750 million revenue threshold be met for any two out of the tested fiscal year (i.e., the post-demerger year just ended) and any other post-demerger years preceding the tested fiscal year in order for the condition in paragraph 9(1)(a) to be deemed to be met. For fiscal years after the fourth post-demerger year, the usual condition in paragraph 9(1)(a) resumes application.

In situations where a merger and a demerger occur one after the other, subsections 9(3) and (4) may interact. Where there is a merger followed by a demerger, subsection 9(4) applies following the demerger, rendering the backward-looking test in subsection 9(3) irrelevant for post-demerger years. Conversely, where there is a demerger – such that the test in paragraph 9(4)(a) applies for the first post-demerger year, and the test in paragraph 9(4)(b) applies for the second, third and fourth post-demerger years – followed by a merger in any of those post-demerger years, and the ultimate parent entity of the demerged MNE group remains the ultimate parent entity of the merged MNE group, the tests in subsection 9(4) will apply but with subsection 9(3) being applied to determine the MNE group's revenue for relevant pre-merger fiscal years.

Merger – meaning

GMTA
9(5)

This subsection implements Article 6.1.2. of the Model Rules.

Demerger – meaning

GMTA
9(6)

This subsection implements Article 6.1.3. of the Model Rules.

Interpretation – fiscal year

GMTA
9(7)

This subsection clarifies the references, in paragraph 9(1)(a) and subsection 9(3), to fiscal years of an MNE group preceding a merger.

As outlined in the note to subsection 9(3), in the case of certain mergers, the post-merger MNE group did not exist before the merger (e.g., where the pre-merger ultimate parent entity of the group ceases to be the ultimate parent entity as a result of the merger). In other cases, the post-merger MNE group may have existed prior to the merger but may not have four pre-merger fiscal years for other reasons (e.g., where another merger had occurred during that four-year pre-merger period and the MNE group did not exist prior to that other merger). As such, there is a need to clarify what constitutes a "fiscal year" of the post-merger MNE group for the relevant pre-merger period.

To fill this void, subsection 9(7) simply deems the requisite notional, pre-merger fiscal years into existence based on the length and start date of the MNE group's earliest actual fiscal year.

In this subsection, as in the rest of the Act, an MNE group is considered to be the same MNE group notwithstanding a change in the entities that form it, so long as the ultimate parent entity of the group remains unchanged.

Definition of MNE group

GMTA
10(1)

This subsection implements Article 1.2.1. of the Model Rules.

Definition of group

GMTA
10(2)

This subsection implements Articles 1.2.2. and 1.2.3. of the Model Rules.

Definition of constituent entity

GMTA
11(1)

This subsection implements Articles 1.3.1. and 1.3.3. of the Model Rules.

The result of limiting constituent entity status to permanent establishments of main entities described in paragraph 11(1)(a) is that, if a main entity is an excluded entity (and therefore not a constituent entity), notwithstanding that its permanent establishment may not be an excluded entity if considered on its own, the permanent establishment will also not be a constituent entity.

Permanent establishment – separate treatment

GMTA
11(2)

This subsection implements Article 1.3.2. of the Model Rules.

Definition of standard constituent entity

GMTA
11(3)

This subsection implements aspects of various Articles of the Model Rules, including Articles 5.1.3. and 5.3.2., by excluding investment entities, insurance investment entities or minority-owned constituent entities from the scope of certain rules (e.g., the top-up amount provisions in subsection 30(1)). In some cases, special rules specific to those classes of entity apply instead.

Definition of ultimate parent entity

GMTA
12(1)

This subsection implements Article 1.4. of the Model Rules.

Exclusion – sovereign wealth funds

GMTA
12(2)

This subsection implements paragraphs 36.1 to 36.4 in the Commentary to the definition "Ultimate Parent Entity" in Article 1.4.1. of the Model Rules (as introduced by Section 1.4 of the February 2023 Administrative Guidance), which pertain to the exclusion of certain governmental entities (often known as "sovereign wealth funds") from the definition "ultimate parent entity".

Definition of excluded entity

GMTA
13(1)

This subsection implements Articles 1.5.1. and 1.5.2 of the Model Rules, as supplemented by paragraphs 43.1, 53 and 54.1 to 54.4 in the Commentary to Article 1.5.2. of the Model Rules (as introduced by Sections 1.5 and 1.6 of the February 2023 Administrative Guidance).

Excluded entity – constituent entity election

GMTA
13(2)

This subsection implements Article 1.5.3. of the Model Rules.

Part 2 – Global Minimum Tax

Division 1
Liability for Tax

Top-up tax liability

GMTA
14(1)

This subsection implements aspects of the charging provisions for the IIR, in Article 2.1. of the Model Rules. It imposes liability for top-up tax on certain persons in respect of a qualifying MNE group (as defined in subsection 9(1)).

Subparagraph 14(1)(b)(i) applies where a relevant parent entity (as defined in subsection 14(3)) located in Canada is a person (as defined in subsection 2(1)). In that case, liability is imposed on the relevant parent entity.

Subparagraph 14(1)(b)(ii) applies to impose liability for top-up tax on persons other than a relevant parent entity, in cases where a top-up amount is allocated to a relevant parent entity that is located in Canada but is not a person. For example, if the relevant parent entity is a mere contractual arrangement that lacks separate legal personality under Canadian law and a top-up amount is allocated to that entity under subsection 15(1) (as a result of income being allocated to that entity under applicable accounting principles), the persons participating in that arrangement are liable for the top-up tax in respect of that top-up amount. There is no pro rata division of the liability among those persons. Rather, all those persons subject to liability under this subparagraph in respect of a particular relevant parent entity are liable in respect of the whole amount of top-up tax (rendered joint and several, or solidary, by the application of subsection 66(8)), and the liability may be discharged by payment of the top-up tax by any or all of those persons under subsection 66(9).

For the purpose of determining the persons liable for the top-up tax in respect of a particular relevant parent entity under subparagraph 14(1)(b)(ii), the "relevant assumptions" in subsection 14(2) apply. This involves the imputation of hypothetical income to the relevant parent entity of a type that would be included in its income for the purposes of Part I of the Income Tax Act if the relevant parent entity were a person resident in Canada (this imputation based on hypothetical income is necessary since the relevant parent entity may not have income for the year). Further, the relevant assumptions include that the persons holding direct interests in the relevant parent entity are Canadian residents. In some cases, this second assumption could result in liability for top-up tax being imposed under subparagraph 14(1)(b)(ii) on persons that are non-resident.

Subparagraph 14(1)(b)(ii) does not apply in respect of relevant parent entities that are either trusts or partnerships, since the condition in clause 14(1)(b)(ii)(B) stipulates that the relevant parent entity must not be a person, and the definition of "person" in subsection 2(1) includes trusts and partnerships.

Relevant assumptions

GMTA
14(2)

This subsection sets out the "relevant assumptions" for the purposes of subparagraph 14(1)(b)(ii). For more information, see the note to subsection 14(1).

Definition of relevant parent entity

GMTA
14(3)

This subsection implements aspects of Article 2.1. of the Model Rules.

In general terms, this subsection determines which parent entity (or parent entities) of a qualifying MNE group are subject to top-up tax under Part 2 of the Act or a qualified IIR of another jurisdiction (or are allocated top-up amounts in respect of which other persons are subject to top-up tax under subparagraph 14(1)(b)(ii)).

The expression "subject to tax" in this subsection does not mean that the subject entity necessarily has a tax liability, but rather that it is within scope of the tax and thus potentially liable.

Top-up tax payable

GMTA
15(1)

This subsection implements aspects of Articles 2.1. and 2.3. of the Model Rules.

This subsection contains a formula that is used to calculate the amount of tax a person is liable for under subsection 14(1). In general terms, this formula incorporates the mechanism by which the top-up amounts of constituent entities are attributed to the ultimate parent entity of the MNE group and/or certain lower-tier parent entities of that group.

Variable A of the formula aggregates a relevant parent entity's allocable shares of underlying top-up amounts of constituent entities that are not located in Canada and in which it holds an ownership interest (or, if the liable person is not a relevant parent entity, the allocable shares of relevant parent entities in respect of which the person is taxable because of subparagraph 14(1)(b)(ii)). The amount of the top-up tax liability is then determined by subtracting from the variable A amount the amount determined for variable B, which is generally the aggregate of any portions of the allocable shares included in variable A in respect of which any lower-tier relevant parent entities are subject to tax under Part 2 of the Act or a qualified IIR of another jurisdiction.

Definition of allocable share

GMTA
15(2)

This subsection implements Article 2.2.1. of the Model Rules.

Definition of inclusion ratio

GMTA
15(3)

This subsection implements Articles 2.2.2. and 2.2.3. of the Model Rules.

Flow-through and investment entities

GMTA
15(4)

This subsection implements Article 2.2.4. of the Model Rules. It also implements paragraph 86 in the Commentary to Article 7.4.5. of the Model Rules, ensuring that the inclusion ratio of a relevant parent entity (as determined under subsection 15(3)) takes into account the fact that the top-up amount computed for an investment entity or insurance investment entity (under the provisions primarily located in Subdivision G of Division 4 of Part 2 of the Act) has, in effect, already been reduced by the amount that would have been attributable to owners that are not members of the MNE group.

Inclusion ratio – deemed GloBE income

GMTA
15(5)

This subsection implements Articles 5.4.2. and 5.4.3. of the Model Rules.

This subsection is relevant in situations where the net GloBE income of an MNE group for a jurisdiction for a fiscal year is nil such that paragraph 30(1)(b) applies. In that case, if a constituent entity located in the jurisdiction has a top-up amount for the fiscal year, that amount will comprise only an allocated adjustment top-up amount and/or excess negative tax expense top-up amount.

Since the net GloBE income for the jurisdiction being nil creates an implication that the constituent entity has nil GloBE income for the year, and GloBE income is required to determine a relevant parent entity's inclusion ratio for a constituent entity, there is a potential need for GloBE income to be deemed to exist for the purpose of determining the inclusion ratio. Accordingly, this subsection deems a constituent entity to have GloBE income for a fiscal year in these circumstances (and operates regardless of whether the constituent entity actually has GloBE income for the fiscal year).

To determine the amount of deemed GloBE income, the formula in this subsection essentially calculates the amount of GloBE income that the constituent entity would have needed to yield the constituent entity's actual top-up amount, if that top-up amount had been determined by applying the minimum rate (15%) to that GloBE income. This is intended to ensure that the top-up amount is allocated to the applicable relevant parent entities on a reasonable basis.

By implication, subsection 15(5) overrides any actual GloBE income amount that the constituent entity might have, but only for the purpose of determining the inclusion ratio under subsection 15(3).

Division 2
Computation of GloBE Income or Loss

Definition of GloBE income or loss

GMTA
16

Section 16 defines "GloBE income or loss" for the purposes of the Act, implementing Article 3.1.1. of the Model Rules. A constituent entity's GloBE income or loss for a fiscal year is the amount of that entity's financial accounting income, as defined in subsection 17(1), subject to the mandated (or, in some cases, elective) income computation adjustments, most of which are provided for in Division 2.

A provision that refers to an entity's "GloBE income or loss" refers to the amount determined under this section, whether positive or negative. Where that amount is positive, the entity has "GloBE income" for the year, as defined under subsection 2(1). Where that amount is negative (as would be the case where the computation rules yield a loss for the year), the entity has a "GloBE loss" for the year, also as defined under that subsection. However, while a reference to "GloBE income or loss" is to the positive or negative amount determined under this section, a reference to a "GloBE loss" is to the absolute value of the negative amount (i.e., the amount of the loss expressed as a positive number).

Subdivision A
Determination of Financial Accounting Income

Definition of financial accounting income

GMTA
17(1)

Subsection 17(1) defines "financial accounting income" for the purposes of the Act, which generally corresponds to the definition of "Financial Accounting Net Income or Loss" in the Model Rules. This subsection implements Articles 3.1.2., 3.1.3., 3.4.1. and 3.4.3. of the Model Rules.

Throughout the Act, "net income or loss" has the meaning that is elaborated in subsection 17(1). It refers to a constituent entity's accounting income or loss, as reported on the financial statements (including, in some cases, hypothetical financial statements) that are the basis for financial accounting income. As with GloBE income or loss, a constituent entity's financial accounting income for a fiscal year may be a negative amount.

Permanent establishments – adjustment

GMTA
17(2)

Subsection 17(2) implements Article 3.4.2. of the Model Rules.

Permanent establishments – general rule

GMTA
17(3)

Subsection 17(3) implements Article 3.4.4. of the Model Rules. This rule is intended to ensure there is no double counting in the computation of GloBE income or loss between a main entity and its permanent establishment. For example, where a permanent establishment of a main entity does not actually prepare separate financial statements, such that its financial accounting income is determined on the basis of hypothetical financial statements, and the main entity's actual financial statements include the permanent establishment's net income or loss, this rule ensures that the GloBE income or loss of the main entity does not include any portion of the permanent establishment's net income or loss that is included in the permanent establishment's financial accounting income.

No consolidation adjustments

GMTA
17(4)

Subsection 17(4) implements a portion of Article 3.1.2. of the Model Rules, providing that financial accounting income is determined without any consolidation adjustments for intra-group transactions, subject to the election under subsection 18(24).

Profit and loss statement – general rule

GMTA
17(5)

Subsection 17(5) implements paragraph 9 in the Commentary to Article 3.1.2. of the Model Rules, clarifying that unless specifically otherwise provided, amounts included in the "other comprehensive income" section of a constituent entity's financial statements are not included in computing GloBE income or loss.

Financial accounting income – flow-through entity

GMTA
17(6)

Subsection 17(6) implements Article 3.5. of the Model Rules.

In general, a flow-through entity (as defined in subsection 2(1)) is not subject to a covered tax on its income in the jurisdiction where it was created (or any other jurisdiction) on the basis of being tax resident in the jurisdiction. The jurisdiction where its owners are tax resident may, however, subject the owners to income tax on the flow-through entity's income on the basis the income belongs to the owners. Thus, to ensure the flow-through entity's income is allocated to the jurisdiction where it is subject to income tax, special rules are required under the Act to allocate the flow-through entity's net income or loss to its owners in cases where they are subject to income tax on the flow-through entity's income in this manner. Where a flow-through entity is owned through a multi-tiered ownership structure, in most cases, the flow-through entity's net income or loss will be included in the financial accounting income of the lowest-tier owner of the flow-through entity that is not itself a flow-through entity (or that is a flow-through entity that is a reverse hybrid entity or ultimate parent entity) and whose jurisdiction treats the flow-through entity as fiscally transparent.

This subsection sets out rules for allocating the net income or loss of a particular flow-through entity – generally, to its owners – in order to determine the financial accounting income of the particular flow-through entity and other group entities. Before applying these rules, however, if the flow-through entity carries out business through a permanent establishment, its net income or loss is allocated to the permanent establishment according to the rules in paragraph 17(1)(b) (as provided in Article 3.5.1.(a) of the Model Rules).

Under paragraph 17(6)(a), any portion of a particular flow-through entity's net income or loss that is attributable to non-group entities (that hold their ownership interests in the flow-through entity directly, or indirectly through a tax transparent structure) is excluded from the financial accounting income of the particular flow-through entity and all other group entities. However, this exclusion does not apply if the particular flow-through entity is an ultimate parent entity. Further, if the particular flow-through entity is owned (directly or through a tax transparent structure) by an ultimate parent entity that is a flow-through entity, the exclusion does not apply to the extent the particular flow-through entity's net income or loss is attributable to ownership interests in the particular flow-through entity that are held by persons or entities indirectly through that ultimate parent entity. Additional rules are available, in particular under section 20, to accommodate special tax regimes that may apply to flow-through ultimate parent entities.

Paragraph (b) provides the general rule for allocating a particular flow-through entity's net income or loss to other group entities with direct or indirect ownership interests in the particular flow-through entity. This paragraph first clarifies that any allocation to a group entity is made only to the extent of that group entity's ownership interest in the particular flow-through entity. For this purpose, a group entity's ownership interest is determined without reference to any non-group entity's ownership interests in the particular flow-through entity, reflecting the fact that the portion of the particular flow-through entity's net income or loss that is attributable to ownership interests held by non-group entities has already been excluded under paragraph (a). For example, if 20% of the direct ownership interests in a particular flow-through entity were held by a non-group entity and the remaining 80% were equally split between two group entities (assuming each group entity also met the remaining conditions in paragraph (b)), each group entity would be allocated 50% of the net income or loss of the particular flow-through entity that gets allocated under paragraph (b) (which is the net income or loss that remains after the exclusion of the 20% attributable to the non-group entity under paragraph (a)).

Consistent with the policy reflected in paragraph (a), subparagraph (b)(i) provides, in effect, that the net income or loss of a flow-through entity that is an ultimate parent entity is not allocated out but remains with that entity.

Subparagraphs (b)(ii) and (iii), in combination, provide that the net income or loss of a flow-through entity can only be allocated to a group entity that

• is located in a jurisdiction that views the flow-through entity as fiscally transparent (and thus treats its income as that of the group entity), and
• is not itself a flow-through entity (other than a flow-through entity that is an ultimate parent entity or a reverse hybrid entity).

Subparagraph (b)(iv) then determines to which group entity in a chain of ownership the particular flow-through entity's net income or loss is allocated. Under clause (A), if a group entity meets the conditions in subparagraphs (ii) and (iii) and holds a direct ownership interest in the flow-through entity, the net income or loss of the particular flow-through entity is allocated to that group entity.

Clause (b)(iv)(B) determines whether group entities with indirect ownership interests in the particular flow-through entity (and that meet the conditions in subparagraphs (ii) and (iii)) are allocated any of its net income or loss. In general terms, an amount is allocated to such a group entity if

• the jurisdiction where that group entity is located views every entity (referred to as an "intermediate owner") through which the group entity holds its ownership interest in the particular flow-through entity as fiscally transparent (subclause (I)), and
• the condition in subclause (II) or (III) is met:
  • The condition in subclause (II) is the one that must be met where the group entity either is not a flow-through entity or is an ultimate parent entity that is a flow-through entity. In that case, sub-subclauses (II)1 and 2 combine to require that there is no intermediate owner that both is not a flow-through entity and would itself meet the conditions to be allocated the particular flow-through entity's net income or loss. The overall result is to allocate to the lowest-tier owner that meets these conditions.
  • The condition in subclause (III) is the one that must be met where the group entity is a reverse hybrid entity. Essentially, it ensures that, if any of the intermediate owners either is not a flow-through entity or is a reverse hybrid entity, and that intermediate owner meets the other conditions noted above for being allocated net income or loss of the particular flow-through entity, then the group entity will not be allocated that net income or loss (because it will be allocated to an intermediate owner).

Paragraph (c) exists to prevent double counting. This could otherwise occur because subparagraph (iv) can, in some cases, allocate the same portion of a particular flow-through entity's net income or loss to a group entity that is a reverse hybrid entity, and to another group entity that is not a flow-through entity (or that is a flow-through entity that is an ultimate parent entity) and that holds its ownership interest in the particular flow-through entity through the reverse hybrid entity. Where this occurs, paragraph (c) provides that the net income or loss is allocated only to the upper-tier group entity, which is not a flow-through entity (or which is a flow-through entity that is the ultimate parent entity).

Finally, under paragraph (d), any remaining, unallocated net income or loss is included in the flow-through entity's own financial accounting income.

Flow-through entity – ownership interests

GMTA
17(7)

Subsection 17(7) implements paragraph 84 in the Commentary to the definition "Ownership Interest" in Article 10.1. of the Model Rules. It clarifies that, when allocating the net income or loss of a particular flow-through entity to other group entities under subsection 17(6) according to their ownership interests in the particular flow-through entity, in determining the group entities' financial accounting income, only ownership interests that carry rights to profits are considered.

Subdivision B
Adjustments in Computing GloBE Income or Loss

Net tax expense

GMTA
18(1)

Subsection 18(1) implements Article 3.2.1.(a) and the definition "Net Taxes Expense" in Article 10.1. of the Model Rules.

Purchase price accounting adjustments

GMTA
18(2)

Subsection 18(2) implements paragraphs 3 and 4 in the Commentary to Article 3.1.2. of the Model Rules, as they relate to purchase accounting adjustments. Purchase price accounting adjustments, whether reflected in the consolidated financial statements or at the level of the constituent entity's financial accounts, are disregarded in computing financial accounting income, unless the limited exception described in paragraphs (a) and (b) applies.

Excluded dividends

GMTA
18(3)

Subsection 18(3) implements Article 3.2.1.(b) of the Model Rules, including the five-year election not to apply excluded dividend treatment in respect of any dividends on a constituent entity's portfolio holdings (which are, as a result, deemed to be short-term portfolio holdings, on which dividends are included in computing GloBE income or loss). That election is provided for in paragraph 45 in the Commentary to Article 3.2.1.(b) of the Model Rules (as introduced by Section 3.5 of the February 2023 Administrative Guidance).

Excluded equity gains and losses

GMTA
18(4)

Subsection 18(4) implements Article 3.2.1.(c) of the Model Rules.

Insurance reserves

GMTA
18(5)

Subsection 18(5) implements paragraph 36 in the Commentary to Article 3.2.1.(b) and paragraph 54 in the Commentary to Article 3.2.1.(c) of the Model Rules (as revised by Section 3.4 of the February 2023 Administrative Guidance). Where an insurance company is contractually obligated to pay to policyholders earnings from a security held on behalf of the policyholders, to the extent those earnings are treated as excluded dividends or excluded equity gains or losses, this subsection ensures that the liability associated with that obligation is excluded from GloBE income or loss, specifically by excluding an expense in respect of an associated movement in the insurance reserves.

The reference to the security being held "on behalf of a policyholder" refers to the insurance company's contractual obligation to pay earnings from the security to the policyholder and is not intended to refer to a trust relationship.

Hedging currency risk – election

GMTA
18(6)

Subsection 18(6) provides an election to treat qualifying currency hedges as excluded equity gains or losses, as provided for in paragraphs 57.1 to 57.3 in the Commentary to Article 3.2.1.(c) of the Model Rules (as introduced by Section 2.2 of the February 2023 Administrative Guidance).

Excluded equity gain or loss – election

GMTA
18(7)

Subsection 18(7) implements paragraphs 57.1 and 57.2 in the Commentary to Article 3.2.1.(c) of the Model Rules (as introduced by Section 2.9 of the February 2023 Administrative Guidance). Like the election under paragraph 18(3)(b), the election under this subsection allows for the inclusion in GloBE income or loss of amounts that would otherwise be excluded equity gains or losses.

Included revaluation method gain or loss

GMTA
18(8)

Subsection 18(8) implements Article 3.2.1.(d) of the Model Rules.

Asymmetric foreign currency gains and losses

GMTA
18(9)

Subsection 18(9) implements Article 3.2.1.(f) of the Model Rules However, subparagraph (a)(ii) ensures that a foreign exchange gain or loss is not added in computing GloBE income or loss where that amount is already included, even if that initial inclusion is offset by an exclusion under subparagraph (b)(ii).

Policy disallowed expenses

GMTA
18(10)

Subsection 18(10) implements Article 3.2.1.(g) of the Model Rules.

Prior period errors and changes in accounting principles

GMTA
18(11)

Subsection 18(11) implements Article 3.2.1.(h) of the Model Rules.

Pension expense

GMTA
18(12)

Subsection 18(12) implements Article 3.2.1.(i) of the Model Rules and paragraphs 85 to 86.1 in the Commentary to Article 3.2.1.(i) of the Model Rules (as introduced by Section 2.5 of the February 2023 Administrative Guidance).

Arm's length requirement – certain transactions

GMTA
18(13)

Subsection 18(13) implements the portion of Article 3.2.3. of the Model Rules concerning the pricing of transactions between constituent entities of an MNE group located in the same jurisdiction, including paragraphs 108 and 109 of the Commentary to that Article.

Arm's length requirement – accounting and tax

GMTA
18(14)

Subsection 18(14) implements the portion of Article 3.2.3. of the Model Rules concerning the pricing of cross-border transactions between constituent entities of an MNE group. Paragraph (a) ensures that a transfer pricing adjustment is reflected in the computation of GloBE income or loss of all relevant parties where the adjustment is the same for all parties (e.g., because of an advance pricing agreement or a mutual agreement procedure), in accordance with paragraph 99 in the Commentary to Article 3.2.3. Paragraph (b) implements paragraphs 100 to 103 of the Commentary to Article 3.2.3., concerning unilateral transfer pricing adjustments. The general principle is to reflect the unilateral transfer pricing adjustment in the computation of the GloBE income or loss of all parties, unless doing so would give rise to double taxation or double non-taxation.

Qualified refundable tax credits

GMTA
18(15)

Subsection 18(15) implements the portion of Article 3.2.4. of the Model Rules that concerns qualified refundable tax credits and paragraph 111 in the Commentary to Article. 3.2.4. of the Model Rules (as revised by Section 2 of the July 2023 Administrative Guidance).

Where the credit is already recorded as income or loss in the financial accounts in the manner required under subsections 18(15) and (16), there is no need to include any additional amount as income or loss in computing GloBE income or loss. However, where the financial accounting treatment does not match the treatment required under these provisions, adjustments must be made in computing GloBE income or loss to conform to the required treatment.

Marketable transferable tax credits

GMTA
18(16)

Subsection 18(16) implements the aspects of paragraphs 112.1 to 112.6 in the Commentary to Article 3.2.4. of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance) that concern marketable transferable tax credits.

Other tax credits

GMTA
18(17)

Subsection 18(17) implements the portion of Article 3.2.4. of the Model Rules that concerns non-qualified refundable tax credits and the aspects of paragraph 113 in the Commentary to Article. 3.2.4. of the Model Rules (as revised by Section 2 of the July 2023 Administrative Guidance) that concern tax credits other than qualified refundable tax credits and marketable transferable tax credits.

Where such a tax credit is recorded as income in the financial accounts, an adjustment must be made to subtract the amount of income so recorded in computing GloBE income or loss under subsection 18(17), reflecting that the credit is instead treated as a reduction to adjusted covered taxes.

Anti-avoidance – intra-group financing arrangements

GMTA
18(18)

Subsection 18(18) implements Article 3.2.7. of the Model Rules.

Insurance companies

GMTA
18(19)

Subsection 18(19) implements Article 3.2.9. of the Model Rules.

Qualifying tier one capital

GMTA
18(20)

Subsection 18(20) implements Article 3.2.10. of the Model Rules, including paragraph 142 in the Commentary to Article 3.2.10. of the Model Rules (as introduced by Section 3.3 of the February 2023 Administrative Guidance). This subsection treats decreases or increases to the equity of banks and insurers that are attributable to distributions paid (or payable) or received (or receivable), respectively, in respect of qualifying tier one capital as expenses or income, respectively.

Stock-based compensation expense – election

GMTA
18(21)

Subsection 18(21) implements Article 3.2.2. of the Model Rules, which essentially allows constituent entities located in a jurisdiction to compute their stock-based compensation expenses, for the purposes of their GloBE income or loss computation, using the domestic tax rules of that jurisdiction rather than the accounting treatment, where the MNE group so elects.

Fair value and impairment accounting – election

GMTA
18(22)

Subsection 18(22) implements Article 3.2.5. of the Model Rules, providing an election to determine gains and losses using the realization principle, rather than fair value and impairment accounting. The election applies on a jurisdictional basis, and the MNE group is permitted to elect for subsection 18(22) to apply only in respect of investment entities and/or tangible assets.

Aggregate asset gain – election

GMTA
18(23)

Subsection 18(23) implements Article 3.2.6. of the Model Rules, allowing an MNE group to elect for its constituent entities located in a jurisdiction to spread certain gains over a five-year "look-back period" (as defined in subsection 2(1)) that comprises the election year and the previous four fiscal years, subject to the allocation rules in paragraphs (d) and (e).

Under paragraph (d), the gain is first allocated to any loss years (as defined in subsection 2(1)) in the look-back period, starting with the earliest loss year. Under paragraph (e), any remainder is allocated pro rata to each year in the look-back period. Within each year, the amount is allocated among constituent entities on the basis of their proportionate share of any net asset gains (as defined in subsection 2(1)) for the jurisdiction or, if no entity has a net asset gain for the year, proportionately among the entities in the jurisdiction.

Paragraph (c), which adjusts GloBE income or loss to give effect to the allocations under paragraphs (d) and (e), is an ETR adjustment provision, as defined in subsection 2(1).

Tax consolidated group – election

GMTA
18(24)

Subsection 18(24) implements Article 3.2.8. of the Model Rules, allowing an MNE group to elect to apply consolidated accounting treatment for standard constituent entities located in a jurisdiction if the entities are members of a tax consolidated group.

Qualified debt release – election

GMTA
18(25)

Subsection 18(25) implements paragraphs 86.1 to 86.7 in the Commentary to Article 3.2.1. of the Model Rules (as introduced by Section 2.4 of the February 2023 Administrative Guidance), permitting an election to exclude a constituent entity's qualified debt release amounts from GloBE income or loss. This exclusion respects the various tax and corporate domestic laws of jurisdictions that seek to assist the recovery of financially distressed entities.

The amount of a debt release that is excluded in computing GloBE income or loss is limited to the portion that meets the conditions in any of paragraphs (a) to (c) of the definition "qualified debt release amount".

Where the debt release is one to which paragraph (c) applies (i.e., it does not arise because of a statutory proceeding or other independently verified process, and the condition in subparagraph (c)(ii) is met), the excluded amount is limited to the least of the amounts described in clauses (c)(iii)(A) to (C), as applicable. Where clause (c)(iii)(A) applies, the excluded amount in respect of the debt release cannot exceed the amount by which the debtor's liabilities exceeded its assets, immediately before the debt release. Where clause (c)(iii)(B) applies, it essentially limits the excluded amount to the amount of the reduction in tax attributes (reflected as a reduction to deferred tax assets) that arises because of the debt release. Finally, clause (c)(iii)(C) ensures that the excluded amount cannot exceed the amount actually included in the entity's net income or loss in its financial accounts as a result of the debt release.

Permanent establishments – losses

GMTA
18(26)

Subsection 18(26) implements Article 3.4.5. of the Model Rules, which allows the GloBE loss of a permanent establishment to be taken into account in computing the GloBE income or loss of the main entity in cases where the loss is permitted to be taken into account in computing the main entity's income for its local tax purposes. The loss is then recaptured in subsequent years in which the permanent establishment is profitable, by including the amount that would otherwise be the permanent establishment's GloBE income in those years in computing the GloBE income or loss of the main entity, rather than that of the permanent establishment, up to the amount that was initially treated as an expense of the main entity.

Subdivision C
International Shipping Net Income or Loss Exclusion

Exclusion of international shipping net income or loss

GMTA
19(1)

Subsection 19(1) implements Article 3.3.1. of the Model Rules, providing that a constituent entity's net income or loss from international shipping for a fiscal year is excluded in computing its GloBE income or loss for the fiscal year.

Definition of net income or loss from international shipping

GMTA
19(2)

Subsection 19(2) defines "net income or loss from international shipping" for the purposes of the Act, implementing a portion of Article 3.3.1. of the Model Rules. A constituent entity's net income or loss from international shipping for a fiscal year is comprised of its core international shipping income and qualified ancillary international shipping income for the fiscal year.

Definition of core international shipping income

GMTA
19(3)

Subsection 19(3) defines "core international shipping income" for the purposes of the Act, implementing a portion of Articles 3.3.2. and 3.3.5. of the Model Rules. A constituent entity's core international shipping income for a fiscal year is its core international shipping revenue minus its core international shipping costs for the fiscal year.

Definition of core international shipping revenue

GMTA
19(4)

Subsection 19(4) defines "core international shipping revenue" for the purposes of the Act, implementing a portion of Article 3.3.2. of the Model Rules. A constituent entity's core international shipping revenue for a fiscal year is the revenue for the fiscal year obtained in consideration for the entity's performance of core international shipping activities.

Definition of core international shipping costs

GMTA
19(5)

Subsection 19(5) defines "core international shipping costs" for the purposes of the Act, implementing a portion of Article 3.3.5. of the Model Rules. A constituent entity's core international shipping costs are determined as the total of the costs that are directly attributable to the entity's performance of core international shipping activities and the proportion, determined as C ÷ D in the formula in this subsection, of the costs that are indirectly attributable to the entity's performance of core international shipping activities.

Definition of core international shipping activity

GMTA
19(6)

Subsection 19(6) defines "core international shipping activity" for the purposes of the Act, implementing a portion of Articles 3.3.2. and 3.3.6. of the Model Rules. Paragraph (a) implements the requirement that the strategic or commercial management of the performance of the core international shipping activity by the constituent entity must be effectively carried on within the jurisdiction in which the constituent entity is located. Paragraph (b) lists the various types of activity that comprise core international shipping activity.

Definition of qualified ancillary international shipping income

GMTA
19(7)

Subsection 19(7) defines "qualified ancillary international shipping income" for the purposes of the Act, implementing Article 3.3.4. of the Model Rules. A constituent entity's qualified ancillary international shipping income is equal to its ancillary international shipping income if the total ancillary international shipping income of all group entities located in the jurisdiction for the fiscal year is less than or equal to 50% of the total core international shipping income of all group entities located in the jurisdiction for the fiscal year.

If the total ancillary international shipping income of all group entities located in the jurisdiction for the fiscal year is more than 50% of the total core international shipping income of all group entities located in the jurisdiction for the fiscal year, a constituent entity's qualified ancillary international shipping income is determined as a proportion of 50% of the amount of the total core international shipping income of all group entities located in the jurisdiction for the fiscal year. The relevant proportion, for these purposes, is the proportion that the constituent entity's ancillary international shipping income for the fiscal year is of the total ancillary international shipping income of all group entities located in the jurisdiction for the fiscal year.

Definition of ancillary international shipping income

GMTA
19(8)

Subsection 19(8) defines "ancillary international shipping income" for the purposes of the Act, implementing a portion of Articles 3.3.3. and 3.3.5. of the Model Rules. A constituent entity's ancillary international shipping income for a fiscal year is its ancillary international shipping revenue minus its ancillary international shipping costs for the fiscal year.

Definition of ancillary international shipping revenue

GMTA
19(9)

Subsection 19(9) defines "ancillary international shipping revenue" for the purposes of the Act, implementing a portion of Article 3.3.3. of the Model Rules. A constituent entity's ancillary international shipping revenue for a fiscal year is the revenue for the fiscal year obtained in consideration for the entity's performance of ancillary international shipping activities.

Definition of ancillary international shipping costs

GMTA
19(10)

Subsection 19(10) defines "ancillary international shipping costs" for the purposes of the Act, implementing a portion of Article 3.3.5. of the Model Rules. A constituent entity's ancillary international shipping costs are equal to its total costs that are directly attributable to its performance of ancillary international shipping activities, plus a proportion of its costs that are indirectly attributable to its performance of ancillary international shipping activities. The relevant proportion, for these purposes, is the proportion that the constituent entity's ancillary international shipping revenue for the fiscal year is of its total revenue for the fiscal year from all sources.

Definition of ancillary international shipping activity

GMTA
19(11)

Subsection 19(11) defines "ancillary international shipping activity" for the purposes of the Act, implementing a portion of Articles 3.3.3. and 3.3.6. of the Model Rules. Paragraph (a) implements the requirement that the strategic or commercial management of the performance of the ancillary international shipping activity by the constituent entity must be effectively carried on within the jurisdiction in which the constituent entity is located. Paragraph (b) requires that the activity is performed primarily in connection with international shipping. Paragraph (c) lists the various types of activity that comprise ancillary international shipping activity.

Subdivision D
Ultimate Parent Entities Subject to Tax Transparency or Deductible Dividend Regimes

GloBE income – flow-through ultimate parent entity

GMTA
20(1)

Subsection 20(1) implements Article 7.1.1. of the Model Rules.

This subsection applies only where an ultimate parent entity that is a flow-through entity has GloBE income (i.e., the amount of its GloBE income or loss, in the absence of this subsection, would be positive).

Any reduction to an ultimate parent entity's GloBE income under this subsection results in a proportional reduction to the entity's adjusted covered taxes, as clarified under paragraph 22(4)(a).

Resident – interpretation

GMTA
20(2)

Subsection 20(2) implements paragraph 20 in the Commentary to Article 7.1.1. and paragraph 44 in the Commentary to Article 7.2.1. of the Model Rules. This subsection provides a special interpretive rule for determining when an entity is resident in a jurisdiction for the purposes of subparagraphs 20(1)(c)(i) and 21(1)(c)(i).

GloBE loss – flow-through ultimate parent entity

GMTA
20(3)

Subsection 20(3) implements Article 7.1.2. of the Model Rules, which provides a corollary to subsection 20(1) for a GloBE loss of a flow-through entity that is an ultimate parent entity. The entity's GloBE loss is reduced to the extent any of the entity's owners is allowed to use the owner's share of the loss in computing the owner's income for tax purposes.

Permanent establishment – flow-through ultimate parent entity

GMTA
20(4)

Subsection 20(4) implements Article 7.1.4. of the Model Rules, extending subsections 20(1) to (3) to a permanent establishment through which the business of an ultimate parent entity that is a flow-through entity, or certain flow-through entities in which that ultimate parent entity holds an ownership interest, is carried on.

GloBE income – deductible dividend regime

GMTA
21(1)

Subsection 21(1) implements Article 7.2.1. of the Model Rules. Under this subsection, where an ultimate parent entity is subject to a deductible dividend regime (as defined in subsection 2(1)) and distributes a deductible dividend (as defined in subsection 2(1)) within 12 months of the end of a fiscal year, the amount of that deductible dividend is excluded from the ultimate parent entity's GloBE income for the fiscal year (except to the extent its exclusion would result in a GloBE loss) if the dividend recipients meet the conditions in any of paragraphs (a) to (c).

This rule applies only to GloBE income of the ultimate parent entity; if that entity instead has a GloBE loss, that GloBE loss is fully taken into account in determining the net GloBE income for the jurisdiction where the entity is located.

The interpretive rule in subsection 20(2), regarding the meaning of "tax resident", applies for the purposes of paragraph 21(1)(c).

Any reduction to an ultimate parent entity's GloBE income under this subsection results in a proportional reduction to the entity's adjusted covered taxes, as clarified by paragraph 22(4)(b).

Exclusion for covered taxes

GMTA
21(2)

Subsection 21(2) implements Article 7.2.2. of the Model Rules, reducing an ultimate parent entity's GloBE income by the amount that is excluded from its covered taxes under paragraph 22(4)(b) consequent on the application of subsection 21(1). This ensures that the add-back to GloBE income or loss for the entity's covered taxes under subsection 18(1) does not overstate the entity's GloBE income.

Back-to-back deductible dividends

GMTA
21(3)

Subsection 21(3) implements Article 7.2.3. of the Model Rules, extending the deductible dividend treatment applicable under subsections 21(1) and (2) to certain other group entities that are located in the same jurisdiction as the ultimate parent entity and distribute deductible dividends, directly or indirectly, to the ultimate parent entity. Among other conditions for this treatment, the ultimate parent entity must in turn distribute the funds it received from the deductible dividend payment by the other group entity within 12 months of the end of the fiscal year, and the ultimate parent entity's distribution must meet any of the conditions in paragraphs 21(1)(a) to (c).

Deeming rule – patronage dividends

GMTA
21(4)

Subsection 21(4) implements Article 7.2.4. of the Model Rules, clarifying the meaning of "subject to tax" in relation to a patronage dividend from a supply cooperative.

Division 3
Computation of Adjusted Covered Taxes

Subdivision A
Adjusted Covered Taxes

Definition of adjusted covered taxes

GMTA
22(1)

Subsection 22(1) defines "adjusted covered taxes" for the purposes of the Act, implementing Article 4.1.1. of the Model Rules.

The starting point in determining a constituent entity's adjusted covered taxes is the current tax expense (which may be a negative amount) accrued in the constituent entity's financial accounts, to the extent that the current tax expense is in respect of "covered taxes" (as defined in subsection 23(1)). This amount is then subject to several adjustments that may either increase or decrease the constituent entity's adjusted covered taxes, depending on whether an adjustment is a positive or negative amount. In all cases, where the adjustment is a positive amount, the constituent entity's adjusted covered taxes increases, and where it is a negative amount, adjusted covered taxes decreases.

Paragraph (a) adds the net amount equal to the total additions to covered taxes under subsection 22(2) less the total reductions to covered taxes under subsection 22(3). If the additions to covered taxes exceed the deductions to covered taxes, the amount determined for paragraph (a) is a positive amount. In the opposite case, the amount determined for paragraph (a) is a negative amount.

Paragraph (b) adjusts for the constituent entity's total deferred tax adjustment amount, as determined under subsection 25(1). This is essentially the net movement in the constituent entity's deferred tax expense for a fiscal year. This adjustment is intended to address temporary book-tax differences. The adjustment does not apply if an election under section 26 is in effect to have a GloBE loss deferred tax asset in respect of the jurisdiction in which the constituent entity is located.

Paragraph (c) adjusts for certain amounts in respect of covered taxes that are recorded in the constituent entity's equity or other comprehensive income.

Adjusted covered taxes – additions

GMTA
22(2)

Subsection 22(2) provides for additions in computing a constituent entity's adjusted covered taxes under paragraph 22(1)(a), implementing Article 4.1.2. of the Model Rules.

The addition for an amount in respect of a qualified refundable tax credit or marketable transferable tax credit is intended to neutralize the effect of these tax credits on adjusted covered taxes. The extension to marketable transferable tax credits implements paragraph 5 in the Commentary to Article 4.1.2.(d) of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

Adjusted covered taxes – reductions

GMTA
22(3)

Subsection 22(3) sets out the reductions in computing a constituent entity's adjusted covered taxes, for the purposes of paragraph 22(1)(a). This implements Article 4.1.3. of the Model Rules.

Paragraph (a) ensures adjusted covered taxes reflects only covered taxes that relate to the constituent entity's GloBE income or loss.

Paragraph (b) reduces adjusted covered taxes for certain tax credits that reduce a constituent entity's liability for covered tax. Subparagraph (ii) targets credits that are not recorded as a reduction to current tax expense in the financial accounts. Subparagraph (i), in conjunction with paragraph (c), implements the adjustments required in respect of non-marketable transferable tax credits, as outlined in paragraph 14.3 in the Commentary to Article 4.1.3.(c) of the Model Rules (as introduced by Section 2 of the July 2023 Administrative Guidance).

Under paragraph (d), a constituent entity's adjusted covered taxes will generally be reduced for amounts credited or refunded in respect of covered taxes, except to the extent the amount is already treated as an adjustment to its current tax expense accrued in its financial accounts. The parenthetical clarifies that this subsection does not apply to amounts credits or refunded in respect of a qualified refundable tax credit, a marketable transferable tax credit or a tax credit the tax benefit of which is a flow-through tax benefit.

Paragraph (e) ensures that a constituent entity's adjusted covered taxes does not include any current tax expense relating to an uncertain tax position. Paragraph 22(2)(c) ensures that such covered taxes are included in adjusted covered taxes in the fiscal year when they are actually paid.

Paragraph (f) provides that any amount of current tax expense in respect of tax that is not expected to be paid within three years is not included in the constituent entity's adjusted covered taxes.

Adjusted covered taxes – special regimes

GMTA
22(4)

Subsection 22(4) implements Articles 7.1.3. and 7.2.2. of the Model Rules, providing for an exclusion from adjusted covered taxes for covered taxes relating to amounts excluded from GloBE income because of subsection 20(1) or 21(1). This is consistent with the general rule in paragraph 22(3)(a), which provides that adjusted covered taxes are to be reduced for covered taxes that relate to amounts excluded in computing GloBE income or loss and, as such, can be viewed as being for greater certainty.

Adjusted covered taxes – no double counting

GMTA
22(5)

Subsection 22(5) is a rule against double counting, implementing Article 4.1.4. of the Model Rules. It clarifies that an amount in respect of covered taxes can only be included in the adjusted covered taxes of one constituent entity and can only be included once.

Definition of covered taxes

GMTA
23(1)

Subsection 23(1) defines "covered taxes", implementing Article 4.2.1. of the Model Rules. A constituent entity's adjusted covered taxes is comprised of its current tax expense (subject to various adjustments) but only to the extent its current tax expense reflects covered taxes.

Definition of excluded taxes

GMTA
23(2)

Subsection 23(2) defines "excluded taxes", implementing Article 4.2.2. of the Model Rules. Excluded taxes do not form part of a constituent entity's adjusted covered taxes.

Subdivision B
Allocation of Covered Taxes

Allocation of covered taxes of a permanent establishment

GMTA
24(1)

Subsection 24(1) implements Article 4.3.2.(a) of the Model Rules, providing for covered taxes accrued in a main entity's financial accounts to be allocated to a permanent establishment of the main entity that is a separate constituent entity of the same MNE group, to the extent those covered taxes are in respect of the permanent establishment's GloBE income or loss for the fiscal year.

Permanent establishment loss

GMTA
24(2)

Subsection 24(2) applies where subsection 18(26) has applied to allocate a permanent establishment's loss to a main entity.

Paragraph 24(2)(a) implements paragraph 66 in the Commentary to Article 4.3.4. of the Model Rules. Where a deferred tax asset is attributable to a tax loss arising in the jurisdiction in which a permanent establishment is located, and the loss is treated as an expense of the main entity under paragraph 18(26)(a), paragraph 24(2)(a) requires both the reduction to deferred tax expense resulting from the arising, and the increase to deferred tax expense resulting from the reversal, of the deferred tax asset to be ignored.

Paragraph 24(2)(b) implements Article 4.3.4. of the Model Rules. Where an amount of a permanent establishment's income is included in a main entity's GloBE income or loss under paragraph 18(26)(b), paragraph 24(2)(b) includes in the main entity's adjusted covered taxes certain amounts in respect of covered taxes of the permanent establishment jurisdiction that are applicable to that income.

Allocation – tax transparent entities

GMTA
24(3)

Subsection 24(3) implements Article 4.3.2.(b) of the Model Rules, allocating covered taxes of a tax transparent entity to a constituent entity-owner of the tax transparent entity, where that owner's financial accounting income includes a portion of the tax transparent entity's net income or loss because of the allocation rules in paragraphs 17(6)(b) and (c).

Allocation – controlled foreign companies

GMTA
24(4)

Subsection 24(4) implements Articles 4.3.2.(c) and 4.3.3 of the Model Rules. This subsection allocates certain covered taxes to a controlled foreign company where they are payable by a constituent entity-owner of the controlled foreign company under a controlled foreign company tax regime, subject to the rules and limitations set out under this subsection. The terms "constituent-entity owner" and "controlled foreign company tax regime" are defined in subsection 2(1). The term "controlled foreign company" is defined in subsection 24(4).

Paragraph (a) provides the general rule for allocating covered taxes arising under a controlled foreign company tax regime.

Paragraph (b), together with the definitions "blended controlled foreign company tax regime" and "transitional special allocation year" in subsection 2(1), implements paragraphs 58.1 to 58.7 in the Commentary to Article 4.3.2.(c) of the Model Rules (as introduced by Section 2.10 of the February 2023 Administrative Guidance), concerning the special time-limited methodology for allocating taxes – incurred under an aggregated or "blended" controlled foreign company tax regime – from a constituent-entity owner to a controlled foreign company.

Certain details of this special allocation methodology were further clarified in Section 4 of the December 2023 Administrative Guidance.

For more information, see the note to the definition "blended controlled foreign company tax regime" in subsection 2(1).

Paragraph (c) implements Article 4.3.3. of the Model Rules, as it applies to allocations of covered taxes under a controlled foreign company tax regime. This paragraph limits (by reference to the 15% minimum rate) the amount of covered taxes allocated to a controlled foreign company under paragraph (a), where the covered taxes relate to passive income (as defined in subsection 2(1)) of the controlled foreign company that is attributed to the constituent entity-owner under the controlled foreign company tax regime. This limitation is intended to address the integrity risks posed by cross-border allocations of covered taxes in respect of passive income, which tends to be highly mobile.

Allocation – hybrid entities

GMTA
24(5)

Subsection 24(5) implements Articles 4.3.2.(d) and 4.3.3 of the Model Rules. This subsection allocates certain covered taxes of a constituent entity-owner of a hybrid entity to the hybrid entity, where that owner's financial accounting income includes amounts in respect of the hybrid entity's income.

Paragraph (b) implements Article 4.3.3. of the Model Rules, as it applies to allocations of covered taxes in respect of passive income to hybrid entities. This paragraph imposes a limitation similar to the one applicable under paragraph 24(4)(c) in relation to allocations of covered taxes in respect of passive income to controlled foreign companies.

Allocation – distributions

GMTA
24(6)

Subsection 24(6) implements Article 4.3.2.(e) of the Model Rules. This subsection allocates covered taxes on dividends or other distributions – that are distributed (or deemed to be distributed) by a constituent entity to one of its constituent entity-owners – from the constituent entity-owner to the distributing constituent entity. The tax accrued by the constituent entity-owner in its financial accounts in respect of a distribution in the fiscal year is allocated to the distributing constituent entity in computing the latter's adjusted covered taxes for that same fiscal year.

The covered taxes accrued by the constituent-entity owner are allocated to the distributing constituent entity in which the owner holds a direct ownership interest. This means that, for example, if a Canadian corporation ("Canco") holds a direct ownership interest in a foreign affiliate ("FA 1") that holds a direct ownership interest in another foreign affiliate ("FA 2"), and FA 2 pays a dividend to FA 1 that FA 1 in turn distributes up to Canco, any tax payable by Canco under the Income Tax Act in respect of its receipt of the dividend is allocated to FA 1, and not to FA 2.

Subdivision C
Total Deferred Tax Adjustment Amount

Definition of total deferred tax adjustment amount

GMTA
25(1)

Subsection 25(1) defines "total deferred tax adjustment amount", implementing portions of Articles 4.4.1. and 4.4.2. of the Model Rules, which accommodate certain temporary book-tax differences through the use of deferred tax accounting principles, which generally treat tax expense as arising in the same fiscal year as the accounting profits to which it relates.

The total deferred tax adjustment amount is generally included under paragraph 22(1)(b) in determining a constituent entity's adjusted covered taxes. The effect of this inclusion depends on whether the total deferred tax adjustment amount is a positive or negative number. If it is a positive number, the addition will increase the constituent entity's adjusted covered taxes. If the amount is a negative number, the addition will reduce adjusted covered taxes.

Under variable A, the starting point for the total deferred tax adjustment amount is the constituent entity's deferred tax expense in respect of covered taxes, as recorded in its financial accounts. However, if the tax rate used to determine this amount exceeds the minimum rate, the deferred tax expense must be recast at the minimum rate. Further, subsection 25(2) provides for certain exclusions in determining the amount for A.

Variable B implements Articles 4.4.2.(a) and (b) of the Model Rules, by adding to the total deferred tax adjustment amount the amount described under paragraphs (a) and (b) of that variable. The inclusion under paragraph (a) for amounts paid in the fiscal year in respect of unclaimed accruals ensures that, in the fiscal year when the deferred tax liability in respect of an unclaimed accrual reverses (i.e., when an amount of tax is "paid" in respect of the unclaimed accrual), the amount of the reversal (i.e., the amount "paid") is added in computing the total deferred tax adjustment amount. This is necessary because the tax expense in respect of the unclaimed accrual was excluded under subparagraph 25(2)(a)(ii) in the fiscal year when the deferred tax liability was generated.

In contrast with Article 4.4.2.(a) of the Model Rules, however, paragraph (a) of variable B does not add, in computing the total deferred tax adjustment amount, an amount paid in respect of a disallowed accrual. This is because doing so would result in double counting, since the movement in deferred tax expense occurring when the deferred tax liability reverses (e.g., when the tax in respect of an uncertain tax position is paid) is disregarded under subparagraph 25(2)(a)(ii), which implements Article 4.4.1.(b). This approach is supported by paragraph 83 of the Commentary to Article 4.4.2.

Paragraph (b) of variable B adds the amount of any recaptured deferred tax liabilities for a previous fiscal year that reverse (i.e., are "paid") in the current fiscal year.

Variable C implements Articles 4.4.2.(c) and 4.4.3 of the Model Rules, by reducing the total deferred tax adjustment amount by the amounts described in paragraphs (a) and (b) of variable C. Paragraph (a) ensures that certain loss deferred tax assets that are not in fact generated for accounting purposes (generally, because the associated tax loss is not predicted to be usable) are taken into account and result in a reduction in computing the total deferred tax adjustment amount. Paragraph (b) provides a reduction in respect of a loss deferred tax asset (reflected in a GloBE loss) that has been recast at the minimum rate under subsection 25(5) (to the extent that it is not already reflected in the constituent entity's deferred tax expense).

The references in subsection 25(1) (and the rest of section 25) to a constituent entity's "deferred tax expense" are not intended to be narrowly construed to mean the item labeled as such in the relevant income statement. For example, they include deferred tax expenses that a regulated utility may be required under regulatory accounting to recognize as regulatory assets or liabilities on its balance sheet rather than record on its income statement (e.g., a deferred tax liability offset to the balance sheet as a regulatory asset).

Total deferred tax adjustment amount – exclusions

GMTA
25(2)

This subsection implements Articles 4.4.1.(a) to (e) of the Model Rules, by providing exclusions from a constituent entity's deferred tax expense for the purpose of computing its total deferred tax adjustment amount.

Foreign tax credits – substitute loss carry-forward

GMTA
25(3)

Subsection 25(3) provides an exception from the general exclusion under subparagraph 25(2)(a)(iii) for deferred tax expense in respect of the generation or use of a tax credit.

For more information, see the notes to the definitions "substitute loss carry-forward recapture amount" and "substitute loss carry-forward tax credit" in subsection 2(1).

Substitute loss carry-forward recapture amount

GMTA
25(4)

Subsection 25(4) deems a deferred tax asset to arise and reverse for the purposes of the Act in certain circumstances in respect of a substitute loss carry-forward recapture amount.

For more information, see the notes to the definitions "substitute loss carry-forward recapture amount" and "substitute loss carry-forward tax credit" in subsection 2(1).

Deferred tax asset below minimum rate

GMTA
25(5)

This subsection implements Article 4.4.3. of the Model Rules. It provides that a deferred tax asset calculated based on a tax rate lower than the 15% minimum rate is to be recalculated using the minimum rate if the deferred tax asset is attributable to a GloBE loss of the constituent entity for the fiscal year.

Recaptured deferred tax liability

GMTA
25(6)

This subsection implements Article 4.4.4. of the Model Rules, recapturing a deferred tax liability (other than a recapture exception accrual) to the extent it was included in a constituent entity's total deferred tax adjustment amount for a fiscal year (referred to as the "adjustment fiscal year") and is not paid (i.e., does not reverse) within five years after the adjustment fiscal year. This subsection is an ETR adjustment provision, such that where an amount is recaptured, the jurisdictional top-up amount for the adjustment fiscal year must be recalculated under subsection 31(1) and additional top-up tax, as an "adjustment top-up amount", may be payable.

Subdivision D
GloBE Loss Election

GloBE loss deferred tax asset

GMTA
26

Section 26 implements Article 4.5. of the Model Rules.

The requirement in Article 4.5.5. of the Model Rules (which reads: "The GloBE Loss Election must be filed with the first GloBE Information Return of the MNE Group that includes the jurisdiction for which the election is made") is clarified in the portion of Section 4 of the July 2023 Administrative Guidance entitled "Transition Years", which provides that a new election must be made in each "Transition Year" of the MNE group in respect of a jurisdiction, or else the election will lapse.

Reflecting that Administrative Guidance, the requirement in the preamble to section 26 is that the election be made in the GloBE transition year (as defined in subsection 2(1)). That requirement is altered by the read-as rule in subsection 50(1) such that, in the context of the domestic minimum top-up tax, the election must be made in the QDMTT transition year (if that occurs before the GloBE transition year) and may then be made again (or otherwise allowed to lapse) in any subsequent GloBE transition year. This approach implements the above-noted Administrative Guidance.

Subdivision E
Post-Filing Adjustments and Tax Rate Changes

Adjustments to covered taxes for a prior year

GMTA
27(1)

Subsection 27(1) implements Article 4.6.1. of the Model Rules, addressing changes in liabilities for covered taxes for prior fiscal years.

Paragraph 27(1)(a) addresses adjustments that increase the liability for covered taxes of a constituent entity for a prior fiscal year, as well adjustments that result in an immaterial decrease (within the meaning of paragraph (c)) in such a liability. In most cases, subparagraph (a)(ii) will apply and the constituent entity's adjusted covered taxes for the fiscal year in which the adjustment occurs (referred to as the "current year"), rather than for the prior year, are increased or decreased, as the case may be, by the amount of the adjustment. In these cases, there is no re-computation of the effective tax rate or top-up tax for the prior year, and no possibility of a refund of top-up tax for the prior year. Rather, a downward adjustment potentially increases top-up tax in respect of the current fiscal year, and an upward adjustment potentially reduces the top-up tax payable for the current year, without affecting top-up tax paid or payable in respect of the prior year.

Where subsection 27(2) applies – meaning the adjustment in liability for covered taxes relates to a change in the constituent entity's deferred tax expense for the prior year that is attributable to a reduction in the applicable tax rate below the minimum rate – and the adjustment results in an increase in the liability for covered taxes, subparagraph 27(1)(a)(i) provides that the constituent entity's adjusted covered taxes are to be increased in the fiscal year in which the deferred tax expense reverses (to the extent the increase is not already reflected in its adjusted covered taxes for any fiscal year), rather than in the year of the tax rate change. Generally, this would be expected to occur where the deferred tax expense relates to a deferred tax asset.   

Paragraph 27(1)(b) addresses adjustments that decrease liability for covered taxes for a prior year (other than immaterial decreases). In contrast with paragraph (a), paragraph (b) is an ETR adjustment provision and so reflects these as reductions to adjusted covered taxes (and, potentially, GloBE income or loss) for the prior year, resulting in a re-computation of the effective tax rate and of top-up tax in accordance with subsection 31(1).

Paragraph 27(1)(c) provides the meaning of "immaterial decrease".

Paragraph 27(1)(d) addresses the effect of a domestic tax loss carry-back on a constituent entity's adjusted covered taxes, by creating a deemed deferred tax asset in the current year, equal to the loss carry-back applied in the prior year multiplied by the minimum rate, which is then treated as reversed in the prior year.

Adjustments – deferred tax expense

GMTA
27(2)

Subsection 27(2) implements Article 4.6.2. of the Model Rules. This subsection applies where there is a change to a constituent entity's deferred tax expense that arose in a prior fiscal year and the change results from a reduction in the applicable tax rate below the minimum rate. In this case, for the purpose of applying subsection 27(1), the change is treated as an adjustment – occurring in the fiscal year in which the tax rate change occurred (referred to as the "current year") – to the liability for covered taxes for the prior fiscal year, to the extent the deferred tax expense was taken into account in determining the constituent entity's total deferred tax adjustment amount for the prior year.

Idem

GMTA
27(3)

Subsection 27(3) implements Article 4.6.3. of the Model Rules. This subsection applies where there is a change to a constituent entity's deferred tax expense that arose in a prior fiscal year and the change results from an increase in the applicable tax rate. In this case, for the purpose of applying subsection 27(1), the change is treated as an adjustment – occurring in the fiscal year in which the deferred tax expense reverses – to liability for covered taxes for the prior year, to the extent the deferred tax expense was taken into account in determining the constituent entity's total deferred tax adjustment amount for the prior year. In applying this provision, any portion of the change to deferred tax expense that is attributable to a tax rate increase above the minimum rate is to be disregarded.

Adjustments – unpaid covered taxes

GMTA
27(4)

Subsection 27(4) implements Article 4.6.4. of the Model Rules.

Subdivision F
Qualified Flow-Through Tax Benefits

This subdivision implements the qualified flow-through tax benefits regime outlined in paragraphs 57.4 to 57.8 in the Commentary to Article 3.2.1.(c) of the Model Rules (as introduced by Section 2.9 of the February 2023 Administrative Guidance and Section 2 of the July 2023 Administrative Guidance).

Definitions

GMTA
28(1)

Subsection 28(1) contains various defined terms specific to the qualified flow-through tax benefits regime.

"adjusted investment amount"

The term "adjusted investment amount" applies in respect of qualified flow-through ownership interests (other than proportional amortization method interests). The adjusted investment amount of an owner in respect of a qualified flow-through ownership interest for a fiscal year represents the remaining (unused) amount of the investment that can be used to receive qualified flow-through tax benefits in that year and any future years.

Given the requirement in the definition "qualified flow-through tax benefits" that an election under subsection 18(7) be in effect in the fiscal year in order for flow-through tax benefits to be considered qualified flow-through tax benefits, there will be no reduction to adjusted investment amount for flow-through tax benefits in years when there is no such election (e.g., after the election has been revoked).

"excess benefits"

The term "excess benefits" is relevant to the alternative proportional amortization method timing mechanism in the qualified flow-through tax benefits regime. In very general terms, it represents the amount by which the total of tax losses, tax credits, distributions and sale proceeds received by an owner in respect of a proportional amortization method interest exceeds the portion of the investment amount in respect of that interest that is available for reduction for a given fiscal year.

Initially, the investment amount that is available for reduction for a fiscal year (variable C of the formula in this definition), which is the measure by which excess benefits are determined, is equal to the proportional investment reduction amount in respect of the interest. Over time, however, the remaining investment amount may become less than the proportional investment reduction amount, at which point it is that remaining amount which becomes the measure by which excess benefits are determined. This remaining amount is calculated as D – E in the formula, which effectively provides the beginning-of-year remaining portion of the investment amount. Notably, the reason for reducing by variable E (being the qualified flow-through tax benefits for the immediately preceding year) is that the proportional amortization method investment remaining amount for a particular year only reflects a reduction for qualified flow-through tax benefits for years prior to that particular year.

The benefit amounts that may comprise "excess benefits" are as follows:

• First, the amount under variable B, which is the flow-through tax benefits for the year to the extent they have not already been taken into account (applying the proportional amortization method or a similar accounting methodology) as a reduction to the current tax expense of the owner in its financial accounts (or that have been taken into account as a reduction, but with an offsetting increase to current tax expense under such accounting methodology).

• Second, the amount under variable A, which generally relates to the "other flow-through amounts" of the owner in respect of a proportional amortization method interest for the year, but is more complex because it is dependent on the determination of variable C (see below).

In fiscal years where the value of D – E (the beginning-of-year unreduced portion of the investment amount) exceeds the proportional investment reduction amount, variable A is equal to the other flow-through amounts. However, in years where the proportional investment reduction amount exceeds the value of D – E, variable A is equal to the lesser of the other flow-through amounts and the value of D – E. In other words, the amount determined for A can never be greater than the amount determined for C for the year. This ensures that the other flow-through amounts are taken into account in computing excess benefits only when there is still unreduced investment amount remaining. When there is no longer unreduced investment amount remaining, the other flow-through amounts are factored into the recapture amount instead, where they are included only to the extent that they do not exceed the amount of qualified flow-through tax benefits that were received in respect of the ownership interest up to that point.

Since the reduction to the investment amount may also be capped in a particular year by reference to the proportional investment reduction amount (for more information, see the note to the definition "proportional amortization method investment remaining amount" in this subsection), situations could arise where the proportional amortization method investment remaining amount exceeds the proportional investment reduction amount but does not exceed the other flow-through amounts. If paragraph (a) were not included in variable A, then in such situations the excess of other flow-through amounts over the proportional amortization method investment remaining amount would receive the potentially preferential recapture treatment as part of the recapture amount, even though there would be investment amount remaining to be reduced in subsequent years. Paragraph (a) addresses this issue by including the other flow-through amounts in their entirety in variable A, including the portion that exceeds the proportional amortization method investment remaining amount.

Once the values of variables A, B and C have been determined, the "excess benefits" are determined as the excess of the benefits (i.e., the sum of variables A and B) over the available investment amount reduction (i.e., variable C). These excess benefits are treated as a reduction to adjusted covered taxes by virtue of variable C in the formula in subsection 28(2).

"expected tax benefits ratio"

This ratio is determined by dividing the flow-through tax benefits received by an owner in respect of a qualified flow-through ownership interest in a fiscal year by the total flow-through tax benefits the owner expects (at the time of acquisition of the ownership interest) it will receive over the lifetime of the investment.

"flow-through tax benefits"

The term "flow-through tax benefits", which is particularly relevant for determining the amount of qualified flow-through tax benefits that an owner receives in respect of its ownership interest, has two components: first, tax credits, other than qualified refundable tax credits and marketable transferable tax credits; and second, the tax benefit of tax losses received in respect of the ownership interest.

"investment amount"

The "investment amount" is the total consideration paid by the owner in return for a qualified flow-through ownership interest.

"other flow-through amounts"

The "other flow-through amounts" comprise distributions received by an owner in respect of a qualified flow-through ownership interest and proceeds from the disposition of all or part of the ownership interest, as well as the tax benefit of qualified refundable tax credits and marketable transferable tax credits received by the owner in respect of the ownership interest.

The phrase "of the owner", qualifying the reference to "marketable transferable tax credit" in paragraph (a) of this definition, is intended to clarify that the tax credit must be a marketable transferable tax credit in relation to that owner. This clarification is necessary since a tax credit may be a marketable transferable tax credit for one person (e.g., its originator) and not another (e.g., a purchaser).

"proportional amortization method interest"

Under the proportional amortization method of accounting, an owner's investment in a qualified flow-through ownership interest is amortized over the life of the investment. A qualified flow-through ownership interest in respect of which this method of accounting is used is a proportional amortization method interest.

"proportional amortization method investment remaining amount"

The "proportional amortization method investment remaining amount" is essentially the analogue, in relation to proportional amortization method interests, of the "adjusted investment amount", which applies in relation to all other qualified flow-through ownership interests. This definition is relevant to the application of the alternative proportional amortization method timing mechanism to qualified flow-through ownership interests for the purposes of the Act.

Variable B in the formula in this definition essentially represents the portion of the investment amount that has already been used up. Notably, both qualified flow-through tax benefits and other flow-through amounts are taken into account in determining the portion that was used up (and thus gets included under variable B) for fiscal years preceding the determination year, but only other flow-through amounts are taken into account in determining the portion that is used up for the determination year. The reason the qualified flow-through tax benefits for the determination year are not taken into account is that one of the determinants of qualified flow-through tax benefits for the determination year is the proportional amortization method investment remaining amount for the determination year (as reflected in subparagraph (a)(ii) of the definition "qualified flow-through tax benefits" in this subsection). Thus, taking the qualified flow-through tax benefits for the determination year into account would result in a circularity. Accordingly, the proportional amortization method investment remaining amount can be conceived of as representing the remaining (unreduced) investment amount at the beginning of the determination year, less the other flow-through amounts for the determination year.

It is also notable that the portion of the investment amount that is treated as being used up for a given fiscal year cannot exceed the proportional investment reduction amount for that year (as variable B is the "lesser of" the amounts in paragraphs (a) and (b)). This limitation performs the stepped investment reduction function of the proportional amortization method.

For more information, see the note to the definition "proportional investment reduction amount" in this subsection.

"proportional investment reduction amount"

The "proportional investment reduction amount" represents the "cap" on the portion of
the investment amount that may be used in a particular fiscal year, and thus on the amount by which the investment in a proportional amortization method interest may be reduced in the year. This amount is calculated by multiplying the investment amount of the owner in respect of the interest by the expected tax benefits ratio of the owner in respect of the interest.

"qualified flow-through ownership interest"

The definition "qualified flow-through ownership interest" implements the definition "qualified ownership interest" in paragraph 57.8 in the Commentary to Article 3.2.1.(c) of the Model Rules (as introduced by Section 2.9 of the February 2023 Administrative Guidance).

The phrase "of the owner", qualifying the reference to "marketable transferable tax credit" in paragraph (b), is intended to clarify that the tax credit must be a marketable transferable tax credit in relation to that owner. This clarification is necessary since a tax credit may be a marketable transferable tax credit for one person (e.g., its originator) and not another (e.g., a purchaser).

For more information, see the note to subsection 28(5).

"qualified flow-through tax benefits"

The definition "qualified flow-through tax benefits" implements the definition of the same term in paragraph 57.5 in the Commentary to Article 3.2.1.(c) of the Model Rules (as introduced by Section 2.9 of the February 2023 Administrative Guidance).

One important clarification made in this definition is that an owner can only have "qualified flow-through tax benefits" for a year in which its ownership interest is subject to an election made under subsection 18(7) (i.e., an "equity gain or loss inclusion" election). Thus, in non-election years (e.g., following revocation of an election), flow-through tax benefits received by the owner in respect of the ownership interest cannot be "qualified", and there will not be any reductions to the investment amount for flow-through tax benefits received.

In respect of proportional amortization method interests, qualified flow-through tax benefits for a fiscal year are subject to two separate caps. One of these caps is based on the proportional amortization method investment remaining amount, which is the remaining (unreduced) investment amount. The other cap is based on the proportional investment reduction amount for the fiscal year less the other flow-through amounts for the year, which essentially represents the portion of the investment amount that is available for use in the year.

"recapture amount"

The definition "recapture amount" describes the portion of an owner's other flow-through amounts, in respect of a qualified flow-through ownership interest, that are recaptured (i.e., applied to reduce adjusted covered taxes) in a fiscal year.

In relation to proportional amortization method interests, in general terms, the recapture amount applies when there is no longer investment amount remaining, whereas the excess benefits mechanism applies when there is still investment amount remaining.

The recapture amount itself is subject to an overall cap equal to the qualified flow-through tax benefits accumulated for all preceding fiscal years, to the extent those benefits have not already been recaptured. This is achieved by paragraph (b) in the definition "recapture amount".

Since the qualified flow-through tax benefits for a fiscal year cannot exceed the adjusted investment amount (or, in the case of a proportional amortization method interest, the proportional amortization method investment remaining amount), the amount determined for variable C in the formula in the definition "recapture amount" for the immediately preceding year can never exceed the amount determined for variable B for that same year. The corollary is that the amount determined for paragraph (a) will never exceed the amount determined for variable A. Thus, the recapture amount cannot result in a decrease to adjusted covered taxes in excess of the other flow-through amounts for the current fiscal year.

"tax benefit"

The definition "tax benefit" clarifies its meaning in respect of tax credits and tax losses in this section.

Adjusted covered taxes – additions and reductions

GMTA
28(2)

Subsection 28(2) is the main operative provision in section 28 and provides for positive or negative adjustments to the adjusted covered taxes of an owner of a qualified flow-through ownership interest.

The phrase "in the absence of section 8" is intended to accommodate situations where either the adjusted covered taxes amount (determined without reference to this subsection) is already negative, or the reductions under this subsection cause the adjusted covered taxes amount to be negative.

Variable B of the formula in this subsection provides for additions to adjusted covered taxes for the purpose of reversing reductions made to current tax expense for financial accounting purposes in respect of qualified flow-through benefits.

Variable C provides for reductions to adjusted covered taxes, for excess benefits and recapture amounts in the case of proportional amortization method interests, and solely recapture amounts in the case of all other qualified flow-through ownership interests.

Proportional amortization method interest – election

GMTA
28(3)

Subsection 28(3) provides an ability for owners to irrevocably elect, on an interest-by-interest basis, for a qualified flow-through ownership interest to be treated as a proportional amortization method interest for the purposes of the qualified flow-through tax benefit regime, in cases where the benefits in respect of the interest are not otherwise accounted for under the proportional amortization method for financial accounting purposes.

The election must be made in the later of the fiscal year in which the ownership interest is first acquired by the owner, and the first fiscal year that the owner is part of the electing MNE group and is "subject to" a qualified IIR, qualified UTPR or a qualified domestic minimum top-up tax.

For more information on the concept of being "subject to" a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax, see the note to subsection 2(7).

Deemed ownership interests – debt-accounted investments

GMTA
28(4)

This subsection implements, in part, paragraph 57.8 in the Commentary to Article 3.2.1.(c) of the Model Rules (as revised by the portion of Section 2 of the July 2023 Administrative Guidance entitled "Qualified Ownership Interests of investors that apply IFRS").

This subsection expands the scope of the qualified flow-through tax benefits regime to include certain investments held by a constituent entity of an MNE group that would otherwise be excluded from the rules solely on the basis that they would not otherwise satisfy the definition of "ownership interest" in subsection 2(1) because they are not "accounted for as equity under the financial accounting standard used in the preparation of the consolidated financial statements of the MNE group".

An investment is deemed to be an "ownership interest" under this rule only if:

• The investment is treated in the same manner as an equity interest would be treated under the domestic income tax laws of the constituent entity's location jurisdiction; and
• The investment would have been accounted for as equity under an authorized financial accounting standard applicable in the jurisdiction where the underlying tax transparent entity operates if such standard applied to it. The word "operates" is used in the second of these two conditions (instead of "is located") mainly because certain entities, though formed under the laws of a particular jurisdiction and operating in that jurisdiction, may be treated as stateless (or as located in a notional jurisdiction) for the purposes of the Act. Such entities may thus be unable to satisfy this condition if it referred to the entity's location jurisdiction.

Qualified flow-through ownership interest – anti-avoidance

GMTA
28(5)

This subsection implements, in part, paragraph 57.8 in the Commentary to Article 3.2.1.(c) of the Model Rules (as revised by the portion of Section 2 of the July 2023 Administrative Guidance entitled "Qualified Ownership Interests of investors that apply IFRS").

This subsection contains an anti-avoidance rule. Paragraph (a) is intended to prevent misuse of the qualified flow-through tax benefits regime by MNE groups seeking to artificially qualify for the treatment provided under that regime without holding a bona fide qualified flow-through ownership interest. Paragraph (b) is intended to prevent MNE groups from accessing the regime where a jurisdiction makes the ability of an owner to obtain tax benefits in respect of credits through an investment in a flow-through entity conditional on the owner or a project developer (e.g., the tax transparent entity) being subject to a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax.

Division 4
Computation of Effective Tax Rate and Top-up Amount

Subdivision A
Effective Tax Rate

Definition of effective tax rate

GMTA
29(1)

Subsection 29(1) implements Article 5.1.1. of the Model Rules.

Paragraph (a) accounts for situations in which, if subsection 29(1) only comprised the contents of paragraph (b), the denominator of the formula in paragraph (b) (i.e., variable C) would be nil such that the result of applying that formula would be undefined.

For more information, including with respect to the function of variable B in the formula in this subsection (relating to "excess negative tax expense"), see the note to subsection 29(4).

Definition of net GloBE income

GMTA
29(2)

Subsection 29(2) implements Article 5.1.2. of the Model Rules.

Definition of jurisdictional adjusted covered taxes

GMTA
29(3)

Subsection 29(3) implements an aspect of Article 5.1.1. of the Model Rules.

The jurisdictional adjusted covered taxes of an MNE group for a jurisdiction for a fiscal year may be a negative amount.

Definition of excess negative tax expense

GMTA
29(4)

This subsection, in combination with variable B in the formula in paragraph 29(1)(b) and subsection 31(5), implements the excess negative tax expense mechanism set out in paragraphs 15.1 to 15.5 in the Commentary to Article 5.2.1. and paragraphs 21.1 to 21.8 in the Commentary to Article 4.1.5. of the Model Rules (as introduced by Section 2.7 of the February 2023 Administrative Guidance).

Under this mechanism, certain negative jurisdictional adjusted covered taxes amounts of an MNE group for a jurisdiction are carried forward and subtracted from the positive jurisdictional adjusted covered taxes of the same MNE group for the same jurisdiction in future years (provided the net GloBE income is also positive in such future years) until the carried-forward amount is fully deducted. These deductions from jurisdictional adjusted covered taxes are made for the purpose of determining the effective tax rate of the MNE group for the jurisdiction for those future years.

The carried-forward amount has two elements. The first, being variable A of the formula in this subsection, is the total of any negative jurisdictional adjusted covered taxes of the MNE group (i.e., of its standard constituent entities) for the jurisdiction for preceding fiscal years in which the net GloBE income of the MNE group (i.e., of its standard constituent entities) for the jurisdiction would be nil or greater if the Act were read without regard to section 8. This element is mandatory. The second, being variable B of the formula in this subsection, is the total of all excess negative tax expense top-up amounts of standard constituent entities of the MNE group for any preceding fiscal years, to the extent those amounts were reduced in those preceding fiscal years because of an election under subsection 31(5).

The carried-forward amount of an MNE group for a jurisdiction is accumulated from year-to-year and reduced only to the extent that it is applied as a reduction to jurisdictional adjusted covered taxes in determining the effective tax rate of the MNE group for the jurisdiction (this reduction occurs under variable B in the formula in paragraph 29(1)(b) and variable C in the formula in this subsection). There is no time limit on the carry-forward, and it is a group-level attribute, meaning it continues to exist even if the MNE group ceases to have standard constituent entities in the jurisdiction in a given fiscal year (such that the carried-forward amount will again become relevant in determining jurisdictional adjusted covered taxes if the MNE group once again has a standard constituent entity in the jurisdiction in a subsequent year).

As with most provisions in Division 4, this mechanism is applied to each subgroup of the MNE group (i.e., a minority-owned subgroup, an investment subgroup or a joint venture group) in the same manner as described above in respect of the standard constituent entities.

Subdivision B
Top-up Amount of a Standard Constituent Entity

Definition of top-up amount

GMTA
30(1)

Subsection 30(1) implements Article 5.2.4. and some aspects of Article 5.4. of the Model Rules.

Paragraph (a) sets out a formula similar to that contained in Article 5.2.4., with the jurisdictional top-up amount being allocated between constituent entities in proportion to their GloBE income.

Paragraph (b) provides for the top-up amount of a constituent entity in a fiscal year where the net GloBE income of the MNE group for the jurisdiction is nil. In such a fiscal year, a constituent entity's top-up amount is comprised of only two components: its allocated adjustment top-up amount (if any) for the fiscal year, and its excess negative tax expense top-up amount (if any) for the fiscal year. Both of these components are reflected in the "Additional Current Top-up Tax" in Chapter 5 of the Model Rules.

Definition of jurisdictional top-up amount

GMTA
30(2)

Subsection 30(2) implements Article 5.2.3. of the Model Rules.

A notable difference between this subsection and Article 5.2.3. is that the excess negative tax expense top-up amounts of the constituent entities of an MNE group are not included in variable C of the formula in this subsection, despite being a component of "Additional Current Top-up Tax" in Article 5.2.3. included under the corresponding variable in Article 5.2.3. These amounts are not included in variable C because they are allocated to a narrower pool of constituent entities (i.e., negative tax expense constituent entities, as defined in subsection 31(3)) than the jurisdictional top-up amount and, therefore, require separate allocation provisions (i.e., subparagraph 30(1)(b)(ii) and subsection 31(4)). Allocating these amounts through separate allocation provisions also facilitates the correct crediting of qualified domestic minimum top-up tax amounts against the different categories of top-up amounts.

Definition of top-up percentage

GMTA
30(3)

Subsection 30(3) implements Article 5.2.1. of the Model Rules.

Definition of excess profit

GMTA
30(4)

Subsection 30(4) implements Article 5.2.2. of the Model Rules.

Definition of allocated adjustment top-up amount

GMTA
30(5)

Subsection 30(5) implements Article 5.2.5. of the Model Rules.

Adjustment top-up amount

GMTA
31(1)

Subsection 31(1) implements Article 5.4.1., Article 7.3.7.(b) and aspects of the definition "Additional Current Top-up Tax" in Article 10.1. of the Model Rules, but "additional current top-up tax" is not adopted as a defined term in the Act.

Definition of excess negative tax expense top-up amount

GMTA
31(2)

Subsection 31(2) implements aspects of Article 5.4.3. and the definition "Additional Current Top-up Tax" in Article 10.1. of the Model Rules.

Definition of negative tax expense constituent entity

GMTA
31(3)

Subsection 31(3) implements an aspect of Article 5.4.3. of the Model Rules.

Definition of jurisdictional excess negative tax expense top-up amount

GMTA
31(4)

Subsection 31(4) implements Article 4.1.5. of the Model Rules.

A "jurisdictional excess negative tax expense top-up amount" of an MNE group arises where the MNE group's net GloBE income is nil (including where the net GloBE income would be negative in the absence of the rule in section 8) for a jurisdiction for a fiscal year and the MNE group's jurisdictional adjusted covered taxes is a negative amount for that jurisdiction for the fiscal year.

The jurisdictional excess negative tax expense top-up amount is calculated by, first, determining the extent to which the jurisdictional adjusted covered taxes is less (i.e., more negative) than the product of the aggregate GloBE income or loss of the standard constituent entities of the MNE group for the fiscal year and the minimum rate (15%). The result of that computation is a positive amount (to the extent the jurisdictional adjusted covered taxes is less), which is then reduced by the amount of any qualified domestic minimum top-up tax allocable to that positive amount (as determined through a pro rata allocation between the positive amount and any adjustment top-up amounts for the jurisdiction for the fiscal year).

Election – excess negative tax expense carry-forward

GMTA
31(5)

Subsection 31(5) implements paragraph 21.5 in the Commentary to Article 4.1.5. of the Model Rules (as introduced by Section 2.7 of the February 2023 Administrative Guidance).

For more information, see the note to subsection 29(4).

Subdivision C
Substance-based Income Exclusion

Definition of substance-based income exclusion amount

GMTA
32(1)

Subsection 32(1) implements Article 5.3.2. and aspects of Articles 5.3.3. and 5.3.4. of the Model Rules, as clarified by paragraph 29.1 in the Commentary to Article 5.3.1. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

Definition of eligible payroll costs

GMTA
32(2)

Subsection 32(2) implements aspects of Article 5.3.3. and the definition "Eligible Payroll Costs" in Article 10.1. of the Model Rules.

This subsection is subject to subsections 32(5), (6) and (7) and subparagraph 38(1)(d)(i), which provide further rules for determining a constituent entity's eligible payroll costs.

Paragraph 32(2)(a) refers to "separate financial accounts" of a permanent establishment, which could be actual or notional accounts based on paragraph 17(1)(b). Paragraph 32(2)(a) also references the adjustments to the financial accounting income of a permanent establishment under clause 17(1)(b)(ii)(B) and subsection 17(2), which are relevant for the purpose of determining the quantum of a permanent establishment's eligible payroll costs.

Definition of excluded costs

GMTA
32(3)

Subsection 32(3) implements aspects of Articles 5.3.3. and 5.3.6 of the Model Rules.

For the purpose of applying paragraph 32(3)(a) to a specific costs item, those costs may, depending on the facts and circumstances, be divided into the portion that is payable primarily in respect of work done in the course of ordinary operating activities by a particular employee in the jurisdiction where the particular standard constituent entity is located, and the portion that is payable primarily in respect of the same kind of work done by the same employee in the course of ordinary operating activities but in another jurisdiction. In the event the deeming rule in subsection 32(4) does not apply, only the portion of the costs relating to the employee's work within the relevant entity's location jurisdiction can qualify as eligible payroll costs.

Interjurisdictional employee deeming rule

GMTA
32(4)

Subsection 32(4) implements paragraphs 33 and 33.1 in the Commentary to Article 5.3.3. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

Eligible payroll costs – flow-through entity allocation

GMTA
32(5)

Subsection 32(5) implements aspects of Article 5.3.7. of the Model Rules.

Given the opening words of this subsection, which reference a particular amount that "would, in the absence of this subsection, be included in the eligible payroll costs of a constituent entity that is a flow-through entity," the allocation under paragraphs 32(2)(a) and 32(3)(c) of eligible payroll costs from a constituent entity that is a main entity to one or more of its permanent establishments is undertaken in respect of a flow-through entity that is a main entity before subsection 32(5) is applied to that flow-through entity. Accordingly, the only amounts allocated under this subsection are those remaining after that allocation to permanent establishments. This implements Article 5.3.7. of the Model Rules, which expressly allocates "Eligible Payroll Costs … that are not allocated under Article 5.3.6."

Eligible payroll costs – deductible dividend regime

GMTA
32(6)

Subsection 32(6) implements paragraph 36.1 in the Commentary to Article 5.3.3. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

Eligible payroll costs – taxable distribution method

GMTA
32(7)

Subsection 32(7) follows a similar structure and rationale to subsection 32(6). It excludes from a constituent entity's eligible payroll costs an amount in proportion to the GloBE income of the constituent entity that is attributable to ownership interests of the constituent entity in respect of which a taxable distribution method election under subsection 42(2) applies.

Absent subsection 32(7), the constituent entity's entire eligible payroll costs amount would be available for use in the calculation of its top-up amount, even though paragraph 42(2)(f) would exclude part (or all) of that entity's GloBE income or loss and adjusted covered taxes in determining the top-up amount (to the extent constituent entity's owners had elected under subsection 42(2)). As a result, any owner of the constituent entity that had not elected under subsection 42(2) would receive a disproportionate benefit from the substance-based income exclusion.

Definition of eligible employee

GMTA
32(8)

Subsection 32(8) implements the definition "Eligible Employees" in Article 10.1. of the Model Rules.

Definition of eligible tangible asset amount

GMTA
32(9)

Subsection 32(9) implements aspects of Articles 5.3.4. and 5.3.5. of the Model Rules.

The computation under this subsection is subject to subsections 32(10) to (13) and subparagraph 38(1)(d)(ii), since further adjustments may apply under those provisions in determining the constituent entity's eligible tangible asset amount.

Eligible tangible asset amount – main entity limitation

GMTA
32(10)

Subsection 32(10) implements aspects of Article 5.3.6. of the Model Rules.

Eligible tangible asset amount – flow-through entity allocation

GMTA
32(11)

Subsection 32(11) implements aspects of Article 5.3.7. of the Model Rules.

This subsection utilizes the allocation mechanism in subsection 32(5) but applies a read-as rule to substitute the term "eligible tangible asset amount" for "eligible payroll costs" wherever the latter term is used in subsection 32(5).

For more information, see the note to subsection 32(5).

Eligible tangible asset amount – deductible dividend regime

GMTA
32(12)

Subsection 32(12) implements paragraph 48.1 in the Commentary to Article 5.3.4. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

This subsection utilizes the allocation mechanism in subsection 32(6) but applies a read-as rule to substitute the term "eligible tangible asset amount" for "eligible payroll costs" wherever the latter term is used in subsection 32(6).

For more information, see the note to subsection 32(6).

Eligible tangible asset amount – taxable distribution method

GMTA
32(13)

This subsection utilizes the allocation mechanism in subsection 32(7) but applies a read-as rule to substitute the term "eligible tangible asset amount" for "eligible payroll costs" wherever the latter term is used in subsection 32(7).

For more information, see the note to subsection 32(7).

Definition of eligible tangible asset

GMTA
32(14)

Subsection 32(14) implements aspects of Articles 5.3.4. and 5.3.6. of the Model Rules and paragraphs 43 to 43.1.7 in the Commentary to Article 5.3.4. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

Eligible tangible asset – carrying value

GMTA
32(15)

Subsection 32(15) implements aspects of Articles 5.3.4. and 5.3.5. of the Model Rules and paragraphs 38 and 38.1 in the Commentary to Article 5.3.3., paragraphs 43 to 43.1.7. in the Commentary to Article 5.3.4. and paragraph 50.1. in the Commentary to Article 5.3.5. of the Model Rules (as introduced by Section 3 of the July 2023 Administrative Guidance).

Unlike the interjurisdictional employee deeming rule for eligible payroll costs (which is contained in a separate subsection, namely subsection 32(4)), the analogous rule for eligible tangible assets is provided through the deduction from carrying value in paragraph 32(15)(g). Under that paragraph, if an asset is located in the location jurisdiction of the constituent entity for more than 50% of the "qualifying days" in a fiscal year, the deduction under that paragraph is nil. Thus, the entire carrying value of the asset, calculated without reference to that paragraph, qualifies for inclusion in the eligible tangible asset amount. In any other case (i.e., where the asset is located in the location jurisdiction of the constituent entity for 50% or less of the qualifying days), there is a proration based on the extent to which this jurisdiction condition is satisfied, resulting in partial or total elimination of the carrying value of the asset for the purposes of computing the eligible tangible asset amount.

The meaning of "qualifying days" is provided in subparagraph (i) in variable E of the formula in paragraph 32(15)(g) as being, in effect, the days that the constituent entity (or main entity, in the case of a permanent establishment) holds the asset and, in the case of a permanent establishment, reflects the asset in its separate financial accounts.

Election not to apply exclusion for a jurisdiction

GMTA
32(16)

Subsection 32(16) implements an aspect of Article 5.3.1. of the Model Rules.

Subdivision D
De minimis Jurisdiction Exclusion

De minimis jurisdiction exclusion

GMTA
33(1)

Subsection 33(1) implements Articles 5.5.1., 5.5.2. and 5.5.4. of the Model Rules.

This subsection, in effect, deems the top-up amount – other than any portion that is attributable to an adjustment top-up amount or excess negative tax expense top-up amount – of every eligible constituent entity of an MNE group located in a jurisdiction to be nil for a fiscal year in which all the subsection's conditions are met (including the requirement that the MNE group make an election). For this purpose, stateless constituent entities and investment entities (including insurance investment entities) are not eligible constituent entities.

The formulas in paragraphs (b) and (c) of this subsection, in effect, take the three-year total of the jurisdictional GloBE revenue and three-year total of jurisdictional GloBE income or loss, respectively, of the MNE group and divide them by the number of years, out of the current year and the two previous years, in which the MNE group had either positive jurisdictional GloBE revenue for the jurisdiction or an eligible constituent entity located in the jurisdiction with a GloBE loss.

Definition of jurisdictional GloBE revenue

GMTA
33(2)

Subsection 33(2) implements Article 5.5.3.(a) of the Model Rules.

Definition of financial accounting revenue

GMTA
33(3)

Subsection 33(3) implements Article 5.5.3.(a) of the Model Rules.

Definition of jurisdictional GloBE income or loss

GMTA
33(4)

Subsection 33(4) implements Article 5.5.3.(b) of the Model Rules.

Subdivision E
Top-up Amount of a Minority-Owned Constituent Entity

Deeming rule – minority-owned subgroup

GMTA
34(1)

Subsection 34(1) implements aspects of Article 5.6.1. of the Model Rules, by excluding minority-owned constituent entities from an MNE group for the purposes of the effective tax rate and top-up amount calculations (as well as other, related calculations) performed in subdivision D in respect of the standard constituent entities of the MNE group.

Although minority-owned constituent entities are already carved out of the direct application of those calculation provisions (see the definition "standard constituent entity" in subsection 11(3)), the exclusion under subsection 34(1) provides further clarity that those entities are excluded from the calculations.

Minority-owned constituent entity – top-up amount

GMTA
34(2)

Subsection 34(2) implements aspects of Article 5.6.1. of the Model Rules, by treating the minority-owned constituent entities of a minority-owned subgroup as the only constituent entities of a separate MNE group for the purpose of the effective tax rate and top-up amount calculations (and related calculations) applicable to each of those entities. Any minority-owned constituent entities that are either investment entities or insurance investment entities are excluded from the minority-owned subgroup for this purpose.

Interpretation rule

GMTA
34(3)

Subsection 34(3) implements aspects of Article 5.6.1. of the Model Rules, clarifying that various specific provisions apply for the purpose of determining the top-up amount of a minority-owned constituent entity under subsection 34(2).

Allocation of minority-owned constituent entity top-up amount

GMTA
34(4)

Subsection 34(4) provides the amount of GloBE income that a minority-owned constituent entity is considered to have in the event that the net GloBE income of its minority-owned subgroup is nil for the jurisdiction for the year (paragraph (a)), and in the event that its net GloBE income is greater than nil (paragraph (b)), in each case for the purpose of allocating the top-up amount of the entity to any relevant parent entities of the MNE group. This provision adapts the concepts in subsection 15(5) (Articles 5.4.2. and 5.4.3. of the Model Rules) to the minority-owned constituent entity context.

Subdivision F
Top-up Amount of a Joint Venture Entity

Joint venture top-up amount

GMTA
35(1)

Subsection 35(1) implements Article 6.4.1.(a) of the Model Rules by adapting to the joint venture context the top-up amount calculation provisions of the Act applicable to standard constituent entities, minority-owned constituent entities and investment entities.

This involves, first, treating each joint venture group as if it were a separate MNE group of its own for the purpose of calculating the top-up amount of each of the entities forming that joint venture group. This is achieved mainly by the read-as rule in paragraph 35(1)(a), which substitutes – in the provisions containing the effective tax rate and top-up amount calculations, and the various related calculations – the concepts of joint venture group, joint venture and joint venture entity in place of MNE group, ultimate parent entity and constituent entity, respectively.

Another role of this read-as rule is to adapt certain ancillary concepts to allow them to apply as required for the purpose of calculating the top-up amounts of joint venture entities. One example, among many, is that reading "joint venture entity" in place of "constituent entity" in the definition "investment subgroup entity" in subsection 36(1) allows the provisions for determining the top-up amount of an investment subgroup entity (in subdivision G) to be applied in respect of joint venture entities that are investment entities (or insurance investment entities), which means such an entity's top-up amount is determined, along with any other investment subgroup entities of the MNE group, separately from that of the broader joint venture group.

Paragraph 35(1)(b) clarifies that the read-as rule in paragraph (a) (and treatment of a joint venture group as a separate MNE group) extends to the determination of amounts (e.g., GloBE income or loss) that must be determined in order for the calculation of the top-up amount of a particular joint venture entity to be undertaken.

Paragraph 35(1)(c) implements the following statement from paragraph 89 in the Commentary to Article 6.4.1.(a):

"When an MNE Group computes the jurisdictional ETR of the members of a JV Group it should take into account any Adjusted Covered Taxes recorded in the financial accounts of the Constituent Entities of such MNE Group with respect to the GloBE Income or Loss of the members of the JV Group in accordance with Article 4.3."

In accordance with that statement in the Commentary, paragraph 35(1)(c) allows covered taxes to be allocated to a joint venture entity from a constituent entity of the MNE group under any of subsections 24(4) to (6), despite the joint venture entity otherwise being treated as a member of a separate (notional) MNE group for the purposes of determining its top-up amount. For example, covered taxes payable by a constituent entity under a controlled foreign company tax regime in respect of amounts included in the GloBE income of a joint venture entity are allocated to the joint venture entity under subsection 24(4) as if the joint venture entity were another constituent entity of the MNE group.

Paragraph 35(1)(d) acts as a general supporting rule to the more specific provisions in paragraphs (a) to (c), by requiring the MNE group to make any otherwise unspecified modifications in reading Part 1 (which includes subsection 2(1), the main definitions subsection of the Act) and the listed Divisions and Subdivisions that are required to facilitate the application of the top-up amount calculation provisions in the joint venture context and to ensure those calculations are made on the basis that the top-up amount of the joint venture entities is determined separately from that of constituent entities of the MNE group. Although there may be many instances where such modifications are required, one example is that the definition "minority-owned constituent entity" is adapted to the joint venture context by replacing the references to "MNE group", "ultimate parent entity" and "constituent entity" in that definition with their joint venture equivalents. These modifications are consistent with the fiction, created by the read-as rule in paragraph 35(1)(a), of the joint venture group as a separate MNE group.

Allocation of joint venture top-up amount
GMTA
35(2)

Subsection 35(2) implements aspects of Article 6.4.1.(b) of the Model Rules.

For more information, see the note to subsection 34(4), describing the application of the parallel rules in respect of minority-owned constituent entities.

Permanent establishment – deemed joint venture subsidiary

GMTA
35(3)

Subsection 35(3) clarifies the application of section 35 to permanent establishments of joint venture entities.

Subdivision G
Top-up Amount of an Investment Entity

Subsection 36(1) – Definitions

Subsection 36(1) implements Articles 7.4.1., 7.4.3. and 7.4.4. of the Model Rules and contains definitions relevant to the application of the rest of section 36.

"investment entity adjusted covered taxes amount"

An investment subgroup entity's "investment entity adjusted covered taxes amount" for a fiscal year is determined under this definition by subtracting, from its adjusted covered taxes for the year otherwise determined, the proportion of those taxes determined by reference to the minority investor percentage of the investment subgroup entity. As adjusted covered taxes can be negative, the investment entity adjusted covered taxes amount can be negative (which is enabled by the reference to "in the absence of section 8" in this definition).

"investment entity GloBE income amount"

An investment subgroup entity's "investment entity GloBE income amount" for a fiscal year is its GloBE income or loss otherwise determined, less the proportion of that income or loss determined by reference to the minority investor percentage of the investment subgroup entity. It is computed in a similar manner to the "investment entity adjusted covered taxes amount".

The GloBE income or loss of an investment subgroup entity is already reduced to the extent it is attributable to ownership interests that are subject to an election under subsection 41(1) or 42(2), before being factored into the investment entity GloBE income amount.

"investment subgroup"

An "investment subgroup" is defined as all the investment subgroup entities of an MNE group.

"investment subgroup entity"

An "investment subgroup entity" of an MNE group is defined as any constituent entity of that MNE group that is an investment entity or an insurance investment entity.

"minority investor percentage"

The "minority investor percentage" of an investment subgroup entity for a fiscal year is the percentage of its GloBE income or loss that is attributable, based on the relevant assumptions (which are defined in subsection 36(1)), to ownership interests in the investment subgroup entity that are not held, directly or indirectly, by the ultimate parent entity of the MNE group to which the investment subgroup entity belongs.

"minority-owned investment entity"

A "minority-owned investment entity" of a minority-owned subgroup of an MNE group is defined as any constituent entity of the MNE group that is an investment entity or insurance investment entity and is included in the minority-owned subgroup.

"minority-owned investment subgroup"

A "minority-owned investment subgroup" is defined as all the minority-owned investment entities of a minority-owned subgroup.

"relevant assumptions"

The definition "relevant assumptions" is used in the definition "minority investment percentage" in this subsection and adapts the income attribution principles from Article 2.2.3. of the Model Rules (implemented in subsection 15(3) of the Act) to the context of investment subgroup entities. Some of those principles (e.g., the deeming of hypothetical consolidated financial statements) are not required in this context, since Article 2.2.3. is concerned with attributing the GloBE income of a constituent entity to parent entities other than the ultimate parent entity (in addition to attributing GloBE income to the ultimate parent entity), whereas the definition "minority investor percentage" is only concerned with attributing GloBE income by reference to the ultimate parent entity.  

Investment subgroup entity – top-up amount

GMTA
36(2)

Subsection 36(2) implements aspects of Articles 7.4.2., 7.4.5. and 7.4.6. of the Model Rules, by adapting the top-up amount calculation provision in subsection 30(1) to the investment subgroup entity context.

For the purposes of calculating the top-up amount of an investment subgroup entity, the read-as rule in paragraph 36(2)(a) replaces the references, in sections 29 to 32 and 34, to various concepts applicable in the context of MNE groups and their standard constituent entities (and minority-owned subgroups and their minority-owned constituent entities) with their investment subgroup counterparts. This exchange of concepts extends to reading references to, for example, "GloBE income or loss" as "investment entity GloBE income amount", and "adjusted covered taxes" as "investment entity adjusted covered taxes amount", reflecting the fact that in the investment subgroup entity context these specific concepts exist that exclude portions of income and taxes that are attributable to non-MNE group members.

The overall effect of the rules in this subsection is to blend income and taxes at the level of the investment subgroup (or the minority-owned investment subgroup, in the case of investment subgroup entities that are also minority-owned constituent entities) in a particular jurisdiction and, importantly, not blend such income and taxes with those of the standard constituent entities of the MNE group located in that same jurisdiction. Among other things, this ensures that any low-taxed income of the investment subgroup entities is not sheltered from top-up tax by any high-taxed income of those standard constituent entities.

Paragraph 36(2)(b) supports the application of paragraph (a), by clarifying that the read-as rule in paragraph (a) is to be applied when determining any amount under any of sections 29, 30, 31, 32 or 34 that is necessary for the purpose of calculating the top-up amount of an investment subgroup entity.

Paragraph 36(2)(c), in effect, provides for a reduction to the substance-based income exclusion amount of an investment subgroup entity that mirrors the reduction to adjusted covered taxes and GloBE income or loss effected in the definitions "investment entity adjusted covered taxes amount" and "investment entity GloBE income amount", respectively. For more information, see the notes to those definitions in subsection 36(1).

Paragraph 36(2)(d) clarifies that references to a fiscal year of an MNE group in sections 29 to 32 and 34 remain unaffected by the read-as rule in paragraph (a).

Paragraph 36(2)(e) acts as a general supporting rule to the more specific provisions in paragraphs (a) to (d), by requiring the MNE group to make any otherwise unspecified modifications to sections 29 to 32 and 34 that are required to facilitate the application of the top-up amount calculation provisions in the investment subgroup entity context and to ensure those calculations are made on the basis that the top-up amount of investment subgroup entities is determined separately from that of other constituent entities of the MNE group.

Subsection 36(2) is subject to subparagraphs 42(2)(d)(ii) and (e)(ii), which operate to further adjust the top-up amount calculated under subsection 36(2) in the case of entities in respect of which a taxable distribution method election applies.

Interpretation rule

GMTA
36(3)

Subsection 36(3) implements aspects of Articles 7.4.2., 7.4.5. and 7.4.6. of the Model Rules.

Allocation of investment subgroup entity top-up amount

GMTA
36(4)

Subsection 36(4) implements aspects of Article 7.4.4. of the Model Rules.

For more information, see the notes to subsections 15(4) and 34(4).

Subdivision H
Eligible Distribution Tax Systems

Deemed distribution tax – rules

GMTA
37(1)

Subsection 37(1) implements Articles 7.3.1., 7.3.3. and 7.3.6. of the Model Rules.

Definition of deemed distribution tax

GMTA
37(2)

Subsection 37(2) implements Article 7.3.2. of the Model Rules.

Definition of recapture account loss carry-forward

GMTA
37(3)

Subsection 37(3) implements Article 7.3.4. of the Model Rules.

ETR adjustment provision – four-year rule

GMTA
37(4)

Subsection 37(4) implements Article 7.3.5. of the Model Rules.

ETR adjustment provision – departing constituent entity

GMTA
37(5)

Subsection 37(5) implements Article 7.3.7. of the Model Rules.

"Departing constituent entity" is defined in subsection 2(1).

Definition of disposition recapture ratio

GMTA
37(6)

Subsection 37(6) implements Article 7.3.8. of the Model Rules.

The defined term "disposition recapture ratio" is used in subsections 31(1) and 37(5).

Division 5
Reorganizations and Asset Transfers

Constituent entities joining and leaving MNE group

GMTA
38(1)

Subsection 38(1) implements Article 6.2.1. of the Model Rules.

The rules in this subsection apply where an entity (referred to as the "transferred entity") ceases to be a constituent entity, or becomes a constituent entity, of an MNE group as a result of the transfer of an ownership interest in the transferred entity or another entity which holds an ownership interest in the transferred entity. In order for these rules to apply, the transferred entity need not be transferred between two MNE groups.

Transfers treated as transfers of assets and liabilities – application

GMTA
38(2)

Subsection 38(2) implements Article 6.2.2. of the Model Rules.

Acquisitions and dispositions of assets and liabilities – no GloBE reorganization

GMTA
39(1)

Subsection 39(1) implements Article 6.3.1. of the Model Rules.

Transfers of assets and liabilities – GloBE reorganization

GMTA
39(2)

Subsection 39(2) implements Articles 6.3.2. and 6.3.3. of the Model Rules.

Election to adjust assets and liabilities to fair value

GMTA
39(3)

Subsection 39(3) implements Article 6.3.4. of the Model Rules.

Division 6
Multi-Parented MNE Groups

Multi-parented MNE group rules

GMTA
40(1)

Subsection 40(1) implements aspects of Article 6.5.1. of the Model Rules.

Deemed group entities

GMTA
40(2)

Subsection 40(2) implements Article 6.5.1.(b) of the Model Rules.

Division 7
Elections in Relation to Investment Entities

Subdivision A
Tax Transparency Election

Investment entity tax transparency election

GMTA
41(1)

Subsection 41(1) implements aspects of Article 7.5.1. of the Model Rules and paragraphs 91 and 91.1 in the Commentary to Article 7.5. of the Model Rules (as introduced by Section 3.6 of the February 2023 Administrative Guidance).

An investment entity or insurance investment entity is deemed (where the conditions set out in this subsection are met) to be a flow-through entity only to the extent that its income is attributable to ownership interests held by constituent entity-owners in respect of which the election in paragraph 41(1)(a) is made, and is deemed to be a tax transparent entity only in relation to those constituent entity-owners.

The expression "subject to tax", used in clause 41(1)(b)(i)(A), does not mean that the subject entity necessarily has a tax liability in a given fiscal year, but rather that it is within scope of the regime and thus potentially liable.

Indirect constituent entity-owners

GMTA
41(2)

Subsection 41(2) implements aspects of Article 7.5.1. of the Model Rules.

For more information on the meaning of the phrase "subject to tax", see the note to subsection 41(1).

Five-year election

GMTA
41(3)

Subsection 41(3) implements Article 7.5.2. of the Model Rules.

Subdivision B
Taxable Distribution Method Election

Definitions

GMTA
42(1)

This subsection defines several terms that apply for the purposes of section 42.

"qualifying owner"

This definition implements the part of Article 7.6.1. of the Model Rules that determines the eligibility requirements of a constituent entity-owner with respect to an election to apply the taxable distribution method.

"testing period"

This definition implements Article 7.6.5.(a) and (b) of the Model Rules.

"undistributed net GloBE income"

This definition implements Articles 7.6.3. and 7.6.4. of the Model Rules.

Taxable distribution method election

GMTA
42(2)

This subsection implements the main operative elements of the taxable distribution method election in Article 7.6. of the Model Rules, namely Articles 7.6.2., 7.6.5.(d) and 7.6.6., as well as paragraph 99 in the Commentary to Article 7.6. (as introduced by Section 3.1 of the February 2023 Administrative Guidance).

The taxable distribution method election is available, where the relevant conditions are met, with respect to the GloBE income of an investment entity or insurance investment entity (referred to in section 42 as the "investment entity"). The election can only be made in respect of an ownership interest in the investment entity that is held by a qualifying owner, where "qualifying owner" status is predicated on the total amount of tax paid on the distributed profits being reasonably expected to be equal to or greater than tax at the minimum rate. The investment entity's GloBE income or loss that is attributable to any ownership interests in respect of which the election applies, and any adjusted covered taxes in respect of that GloBE income or loss, are excluded from all computations of effective tax rates and top-up amounts. To the extent the entity distributes its GloBE income to any qualifying owners within four years, the distributions are included in computing the qualifying owner's GloBE income or loss, and any amount that is not distributed within four years – the "undistributed net GloBE income" – is multiplied by the minimum rate (15%) and the result is included in the investment entity's top-up amount.

Deemed distribution – transfer of ownership interest

GMTA
42(3)

This subsection implements Article 7.6.5.(c) of the Model Rules.

Division 8
Safe Harbours

Subdivision A
Permanent Safe Harbours

Definitions

GMTA
43

"non-material constituent entity"

The definition "non-material constituent entity" implements the corresponding definition in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance).

"relevant country-by-country reporting regulations"

The definition "relevant country-by-country reporting regulations" implements the definition "Relevant CbC Regulations" in Annex A, Chapters 1 and 2 of the Commentary (as introduced by Sections 2 and 6 of the December 2023 Administrative Guidance).

"simplified income"

The definition "simplified income" implements the definition "Simplified Income Calculation" for a non-material constituent entity in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance).

If an MNE group makes the election under section 46 in respect of a non-material constituent entity for a fiscal year, that entity's simplified income for the fiscal year is determined under paragraph 46(a). If the MNE group does not make that election in respect of the non-material constituent entity for the fiscal year, the entity's simplified income is equal to its GloBE income or loss for the year.

"simplified revenue"

The definition "simplified revenue" implements the definition "Simplified Revenue Calculation" for a non-material constituent entity in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance).

If an MNE group makes the election under section 46 in respect of a non-material constituent entity for a fiscal year, that entity's simplified revenue for the fiscal year is determined under paragraph 46(a). If the MNE group does not make that election in respect of the non-material constituent entity for the fiscal year, the entity's simplified revenue is equal to its "financial accounting revenue" for the year.

"simplified tax"

The definition "simplified tax" implements the definition "Simplified Tax Calculation" for a non-material constituent entity in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance).

If an MNE group makes the election under section 46 in respect of a non-material constituent entity for a fiscal year, that entity's simplified tax for the fiscal year is determined under paragraph 46(b). If the MNE group does not make that election in respect of the non-material constituent entity for the fiscal year, the entity's simplified tax is equal to its "adjusted covered taxes" for the year.

Qualified domestic minimum top-up tax safe harbour

GMTA
44

Section 44 implements, in part, Article 8.2.1. of the Model Rules and the "Qualified Domestic Minimum Top-up Tax Safe Harbour" as set out in Annex A, Chapter 3 of the Commentary (as introduced by Section 5.1 of the July 2023 Administrative Guidance).

Paragraph (b) requires that the jurisdiction's qualified domestic minimum top-up tax (as defined in subsection 2(1)) be on the list of qualified domestic minimum top-up taxes that have "safe harbour" status for the fiscal year on the OECD website, or the list of jurisdictions with transitional safe harbour status for the fiscal year on the OECD website (whose qualified domestic minimum top-up taxes are to be treated as having safe harbour status on an interim basis, pending a full peer review of the jurisdiction's law by the Inclusive Framework). Where a jurisdiction's law does not appear on either of these lists at the beginning of a fiscal year, it will nonetheless be considered as having safe harbour status for that fiscal year if it is subsequently included on one of those lists applicable for that fiscal year.

Paragraph (c) requires that the MNE group is permitted to elect the qualified domestic minimum top-up tax safe harbour for the fiscal year in respect of the particular entity. Whether an MNE group is permitted to so elect is determined in accordance with paragraphs 8 to 13 on the "Operation of the QDMTT Safe Harbour" and paragraphs 37 to 49 on the "Switch-off Rule", in Annex A, Chapter 3 of the Commentary.

Notably, where an MNE group files a qualified domestic minimum top-up tax safe harbour election in respect of a particular entity located in Canada, the top-up amount (and, by extension, the domestic minimum top-up amount) of the particular entity is not deemed to be nil for the purposes of applying Canada's domestic minimum top-up tax, since paragraph 50(1)(c) provides that the effect of such an election is disregarded in determining the particular entity's domestic minimum top-up amount.

Simplified calculations safe harbour

GMTA
45

Section 45 implements, in part, Article 8.2.1. of the Model Rules and the "Simplified Calculations Safe Harbour for Non-Material Constituent Entities" in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance).

This section, in effect, deems the top-up amount – other than any portion that is attributable to an adjustment top-up amount or excess negative tax expense top-up amount – of an MNE group's standard constituent entities that are non-material constituent entities located in a particular jurisdiction to be nil for a fiscal year in which all the section's conditions are met (including the requirement that the MNE group make an election).

Notably, paragraph 45(a) requires that, in order for the deeming rule under this section to apply, all of the standard constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year must be non-material constituent entities.

Non-material constituent entities

GMTA
46

Section 46 implements the election for the "Simplified Income Calculation", "Simplified Revenue Calculation" and "Simplified Tax Calculation" for a non-material constituent entity, as set out in Annex A, Chapter 2, Section 2 of the Commentary (as introduced by Section 6 of the December 2023 Administrative Guidance), for the purposes of applying the simplified calculations safe harbour for non-material constituent entities under section 45.

Subdivision B
Transitional Safe Harbours

Definitions – transitional CbCR safe harbour

GMTA
47(1)

"deduction/non-inclusion arrangement"

The definition "deduction/non-inclusion arrangement" implements the corresponding definition in paragraph 93 in Annex A, Chapter 1 of the Commentary (as introduced by Section 2.6 of the December 2023 Administrative Guidance).

"duplicate loss arrangement"

The definition "duplicate loss arrangement" implements the corresponding definition in paragraph 94 in Annex A, Chapter 1 of the Commentary (as introduced by Section 2.6 of the December 2023 Administrative Guidance).

"duplicate tax recognition arrangement"

The definition "duplicate tax recognition arrangement" implements the corresponding definition in paragraph 95 in Annex A, Chapter 1 of the Commentary (as introduced by Section 2.6 of the December 2023 Administrative Guidance).

"net unrealized fair value loss"

The definition "net unrealized fair value loss" implements the corresponding definition in paragraph 66 of Annex A, Chapter 1 of the Commentary.

"profit (loss) before income tax"

The definition "profit (loss) before income tax" implements the corresponding definition in the box under paragraph 5 of Annex A, Chapter 1 of the Commentary.

Paragraph (a) implements the exclusion of net unrealized fair value loss, as outlined in paragraph 66 of Annex A, Chapter 1 of the Commentary.

Paragraph (b) implements the goodwill impairment adjustment under paragraph 9.5 of Annex A, Chapter 1 of the Commentary (as introduced by Section 1.3 of the December 2023 Administrative Guidance).

"qualified country-by-country report"

The definition "qualified country-by-country report" implements the definition "Qualified CbC Report" in the box under paragraph 5 of Annex A, Chapter 1 of the Commentary.

Paragraph (a) implements the requirement that the country-by-country report is filed in accordance with the relevant country-by-country reporting regulations, as defined in section 43.

Paragraph (b) implements the requirement that the country-by-country report is prepared on the basis of qualified financial statements of the standard constituent entities of the MNE group for the jurisdiction for the fiscal year.

Paragraph (c) implements the requirement applicable in the case of multi-parented MNE groups, in accordance with paragraph 10(b) of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 42 to 44) of Annex A, Chapter 1 of the Commentary.

"qualified financial statements"

The definition "qualified financial statements" implements the corresponding definition in the box under paragraph 5 of Annex A, Chapter 1 of the Commentary.

Subparagraph (a)(iv) implements paragraph 86 of Annex A, Chapter 1 of the Commentary (as introduced by Section 2.3.5 of the December 2023 Administrative Guidance) on what constitutes qualified financial statements for permanent establishments.

Paragraph (b) implements the rules for purchase price accounting adjustments in qualified financial statements set out in paragraphs 9.1 to 9.4 of Annex A, Chapter 1 of the Commentary (as introduced by Section 1 of the December 2023 Administrative Guidance). Subparagraph (b)(ii) implements the "Consistent reporting condition" under paragraph 9.4 of Annex A, Chapter 1 of the Commentary (as introduced by Section 1.3 of the December 2023 Administrative Guidance).

"qualified person"

The definition "qualified person" implements the corresponding definition in paragraph 4 of the box on "Treatment of certain entities and groups", under paragraph 29 of Annex A, Chapter 1 of the Commentary.

"qualified substance-based income exclusion amount"

The definition "qualified substance-based income exclusion amount" implements the calculation of the substance-based income exclusion amount for the purposes of the routine profits test under subsection 47(6), in accordance with paragraph 21 of Annex A, Chapter 1 of the Commentary.

"qualifying income tax expense"

The definition "qualifying income tax expense" implements, for the purposes of the simplified effective tax rate test in subsection 47(4) and the calculation of the simplified effective tax rate under subsection 47(5), the definition "Simplified Covered Taxes" in the box at the beginning of Annex A, Chapter 1 of the Commentary and paragraphs 12 to 14 of Annex A, Chapter 1 of the Commentary.

"total revenues"

The definition "total revenues" implements the corresponding definition in the box under paragraph 5, and the adjustment for entities held for sale under paragraphs 36 and 37, of Annex A, Chapter 1 of the Commentary.

Election – transitional CbCR safe harbour

GMTA
47(2)

Subsection 47(2) implements, in part, Article 8.2.1. of the Model Rules and Annex A, Chapter 1 of the Commentary.

Paragraph 47(2)(a) implements the definition "Transition Period" in the box at the beginning of Annex A, Chapter 1 of the Commentary as further explained in paragraph 24 of Annex A, Chapter 1 of the Commentary.

Subparagraph 47(2)(b)(i) implements the condition that a qualified country-by-country report must have been filed, in accordance with paragraph 8 of Annex A, Chapter 1 of the Commentary. Subparagraph 44(2)(b)(ii) implements paragraph 84 of Annex A, Chapter 1 of the Commentary (as introduced by Section 2.3.4. of the December 2023 Administrative Guidance), which allows MNE groups that are not required to file a country-by-country report to access the transitional CbCR safe harbour, provided they include in their GIR the relevant information they would otherwise have been required to include in their country-by-country report.

Paragraph 47(2)(c) implements the "once out, always out" approach in respect of the transitional CbCR safe harbour, as set out under paragraphs 27 and 28 of Annex A, Chapter 1 of the Commentary.

Paragraph 47(2)(d) implements the exclusion from the transitional CbCR safe harbour that applies where an MNE group makes an election under subsection 37(1) in respect of a jurisdiction that has an eligible distribution tax system, as described in paragraphs 55 to 57 of Annex A, Chapter 1 of the Commentary.

Paragraph 47(2)(e) implements the applicable tests, as described in paragraph 15 of Annex A, Chapter 1 of the Commentary.

Paragraph 47(2)(f) implements the requirement for "Consistent use of data" in Annex A, Chapter 1 of the Commentary (as introduced by Section 2.3.1 of the December 2023 Administrative Guidance).

Paragraph 47(2)(g) implements paragraphs 82 and 83 of Annex A, Chapter 1 of the Commentary (as introduced by Section 2.3.3 of the December 2023 Administrative Guidance), regarding the treatment of intragroup payments.

De minimis threshold test

GMTA
47(3)

Subsection 47(3) implements the "De minimis test" in paragraphs 16 to 18 of Annex A, Chapter 1 of the Commentary.

Simplified effective tax rate test

GMTA
47(4)

Subsection 47(4) implements the definitions "Transition Rate", in the box at the beginning of Annex A, Chapter 1 of the Commentary, and "Simplified ETR test", in paragraph 20 of Annex A, Chapter 1 of the Commentary.

Simplified effective tax rate

GMTA
47(5)

Subsection 47(5) implements the simplified ETR calculation in paragraph 19 of Annex A, Chapter 1 of the Commentary.

Routine profits test

GMTA
47(6)

Subsection 47(6) implements the "Routine profits test" in paragraphs 21 to 23 of Annex A, Chapter 1 of the Commentary.

Application to joint ventures

GMTA
47(7)

Subsection 47(7) implements the rule for applying the transitional CbCR safe harbour to joint ventures, in paragraph 1 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 32 to 35) of Annex A, Chapter 1 of the Commentary.

Application to minority-owned constituent entities

GMTA
47(8)

Subsection 47(8) implements the rule for applying the transitional CbCR safe harbour to minority-owned constituent entities, as set out in paragraphs 40 and 41 of Annex A, Chapter 1 of the Commentary.

Tax-neutral ultimate parent entities

GMTA
47(9)

Subsection 47(9) implements the rule for applying the transitional CbCR safe harbour with respect to tax-neutral ultimate parent entities, in paragraph 2 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 45 to 57) of Annex A, Chapter 1 of the Commentary.

Tax-neutral ultimate parent entities – adjustments

GMTA
47(10)

Subsection 47(10) implements the rule for applying the transitional CbCR safe harbour with respect to tax-neutral ultimate parent entities, in paragraph 3 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 45 to 57) of Annex A, Chapter 1 of the Commentary.

Investment entities as standard constituent entities

GMTA
47(11)

Subsection 47(11) implements, in part, the rules for applying the transitional CbCR safe harbour with respect to investment entities and insurance investment entities, in paragraphs 5 to 7 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 58 to 64) of Annex A, Chapter 1 of the Commentary.

Investment entities – amounts reflected in owners' jurisdiction

GMTA
47(12)

Subsection 47(12) implements, in part, the rules for applying the transitional CbCR safe harbour with respect to investment entities and insurance investment entities, in paragraphs 5 to 7 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 58 to 64) of Annex A, Chapter 1 of the Commentary.

Location of investment entities

GMTA
47(13)

Subsection 47(13) implements, in part, the rules for applying the transitional CbCR safe harbour with respect to investment entities and insurance investment entities, in paragraphs 5 to 7 of the box on "Treatment of Certain Entities and Groups" under paragraph 29 (and further explained in paragraphs 58 to 64) of Annex A, Chapter 1 of the Commentary.

Hybrid arbitrage arrangements

GMTA
47(14)

Subsection 47(14) implements paragraphs 91 to 97 of Annex A, Chapter 1 of the Commentary (as introduced by Section 2.6 of the December 2023 Administrative Guidance), concerning the treatment of hybrid arbitrage arrangements entered into after December 15, 2022, for the purposes of the transitional CbCR safe harbour. Subsection 47(14) sets out the adjustments that must be made to profit (loss) before income tax as a result of a deduction/non-inclusion arrangement or a duplicate loss arrangement, and the adjustments that must be made to qualifying income tax expense as a result of a deduction/non-inclusion arrangement.

Division 9
Transition Rules

Subdivision A
Tax Attributes on Transition

Transition – deferred tax assets and liabilities

GMTA
48(1)

Subsection 48(1) implements aspects of Article 9.1.1. of the Model Rules and paragraphs 6.1 to 6.3 in the Commentary to Article 9.1.1. of the Model Rules (as introduced by Section 4.1 of the February 2023 Administrative Guidance).

Subparagraph (a)(ii) implements, in part, paragraph 6.1 of the Commentary to Article 9.1.1. of the Model Rules (as introduced by Section 4.1 of the February 2023 Administrative Guidance).

Paragraph (b) implements, in part, paragraph 6.1 of the Commentary to Article 9.1.1. of the Model Rules (as introduced by Section 4.1 of the February 2023 Administrative Guidance).

The definitions "GloBE transition year" and "QDMTT transition year" are provided in subsection 2(1). Together with paragraphs 52(1)(c) and (d), they implement the "refreshing" transition year rule set out in paragraphs 118.49.1 and 118.49.2 in the Commentary to the definition "Transition Year" in Article 10.1. of the Model Rules (as introduced by Section 4 of the July 2023 Administrative Guidance, entitled "Transition Years").

Paragraph 48(1)(c) provides that the restrictions under paragraph 25(2)(a) and subsection 25(6) do not apply in respect of the deferred tax assets and deferred tax liabilities referred to in paragraph 48(1)(a). Consequently, the additions in computing the total deferred tax adjustment amount under variable B of the formula in subsection 25(1) also do not apply in respect of any such deferred tax liabilities.

Excluded deferred tax assets

GMTA
48(2)

Subsection 48(2) implements Article 9.1.2. of the Model Rules.

The phrase "taken into account in computing", used in clauses 48(2)(b)(i)(A) and (B), captures income or expense items that are factored into the calculation of income or profits, or GloBE income or loss, as the case may be.

An amount described in subparagraph 48(2)(b)(i) can be in respect of income or expense. An example of an expense that could give rise to an amount described in that subparagraph is an expense in respect of which a "super-deduction" is available in computing a constituent entity's taxable income under a jurisdiction's corporate income tax law. In that case, there would be an amount that is taken into account in computing the domestic taxable income of the constituent entity in a jurisdiction but that would not be taken into account in computing its GloBE income or loss (if its GloBE income or loss were determined).

An example of a situation at which subparagraph 48(2)(b)(ii) is directed is as follows:

Constituent Entity A, a member of a qualifying MNE group, is tax resident in Jurisdiction A (a jurisdiction with a qualified IIR). The corporate income tax law applicable in Jurisdiction A does not include capital gains in taxable income and allows for a carry-forward of tax losses. In Year 1, Constituent Entity A accrues a large capital gain as well as a business loss in an amount lower than the amount of the capital gain. Since Jurisdiction A does not tax capital gains, Constituent Entity A has a loss for domestic income tax purposes. However, for financial accounting purposes (and thus in computing GloBE income or loss), there would be net income, due to the capital gain. This permanent difference between tax and accounting results could give rise to a deferred tax asset, which is excluded under subparagraph 48(2)(b)(ii).

Valuation adjustments and accounting recognition adjustments

GMTA
48(3)

Subsection 48(3) implements an aspect of Article 9.1.1. of the Model Rules.

This subsection applies, for instance, in situations where a deferred tax asset in respect of a tax-deductible loss has not been reported (or has been reported at a lower amount) for accounting purposes as a result of an accounting recognition adjustment or valuation allowance.

Asset transfers before transferor transition year – conditions

GMTA
48(4)

Subsection 48(4) implements aspects of Article 9.1.3. of the Model Rules.

Asset transfers before transferor transition year – consequences

GMTA
48(5)

Subsection 48(5) implements aspects of Article 9.1.3. of the Model Rules and paragraphs 10.8 and 10.9 in the Commentary to Article 9.1.3. of the Model Rules (as introduced by Section 4.3 of the February 2023 Administrative Guidance).

Deemed transfer

GMTA
48(6)

Subsection 48(6) implements aspects of Article 9.1.3. of the Model Rules and paragraphs 10.3 to 10.7 in the Commentary to Article 9.1.3. of the Model Rules (as introduced by Section 4.3 of the February 2023 Administrative Guidance).

Interpretation – single-entity transaction

GMTA
48(7)

Subsection 48(7) implements aspects of Article 9.1.3. of the Model Rules and paragraph 10.4 in the Commentary to Article 9.1.3. of the Model Rules (as introduced by Section 4.3 of the February 2023 Administrative Guidance).

Interpretation – pre-existing deferred tax assets and liabilities

GMTA
48(8)

Subsection 48(8) implements aspects of Article 9.1.3. of the Model Rules and paragraph 10.8 in the Commentary to Article 9.1.3. of the Model Rules (as introduced by Section 4.3 of the February 2023 Administrative Guidance).

Election – non-application of paragraph (5)(a) and subparagraph (5)(b)(ii)

GMTA
48(9)

Subsection 48(9) implements aspects of Article 9.1.3. of the Model Rules and paragraph 10.10 in the Commentary to Article 9.1.3. of the Model Rules (as introduced by Section 4.3 of the February 2023 Administrative Guidance).

Subdivision B
Transitional Rates for the Substance-based Income Exclusion

Transitional rates for the substance-based income exclusion

GMTA
49(1)

Subsection 49(1) implements Article 9.2.1. of the Model Rules.

Idem

GMTA
49(2)

Subsection 49(2) implements Article 9.2.2. of the Model Rules.

Part 3 – Domestic Minimum Top-up Tax

Interpretation

GMTA
50

Section 50 sets out the purpose of Part 3 of the Act: to implement a qualified domestic minimum top-up tax that has qualified domestic minimum top-up tax safe harbour status (or "transitional qualified status", during the interim period pending a full peer review of the jurisdiction's law by the Inclusive Framework). Part 3 is intended to be interpreted in accordance with that purpose and, as provided in paragraph (b), consistently with the requirements that a domestic minimum top-up tax must meet in order to obtain "qualified" status and "safe harbour" status, as outlined in the Commentary and related Administrative Guidance (in particular, paragraphs 116 to 118.54 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules, as introduced in part by Section 5.1 of the February 2023 Administrative Guidance, and Sections 4 and 5 of the July 2023 Administrative Guidance).

Section 50 is intended to ensure that the general requirements for "qualified" status set out in paragraphs 116 and 118 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" – that the domestic minimum top-up tax must be implemented and administered in a way that is consistent with the outcomes provided for under the Model Rules and Commentary, and be functionally equivalent to the Model Rules – are met in relation to Part 3. As such, this section's function in relation to Part 3 of the Act is analogous to the function of subsection 3(1) in relation to Parts 1, 2 and (relevant portions of) Part 5, and the comments in the note to subsection 3(1) generally are equally applicable in relation to this section. For more information, see the note to subsection 3(1).

Domestic minimum top-up tax

GMTA
51(1)

Subsection 51(1) implements paragraphs 118.9 and 118.13 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by Section 5.1 of the February 2023 Administrative Guidance) and paragraphs 118.10 to 118.12 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by Section 4 of the July 2023 Administrative Guidance).

Relevant assumptions

GMTA
51(2)

This subsection serves a function in relation to subsection 51(1) that is analogous to the function of subsection 14(2) in relation to subsection 14(1) (the charging provision for the tax under Part 2 of the Act). For more information, see the note to subsection 14(1).

Definition of domestic top-up amount

GMTA
52(1)

Subsection 52(1) implements paragraphs 118.33 to 118.39 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by Section 5.1 of the February 2023 Administrative Guidance) and paragraphs 118.30 and 118.33.1 in that Commentary (as introduced by Section 4 of the July 2023 Administrative Guidance).

Paragraph (a) implements the exclusion for cross-border taxes, in accordance with paragraph 118.30 of that Commentary.

Paragraph (b) ensures that a constituent entity's domestic top-up amount is not reduced by the amount of any tax under subsection 51(1) (as would normally be the case in computing a top-up amount, by virtue of variable D of the formula in subsection 30(2)). This avoids circularity and is necessary to achieve an appropriate computation.

Paragraphs (c) and (d), together with the definitions "GloBE transition year" and "QDMTT" in subsection 2(1), implement the "refreshing" transition year rule set out in paragraphs 118.49.1 and 118.49.2 in the Commentary to the definition "Transition Year" in Article 10.1. of the Model Rules (as introduced by Section 4 of the July 2023 Administrative Guidance, entitled "Transition Years").

For the purposes of subclause 52(1)(d)(i)(A)(II), subsection 25(6) is considered to apply in a particular fiscal year where the amount of a deferred tax liability of the constituent entity (which has not yet reversed as of the particular fiscal year) is deducted from the adjusted covered taxes of the constituent entity for a prior fiscal year (for the purpose of applying subsection 31(1) in respect of that prior year) because of subsection 25(6).

Paragraph 52(1)(e) clarifies that, where an MNE group has elected the qualifying domestic minimum top-up tax safe harbour in respect of its Canadian-located constituent entities, that election is disregarded in computing those entities' domestic top-up amounts (to avoid those amounts being deemed to be nil). All other elections made by the MNE group in its GIR are taken into account for the purposes of determining domestic minimum top-up amounts as they would be for determining top-up amounts under Part 2 of the Act.

Application – joint ventures

GMTA
52(2)

Subsection 52(2) implements paragraphs 118.7 and 118.8 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by Section 5.1 of the February 2023 Administrative Guidance) and paragraph 118.8 in that Commentary (as introduced by Section 4 of the July 2023 Administrative Guidance).

Definitions – initial phase of international activity

GMTA
53(1)

"initial phase of international activity year"

This definition implements Article 9.3.2. of the Model Rules.

"net book value"

This definition implements the definition "Net Book Value of Tangible Assets" in Article 10.1. of the Model Rules.

"reference jurisdiction"

This definition implements Article 9.3.3. of the Model Rules.

Tangible assets – permanent establishments

GMTA
53(2)

Subsection 53(2) implements aspects of the definition "Tangible Assets" in Article 10.1. of the Model Rules.

Initial phase of international activity – exclusion

GMTA
53(3)

Subsection 53(3) implements paragraph 118.51 in the Commentary to the definition "Qualified Domestic Minimum Top-up Tax" in Article 10.1. of the Model Rules (as introduced by Section 4 of the July 2023 Administrative Guidance). This subsection, in effect, adopts "Option two" as set out in that paragraph of the Commentary.

While Article 9.3. of the Model Rules applies for the purposes of the UTPR, it is adapted in section 53 to apply for the purposes of Part 3 of the Act.

The expression "subject to tax", used in paragraph (a), does not mean that the subject entity necessarily has a tax liability in a given fiscal year, but rather that it is within scope of a qualified IIR and thus potentially liable.

Part 4 – Anti-Avoidance

General anti-avoidance rule

GMTA
54

Section 54 provides that the general anti-avoidance rule in section 245 of the Income Tax Act is applicable for the purposes of the Act, with necessary modifications.

Part 5 – General Provisions, Administration and Enforcement

Part 5 sets out rules related to the administration and enforcement of the Act.

Definitions

GMTA
55(1)

The definitions in subsection 55(1) apply for the purposes of Part 5 of the Act.

"Agency"

The definition "Agency" provides that the term refers to the Canada Revenue Agency, which was continued as a body corporate from the Canada Customs and Revenue Agency by subsection 4(1) of the Canada Revenue Agency Act.

"assessment"

The definition "assessment" provides that the term refers to an assessment or a reassessment under this Act.

"bank"

The definition "bank" provides that the term refers to a "bank" or an "authorized foreign bank", as defined in section 2 of the Bank Act, that is not subject to the restrictions and requirements referred to in subsection 524(2) of the Bank Act.

"bankrupt"

The definition "bankrupt" provides that the term has the same meaning as in section 2 of the Bankruptcy and Insolvency Act.

"business number"

The definition "business number" provides that the term refers to any number (other than a Social Insurance Number) used by the Minister of National Revenue to identify a person for the purposes of this Act.

"Canadian filing entity"

"Canadian filing entity" is defined, for the purposes of the Act, as being an entity appointed under subsection 61(3). 

"Commissioner"

The definition "Commissioner" provides that the term refers to the Commissioner of Revenue, as appointed under section 25 of the Canada Revenue Agency Act, except for in certain specified provisions in which that term is used in a different context.

"designated filing entity"

The definition "designated filing entity" implements the corresponding definition in Article 10.1. of the Model Rules.

"designated local entity"

The term "designated local entity" is defined, for the purposes of the Act, as being an entity appointed under paragraph 60(3)(a).

"designated notification entity"

The term "designated notification entity" is defined, for the purposes of the Act, as being an entity appointed under paragraph 60(5)(a).

"GIR due date"

The definition "GIR due date" implements the filing deadlines for the GIR in Articles 8.1.6. and 9.4.1. of the Model Rules (as elaborated by Section 5 of the December 2023 Administrative Guidance).

"GIR exchange date"

The definition "GIR exchange date" implements a portion of Article 8.1.2. of the Model Rules and reflects the additional timeframes allowed for exchange of GIR information between competent authorities as expounded in the Multilateral Competent Authority Agreement on the Exchange of GloBE Information developed by the Inclusive Framework on BEPS.

Subsection 2(7) provides an interpretation rule for determining whether a constituent entity or joint venture entity is considered to be "subject to" a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax (including the one implemented in Part 3), which is relevant in interpreting clauses (b)(i)(A) and (B) of this definition.

"judge"

The definition "judge" provides that the term refers to, in respect of any matter, a judge of a superior court having jurisdiction in the province in which the matter arises, or a judge of the Federal Court.

"official"

The definition "official" provides that the term refers to a person who is employed in the service of, who occupies a position of responsibility in the service of, or who is engaged by or on behalf of, His Majesty in right of Canada or a province, or a person who was previously in any such role. This definition is referenced in several provisions that delegate powers to the Agency to administer the Act (e.g., inspections)

"person"

The definition "person" in subsection 55(1) expands on the definition of the same term in subsection 2(1), such that the term encompasses all entities.

"qualifying competent authority agreement"

The definition "qualifying competent authority agreement" implements the corresponding definition in Article 10.1. of the Model Rules.

"qualifying foreign filing entity"

The definition "qualifying foreign filing entity" implements a portion of Article 8.1.2. of the Model Rules and the dissemination approach outlined in Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (Pillar Two), published by the OECD on July 13, 2023.

"record"

The definition "record" is relevant for Division 7 of Part 5, which provides that taxpayers have obligations to keep records to show compliance with the Act. "Record" is defined as any material on which representations, in any form, of information or concepts are recorded or marked and that is capable of being read or understood by an individual or a computer system or other device. This includes both physical and electronic records.

Person resident in Canada

GMTA
55(2)

Subsection 55(2) provides rules relating to residence in Canada for the purposes of the administrative provisions of the Act. A person's residence status for Canadian tax purposes ordinarily depends on criteria established by case law. However, this subsection provides that, in certain circumstances, a person is deemed to be resident in Canada whether or not that person would be considered as such under the default common law rules.

Paragraph 55(2)(a) deems a corporation to be resident in Canada if it is incorporated in Canada (and not continued elsewhere) or continued in Canada. Under paragraph 55(2)(b), a partnership (or other unincorporated body as listed in the paragraph) is deemed to be resident in Canada if a majority of its members having management and control of it are resident in Canada. Under paragraph 55(2)(c), a labour union carrying on union activities in Canada and having a local union or branch in Canada is deemed to be resident in Canada. Finally, paragraph 55(2)(d) provides that individuals who are deemed to be resident in Canada under any of paragraphs 250(1)(a) to (f) of the Income Tax Act are also deemed to be resident in Canada for the purposes of Part 5 of the Act. This includes "sojourners" who spend a total of 183 days or more in Canada over the course of a year.

Residence in Canada is relevant for Canadian filing entity status under subsection 61(3), requirements to provide foreign-based information under subsection 119(2) and for subsection 124(9) which provides for various extensions to the limitation period for the collection of a tax debt.

Arm's length

GMTA
55(3)

Subsection 55(3) emulates, to some extent, subsection 251(1) of the Income Tax Act by stating the default position that it is a question of fact whether unrelated persons deal with each other at arm's length (paragraph (b)) and the implicit corollary to that position, being that related persons are deemed to not deal with each other at arm's length regardless of whether they do or do not as a matter of fact (paragraph (a)).

Related persons

GMTA
55(4)

Subsection 55(4) refers to subsection 6(2) of the Excise Act, 2001 (which in turn references and adapts subsections 251(2) to (6) of the Income Tax Act) in order to identify whether persons are considered to be related to each other for the purposes of Part 5 of this Act.

Administration or enforcement

GMTA
55(5)

Subsection 55(5) clarifies that, for greater certainty, a reference in Part 5 to "administration or enforcement" of this Act includes the collection of any amount payable under this Act. This ensures that certain actions that may be taken in the course of "administration or enforcement" may be taken in the course of collection.

Partnerships

GMTA
55(6)

Subsection 55(6) deems the acts of a person done in the capacity of a member of a partnership to be done by the partnership (and not the person) for the purposes of Part 5.

Division 1
Duties of Minister

Division 1 of Part 5 sets out rules regarding the duties of the Minister of National Revenue in administering the Act.

Minister's duty

GMTA
56

Section 56 specifies that the Minister is responsible for the administration and enforcement of the Act and that the Commissioner may exercise the powers and perform the duties of the Minister under the Act.

Staff

GMTA
57(1)

Subsection 57(1) provides for the appointment or employment of persons necessary for administering and enforcing the Act.

Delegation of powers

GMTA
57(2)

Subsection 57(2) provides that the Minister may authorize certain persons to exercise the powers and perform the duties of the Minister under the Act, including judicial or quasi-judicial powers or duties.

Administration of oaths

GMTA
58

Section 58 provides that the Minister can designate persons to administer oaths and take and receive affidavits, declarations and affirmations for the purposes of (or incidental to) the administration or enforcement of the Act. Any such person would have, for those purposes, the powers of a commissioner for administering oaths or taking affidavits.

Waiving the filing of documents

GMTA
59

Section 59 provides that the Minister may waive a requirement for a person to file a form or other document (other than a return or a form, or other document, with respect to an election) or to provide information, if that form or document must be filed in the form and manner  prescribed by the Minister or if that information is prescribed by the Minister. This section preserves the right of the Minister to require a taxpayer, whose requirement was waived under this section, to file the form or document or provide the information at a later date.

Division 2
Returns

Division 2 of Part 5 sets out rules regarding when and how a taxpayer must file a GIR return, or a Part 2 or Part 3 return, including how to appoint a designated local entity to file a GIR on behalf of all of the constituent entities of an MNE group that are located in Canada or to appoint a Canadian filing entity (in respect of an MNE group) to file a Part 2 or Part 3 return on behalf of all persons who would otherwise have been required to file that return in respect of the MNE group.

GIR filing obligation

GMTA
60(1)

Subsection 60(1) implements a portion of Article 8.1.1. and 8.1.2. of the Model Rules, providing that, in certain circumstances, one or more constituent entities of a qualifying MNE group that are located in Canada must file a GIR, in respect of the qualifying MNE group for a fiscal year, in prescribed manner with the Minister by the GIR due date for the fiscal year.

If the MNE group has a designated filing entity located in Canada for the fiscal year, that entity must file the GIR with the Minister. If there is no designated filing entity located in Canada, then the ultimate parent entity must file the GIR with the Minister if it is located in Canada. If the MNE group has neither a designated filing entity nor an ultimate parent entity located in Canada for the fiscal year, then paragraph 60(1)(c) provides that all the MNE group's constituent entities that are located in Canada must file the GIR with the Minister if certain further conditions set out in subparagraphs (c)(ii) and (iii) are satisfied, which generally relate to whether the Minister will otherwise receive the GIR directly or indirectly from a constituent entity located in a foreign jurisdiction.

The condition under subparagraph 60(1)(c)(ii) tests whether the MNE group has a qualifying foreign filing entity for the fiscal year, which means the ultimate parent entity or designated filing entity of the MNE group that is located in a foreign jurisdiction and that is obligated to file a GIR with the tax authority of the foreign jurisdiction, provided that the foreign jurisdiction has a qualifying competent authority agreement that is in effect, and to which Canada is a party, on or before the GIR exchange date for the fiscal year, such that the Minister will receive the GIR indirectly through exchange of information with the tax authority of the foreign jurisdiction.

If the MNE group does not have a qualifying foreign filing entity, the condition under subparagraph 60(1)(c)(iii) tests whether the ultimate parent entity or the designated filing entity of the MNE group that is located in a foreign jurisdiction has filed a GIR, that is complete or substantially complete, directly with the Minister on or before the GIR due date. If not (and the condition in subparagraph 60(1)(c)(ii) also is not met), all the MNE group's constituent entities that are located in Canada must file the GIR with the Minister.

If more than one constituent entity of an MNE group located in Canada is required to file a GIR under paragraph 60(1)(c), paragraph 60(3)(b) allows the MNE group to appoint a designated local entity to file the GIR on behalf of all the constituent entities located in Canada.    

GIR filing obligation - failure to exchange

GMTA
60(2)

Subsection 60(2) implements a portion of Article 8.1.1. and 8.1.2. of the Model Rules providing for local filing by an MNE group's constituent entities located in Canada (or the designated notification entity, if one had been appointed under subsection 60(5)) in situations where a GIR in respect a qualifying MNE group, containing all of the required information in accordance with the content and dissemination approach of the standardized GIR published by the OECD, was expected to be filed by a qualifying foreign filing entity and provided to the Minister through exchange of information but is not received by the GIR exchange date deadline. Paragraph (b) provides that in order for this local filing obligation to apply, the Minister must notify the constituent entities of the MNE group that are located in Canada, or the designated notification entity if such an entity has been appointed, that the Minister has not received the GIR and require it to be filed by one or more of those entities within 30 days of the notification.

GIR - appointment of a designated local entity

GMTA
60(3)

Paragraph 60(3)(a) implements the corresponding definition "designated local entity" in Article 10.1. of the Model Rules and a portion of Article 8.1.1. of the Model Rules, providing that a single constituent entity of a qualifying MNE group that is located in Canada can be appointed, in the GIR filed with the Minister on or before the GIR due date for the fiscal year, to fulfil the GIR filing requirements under paragraph 60(1)(c) on behalf of all the constituent entities of the qualifying MNE group that are located in Canada.

Paragraph 60(3)(b) requires the designated local entity to file the GIR, in respect of the MNE group for the year, with the Minister on or before the GIR due date for the fiscal year and, if this condition is satisfied, deems the GIR to have been filed at that time by each of the other constituent entities of the MNE group that are located in Canada.

GIR notification requirement

GMTA
60(4)

Subsection 60(4) implements a portion of Article 8.1.3. of the Model Rules, providing that each constituent entity of a qualifying MNE group that are located in Canada must notify the Minister of the identity of any qualifying foreign filing entity and the jurisdiction in which the qualifying foreign filing entity is located. Subsection 60(5) allows an MNE group to appoint a single constituent entity located in Canada (referred to as a "designated notification entity") to provide this notification to the Minister on behalf of all the constituent entities located in Canada.

GIR - appointment of a designated notification entity

GMTA
60(5)

Paragraph 60(5)(a) defines "designated notification entity" and implements a portion of Article 8.1.3. of the Model Rules, providing that a single constituent entity of a qualifying MNE group that is located in Canada can be appointed to fulfil the notification requirements under subsection 60(4) on behalf of all the constituent entities of the qualifying MNE group that are located in Canada.

Paragraph 60(5)(b) requires the designated notification entity to provide the notification to the Minister, in respect of the MNE group for the fiscal year, on or before the GIR due date for the fiscal year and, if this condition is satisfied, deems the notification to have been provided at that time by each of the other constituent entities of the MNE group that are located in Canada.

Part 2 return

GMTA
61(1)

Subsection 61(1) provides that a person with a liability for Part 2 tax for a fiscal year must file a return (separate and distinct from the GIR) with the Minister on or before the GIR due date for that year. This return must be in prescribed form and include the person's estimate (i.e., the result of the person's own calculations ) of the person's liability for Part 2 tax for the fiscal year.

Part 3 return

GMTA
61(2)

Subsection 61(2) fulfils the same function as subsection 61(1) does, except in respect of a person's liability for Part 3 tax.

For more information, see the note on subsection 61(1).

Canadian filing entity

GMTA
61(3)

Subsection 61(3) stipulates that a Canadian-resident person – that is required to file a return under subsection 61(1) or (2) because of its relation to a particular MNE group – may be appointed as the Canadian filing entity in respect of that return (with the duty of filing the return on behalf of all persons that would otherwise also be required to file it in respect of the MNE group, as described in paragraph 61(4)(a)).

This appointment is made, with the consent of the Canadian filing entity candidate, by designation in the return. Since the designation is made in the return itself, the designation and the filing of the return will generally take place simultaneously such that the duty of the Canadian filing entity to file on behalf of the other persons should arise and be discharged in one action.

Consequences – Canadian filing entity

GMTA
61(4)

Subsection 61(4) provides that, if a Canadian filing entity is appointed under subsection 61(3) in respect of a return for a fiscal year, that person must file the return on or before the GIR due date on behalf of all the other persons that would otherwise be required to file it in respect of the same MNE group and, if  that person complies with that obligation in the time provided, the return will be deemed to have been filed by each of the Canadian filing entity and the other persons at the time of filing.

Consequences – appointment

GMTA
61(5)

Subsection 61(5) outlines certain consequences resulting from the appointment of a Canadian-located designated filing entity, a designated local entity or a Canadian filing entity, namely:

• The appointed entity acts on behalf the persons in respect of which it is appointed;
• The actions of the appointed entity are deemed to be those of the represented persons; and
• The Minister must make any communication in respect of the represented persons to both the appointed entity and the represented persons.

Demand for return

GMTA
62

Section 62 provides that the Minister may require, by way of a demand, any taxpayer to file a return for any fiscal year. The demand may specify a reasonable time for the filing.

Trustees, etc.

GMTA
63

Section 63 creates a requirement for a trustee in bankruptcy, etc., in respect of a person to file a return in place of the person if that return has not been filed.

Division 3
Payments

Division 3 of Part 5 sets out rules regarding the payment of tax and joint liability.

Payments

GMTA
64

Section 64 sets out the due date for tax payments under the Act. The tax payable under the Act in respect of a fiscal year must be paid on or before the GIR due date for the fiscal year.

Manner and form of payments

GMTA
65

Section 65 provides that payments under the Act must be made to the account of the Receiver General for Canada in the manner and form prescribed by the Minister.

Part 2 – Assessment of another constituent entity

GMTA
66(1)

Subsection 66(1) allows the Minister to assess any constituent entity of an MNE group that is located in Canada for any amount owed, under Part 2 or 5 of the Act, by any other constituent entity of the group located in Canada. Upon such an assessment, the assessed constituent entity becomes jointly and severally, or solidarily, liable with the other constituent entity to pay the amount assessed, and the provisions of Part 5 (for example, the Appeals and Objections Divisions) apply to the assessed constituent entity with any modifications that the circumstances require.

Limitation

GMTA
66(2)

Subsection 66(2) clarifies that subsection 66(1) does not limit the liability of the other constituent entity in any way. Even though the assessed constituent entity may be made jointly and severally, or solidarily, liable for the other constituent entity's debts, the other constituent entity would remain liable for those same debts (as well as any other debts it might have under the Act). Additionally, subsection 66(2) clarifies that subsection 66(1) does not limit the interest that may be payable by the assessed constituent entity in respect of the amount that it is made jointly liable for.

Part 3 – joint and several, or solidary, liability

GMTA
66(3)

Subsection 66(3) provides that a constituent entity of an MNE group that is located in Canada is jointly and severally (or solidarily) liable for the liabilities that another constituent entity (or joint venture entity) of that MNE group has under Part 3 or Part 5, and that the provisions of Part 5 apply to the constituent entity with any modifications that the circumstances require.

Part 3 – joint and several, or solidary, liability of joint venture entities

GMTA
66(4)

Subsection 66(4) provides that a joint venture entity located in Canada is jointly and severally (or solidarily) liable for the liabilities that another joint venture entity of the same joint venture group has under Part 3 or Part 5, and that the provisions of Part 5 apply to the joint venture entity with any modifications that the circumstances require.

Partnerships – joint and several, or solidary, liability

GMTA
66(5)

Subsection 66(5) provides for the joint and several (or solidary) liability of members (and former members) of a partnership for liabilities of that partnership under the Act, with certain limitations.

Partnerships – tiers

GMTA
66(6)

Subsection 66(6) deems a person (including a partnership) – that is a member of a partnership which, in turn, is a member of another partnership – to be a member of that other partnership. This rule applies for the purposes of section 66.

Trusts – joint and several, or solidary, liability

GMTA
66(7)

Subsection 66(7) provides for the joint and several (or solidary) liability of trustees of a trust for liabilities of that trust under the Act.

Persons liable in respect of other entities

GMTA
66(8)

Subsection 66(8) provides for the joint and several (or solidary) liability, of all persons that are liable to pay an amount under this Act in respect of a particular constituent entity for a fiscal year, for anyliability of that constituent entity or of any of those persons under this Act for the year.

This subsection is intended to apply joint and several liability to persons that are liable to pay any amount in respect of a constituent entity because that constituent entity is not a person (e.g., if the constituent entity is considered to be a contractual arrangement under Canadian private law). This subsection is directed at the persons described in subparagraph 14(1)(b)(ii) or 51(1)(c)(ii). For clarity, this subsection is not intended to apply to persons that merely include some or all of the net income or loss of a constituent entity in their financial accounting income (and may, therefore, be liable for tax under this Act in respect of that income) as a result of the application of the flow-through rules in subsection 17(6).

Liability is also conferred on the constituent entity itself (even though that entity is not a person). Making a non-person constituent entity liable ensures, among other things, that subsection 66(3) applies joint and several liability to the other constituent entities of the MNE group that are located in Canada.

Discharge of liability

GMTA
66(9)

Where a person is assessed in respect of an amount owed by another person under the Act, subsection 66(9) clarifies the effect of a payment made by either the assessed person or the other person on account of the debt. Under paragraph (a), where the assessed person makes a payment, it discharges the joint liability to the extent of the payment. Under paragraph (b), where the other person makes a payment, the payment discharges the joint liability only to the extent that the payment reduces the liability to an amount below that which the assessed person was made liable under the provision that made the assessed person joint and severally, or solidarily, liable.

Definition of transaction

GMTA
67(1)

Subsection 67(1) provides that for the purposes of sections 67 and 102, "transaction" includes an arrangement or event.

Tax liability — property transferred not at arm's length

GMTA
67(2)

Subsection 67(2) facilitates collection. It applies in situations where:

• there has been a non-arm's length transfer of property at less than fair market value; and
• the transferor had a pre-existing liability under the Act, or a liability under the Act in respect of the fiscal year in which the transfer occurred.

If these conditions are met, subsection 67(2) provides that the transferee is jointly and severally, or solidarily, liable in respect of amounts owed by the transferor under the Act, to the extent that the fair market value of the property transferred exceeded the value of the consideration given by the transferee for the property at the time of the transfer. The calculation also takes into account any amounts assessed under similar joint liability provisions in other Acts, and any payments made by the transferor to reduce those liabilities.

Subsection 67(5) provides for assessment of the liability under subsection 67(2).

Limitation

GMTA
67(3)

Subsection 67(3) clarifies that subsection 67(2) does not limit the liability of the transferor in any way. Even though the transferee may be made jointly and severally, or solidarily, liable for the transferor's debts, the transferor would remain liable for those same debts (as well as any other debts it might have under the Act). Additionally, subsection 67(3) clarifies that subsection 67(2) does not limit the interest that may be payable by the transferee in respect of the amount that it is made jointly liable for.

Fair market value of undivided interest or right

GMTA
67(4)

Subsection 67(4) specifies that where the property transferred includes an undivided interest or right in a property, and that interest or right is expressed as a proportionate interest or right, the fair market value of that interest or right is deemed to be equal to the same proportion of the fair market value of that property. For example, if the transferred property included a 50% interest in a real estate property, the fair market value of that interest would be 50% of the fair market value of the full property.

Assessment

GMTA
67(5)

Subsection 67(5) allows the Minister to assess a transferee who is liable for an amount under subsection 67(2) and clarifies that the administrative provisions of the Act (for example, the Appeals and Objections Divisions) apply to the transferee with any modifications that the circumstances require. Such an assessment may be made at any time without regard to the general seven-year limitation period for assessments.

Rules applicable

GMTA
67(6)

Where a transferee is assessed under subsection 67(5), subsection 67(6) clarifies the effect of a payment made by either the transferee or the transferor on account of the debt. Under paragraph (a), where the transferee makes a payment, it discharges the joint liability to the extent of the payment. Under paragraph (b), where the transferor makes a payment, the payment discharges the joint liability only to the extent that the payment reduces the liability to an amount below that which the transferee was made liable for under subsection 67(2).

Anti-avoidance rules

GMTA
67(7)

Subsection 67(7) contains anti-avoidance rules to address planning which seeks to circumvent the application of section 67. Paragraph (a) addresses planning that attempts to circumvent the application of section 67 by avoiding the requirement that property be transferred between persons that do not deal at arm's length. This paragraph deems, for the purposes of section 67, a transferor and transferee of property to not be dealing at arm's length at all times in a transaction or series of transactions involving the transfer if

• at any time during the period beginning immediately before the transaction or series of transactions and ending immediately after the transaction or series of transactions, the transferor and transferee do not deal at arm's length; and
• it is reasonable to conclude that one of the purposes of undertaking or arranging the transaction or series of transactions is to avoid joint and several, or solidary, liability of the transferee and transferor for an amount payable under the Act.

Paragraph (b) addresses planning that attempts to circumvent the application of section 67 by avoiding the requirement that the transferor have a pre-existing liability under the Act, or a liability under the Act in respect of the fiscal year in which the property is transferred. This paragraph provides that an amount that the transferor is liable to pay under the Act (including, for greater certainty, an amount that the transferor is liable to pay under section 67, regardless of whether the Minister has made an assessment under subsection 67(5) for that amount) is deemed to have become payable in the fiscal year in which the property was transferred, if it is reasonable to conclude that one of the purposes of the transfer of property is to avoid the payment of a future debt under the Act by the transferor or transferee.

Paragraph (c) addresses planning that attempts to effectively avoid section 67 through a transaction or series of transactions that reduce the fair market value of consideration given for the property transferred in order to render all or a portion of a tax debt of the transferor uncollectible.

In applying section 67, variable A of the formula in paragraph 67(2)(a) is intended to limit the joint and several, or solidary, liability in respect of any tax liability of the transferor for the year in which the transfer took place, or any preceding year. Variable A limits the joint and several, or solidary, nature of the transferor's tax liability to the extent that, at the time of the transfer, the fair market value of the transferred property exceeds the fair market value of the consideration received.

Paragraph (c) ensures that the fair market value of consideration given for the transferred property remains relevant in determining the extent to which joint and several, or solidary, liability applies under section 67, including

• at the time that the consideration was given; and
• throughout the period that begins immediately before and ends immediately after the transaction or series of transactions that includes the transfer of property.

For this purpose, paragraph (c) deems the amount determined under variable A in paragraph 67(2)(a) to be the greater of

• the amount otherwise determined for variable A without reference to this anti-avoidance rule; and
• the amount by which the fair market value of the property at the time of the transfer exceeds either
• the lowest fair market value of the consideration (that is held by the transferor) given for the property at any time during the period beginning immediately prior to the transaction or series of transactions and ending immediately after the transaction or series of transactions, or
• if the consideration is in a form that is cancelled or extinguished during the above-noted period, subclause (B)(I) provides a continuity rule that applies in cases where there is substituted property and subclause (B)(II) provides that in other cases the amount determined for variable B is nil.

For greater certainty, the reference to consideration that is in a form that is cancelled or extinguished in the description of variable B in the formula in subparagraph 67(7)(c)(ii) is intended to ensure an appropriate extension of the joint and several, or solidary, liability in situations where property given as consideration (for example, a promissory note) is subsequently cancelled or extinguished for proceeds below the fair market value at the time it is given.

Payment in Canadian dollars

GMTA
68(1)

Subsection 68(1) specifies that persons are required to make their payments under the Act to the Receiver General in Canadian dollars.

Exchange rate

GMTA
68(2)

Subsection 68(2) provides the methodology for converting amounts payable under the Act that are otherwise denominated in a currency other than Canadian dollars, into Canadian dollars. This methodology uses the average of the Bank of Canada daily exchange rates for the fiscal year in respect of that non-Canadian dollar currency. If a Bank of Canada rate is not available for a particular day or days, for the purposes of applying the currency conversion methodology, a daily rate of exchange acceptable to the Minister may be used in respect of those days.

Exception

GMTA
68(3)

Subsection 68(3) allows the Minister to waive the requirement under subsection (1) and receive payment in other currencies. Where such a waiver is granted, the amount is to be converted from Canadian dollars to that other currency using a rate of exchange that is acceptable to the Minister.

Definition of electronic payment

GMTA
69(1)

Subsection 69(1) provides that the term "electronic payment" means any payment to the Receiver General for Canada that is made through electronic services offered by a financial institution, as described by paragraphs 69(2)(a) to (d), or by any electronic means specified by the Minister.

Electronic payment

GMTA
69(2)

Subsection 69(2) imposes a requirement to make payments to the Receiver General for Canada through electronic means where the amount of the payment is $10,000 or more, unless the payor cannot reasonably pay the amount in that manner.

Small amounts owing by a person

GMTA
70(1)

Subsection 70(1) provides that if the total amount payable by a person under the Act does not exceed $2.00, then the amount is deemed to be nil and the person is not required to pay the amount.

Small amounts payable to a person

GMTA
70(2)

Subsection 70(2) provides that the Minister can deduct small amounts under $2.00 payable to a person from any amount payable by that person. If there are no amounts payable by the person available to apply the small amount against, then the small amount is deemed to be nil, and the Minister is not required to pay it.

Division 4
Interest

Division 4 of Part 5 sets out rules related to interest on unpaid amounts.

Compound interest

GMTA
71(1)

Subsection 71(1) provides that if a person fails to pay an amount to the Receiver General as and when required under the Act, the person must pay interest on the amount. This interest will be compounded daily and charged for the period of time beginning on the day following the day on which the amount was required to be paid and ending on the day on which the amount is paid. The applicable interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require.

Payment of compounded interest

GMTA
71(2)

Subsection 71(2) provides that where interest compounded on a particular day remains unpaid at the end of the following day, the unpaid interest will be added, at the end of the particular day, to the total amount unpaid. Interest will then be charged for the following day on the total amount that was unpaid at the end of the particular day, including the unpaid interest.

Period when interest not payable

GMTA
71(3)

Subsection 71(3) provides that if the Minister serves a demand that a person pay all amounts owing under the Act, and the person pays by the date specified in the demand, the Minister must waive any interest on the amounts between the date of the demand and the day of payment.

Interest and penalty amounts of $25 or less

GMTA
71(4)

Subsection 71(4) allows the Minister to cancel interest and penalty amounts of $25 or less in respect of a fiscal year where the person who owes the interest or penalties has otherwise paid off all amounts owing under the Act in respect of the year.

Waiving or cancelling interest

GMTA
72(1)

Subsection 72(1) allows the Minister to waive or cancel interest payable by a person. However, interest on an amount payable in respect of a fiscal year cannot be waived or cancelled after ten calendar years have passed since the end of that fiscal year. Any assessment that is necessary to take into account the waiver, cancellation or reduction of the interest may be made, regardless of the general seven-year limitation period for assessments. It should be noted that the Minister has full discretion over the use of this waiver. The Minister need not waive or cancel interest unless the Minister considers it appropriate to do so.

Interest on amounts waived or cancelled

GMTA
72(2)

Subsection 72(2) provides that where the Minister has waived or cancelled an interest amount under subsection 72(1), and the person has already paid the interest, the Minister must refund that interest amount. It also provides that the Minister must pay interest on the refund if that refund is not made within 30 days of receipt of the person's application to waive or cancel the interest amount (or, if there is no such application, if that refund is not made on the day on which the Minister waived, cancelled or reduced the interest amount). The relevant interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require.

Division 5
Administrative Charge under Financial Administration Act

Division 5 of Part 5 sets out a rule relating to administrative fees.

Dishonoured instruments

GMTA
73

Section 73 incorporates the fee structure currently imposed under the Financial Administration Act (FAA) when a financial instrument (e.g., a cheque) becomes dishonoured.

This section deems a charge that becomes payable under the FAA in respect of an instrument used to pay or settle an amount payable under this Act, to also be an amount payable under this Act. Further, the interest and collection provisions under the FAA will not apply to the charge and the debt established by the FAA in respect of the charge is deemed to be extinguished once the charge and applicable interest is paid under this Act. By deeming a charge for a dishonoured instrument to be an amount payable under this Act, the charge becomes subject to the interest and collection provisions under this Act in Divisions 4 and 15 of Part 5.

Division 6
Refunds

Division 6 of Part 5 sets out various rules regarding refunds including rules relating to payments made in error, set-offs, the effect of unfulfilled filing requirements and overpayments of refunds by the Minister. Refunds resulting from assessments are further addressed in Division 8.

Statutory recovery rights

GMTA
74

Section 74 limits a person's recovery rights when they seek to recover money that has been paid to His Majesty in right of Canada as an amount payable under the Act. A person cannot recover such an amount, except where specifically provided by this Act or by the Financial Administration Act.

Refund — payment in error

GMTA
75(1)

Section 75 provides rules regarding the refund of amounts that were paid to His Majesty in right of Canada in error. Subsection 75(1) sets out the requirement for His Majesty to refund an amount paid by a person by mistake if that amount has been taken into account by His Majesty as taxes, penalties, interest or other amount under this Act, provided that the person applies for the refund within two years of the date they paid the amount. If a refund is not pursued within two years, the amount will be the property of the Crown and cannot be recovered by the person.

This section solely applies to amounts that were paid to the Minister in error, and does not apply to overpayments of amounts payable under the Act. For example, if a person were to pay an amount to the incorrect tax account, or in respect of a year that has already been assessed and paid in full, or were to pay tax despite not being required to under this Act, this section allows the person to recover the amount (provided that the person does not otherwise owe amounts to the Crown or have unfulfilled filing requirements, see Notes to sections 76 and 77).

The refund rules that apply to the overpayment of tax can be found throughout the Act:

• refund of overpayment on assessment or reassessment: Section 84;
• refund of overpayment after successful objection: Subsection 87(11); and
• refund of overpayment after successful appeal: Section 97.

Form and contents of application

GMTA
75(2)

Subsection 75(2) specifies that an application for refund under subsection 75(1) must be made in the form and manner, and containing the information, prescribed by the Minister.

Determination

GMTA
75(3)

Subsection 75(3) provides that when the Minister receives an application for a refund under subsection 75(1) of an amount paid in error, the Minister must consider the application without delay, and determine the amount of the refund, if any, payable to the applicant.

Minister not bound

GMTA
75(4)

Subsection 75(4) provides that when the Minister is considering an application in order to make a determination under subsection 75(3), the Minister is not bound by any application made (including the application made under subsection 75(1)) or information provided by or on behalf of any person.

Notice and payment

GMTA
75(5)

Subsection 75(5) sets out the actions the Minister must take after making a determination under subsection 75(3). The Minister must send to the applicant a "notice of determination", and if any refund is payable, must pay the refund.

Objections and appeals

GMTA
75(6)

Subsection 75(6) provides that the rules for objections and appeals following assessments also apply to determinations of refunds under subsection 75(3) by deeming such determinations to be assessments for the purposes of those rules and for certain other subsections. This allows a taxpayer to object to or appeal from a determination of a refund.

Interest on payment

GMTA
75(7)

If the Minister is required to pay a refund to an applicant under subsection 75(5), subsection 75(7) provides that the Minister might also be required to pay interest on the refund. Interest would accrue during the period, if any, from the day that is 30 days after the day the application was received to the day the refund is paid to the applicant.

Determination valid and binding

GMTA
75(8)

Subsection 75(8) provides that a determination of a refund under subsection 75(3) is deemed to be valid and binding (subject to being varied or vacated on an objection or appeal) despite any irregularity, informality, error, defect or omission in the notice of the determination or in any proceeding under the Act relating to the determination.

Restriction — application to other debts

GMTA
76

Section 76 allows the Minister to apply a refund against another amount owing by a person, rather than paying the refund to the person. The refund can be applied against any liability that the person owes to His Majesty in right of Canada or a province. It should be noted that this includes liabilities under other statutes, such as the Excise Tax Act. This section is not limited to refunds of amounts paid in error; rather, it applies to all refunds under this Act.

Restriction — unfulfilled filing requirements

GMTA
77

Section 77 sets out a restriction on refunds. An amount cannot be refunded by the Minister until the person to which the refund is owed has filed with the Minister all returns and other records of which the Minister has knowledge that are required to be filed under the Act, the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act, the Greenhouse Gas Pollution Pricing Act, the Underused Housing Tax Act, and the Select Luxury Items Tax Act. This section is not limited to refunds of amounts paid in error; rather, it applies to all refunds under this Act.

Restriction — trustees

GMTA
78

Section 78 provides a rule that applies if a trustee is appointed under the Bankruptcy and Insolvency Act to act in the administration of the estate of a bankrupt. In that case, a refund that the bankrupt was entitled to claim before the appointment of the trustee cannot be paid after the appointment unless the conditions of this section are met. The first condition is that all returns required under the Act to be filed before the appointment have been filed. The second condition is that all amounts required under the Act to be paid by the bankrupt have been paid.

Overpayment of refund or interest

GMTA
79

Section 79 addresses a scenario where a person received an amount of refund or interest that they were not entitled to. This section requires the person to repay the amount to the Receiver General. The Minister may assess them for the amount, and such an assessment is not subject to the general seven-year limitation period for assessments and can be made at any time. The repayment is due on the date the amount was paid to the person and the compound interest provisions will apply to the repayment.

Division 7
Records and Information

Division 7 of Part 5 sets out rules regarding the keeping of records relating to the Act.

Keeping records

GMTA
80(1)

Subsection 80(1) provides that a person must keep all records that are necessary to determine whether the person has complied with the Act. If a person is a constituent entity of an MNE group, the person must also keep any of that person's records that are necessary to determine whether other constituent entities of the group have complied with this Act.

This section does not require each constituent entity in a group to obtain and keep all the records of all other constituent entities in the group. Rather, entities must keep records that they possess, in the ordinary course of their business, that are pertinent to those other group members. In determining whether a person's records are "necessary to determine whether other constituent entities of the group have complied with this Act" the following factors should be considered:

• whether the record is relevant to the calculation of any component of the top-up amount or domestic top-up amount of any constituent entity in the MNE group; and
• whether the record is relevant to compliance by any entity in the MNE group with its administrative obligations under the Act, such as payment and filing.

This subsection is not intended to require taxpayers to keep detailed transaction-by transaction data, except where the provisions of the Act clearly envisage that such information is required. In certain contexts, the quantity of this data would be burdensome and impractical to keep, and would go beyond what is "necessary" to determine whether the person has complied with the Act. Rather, it is expected that taxpayers would have systems to generate sufficiently detailed summarized data to support the calculations they have made for the purposes of the Act, and would maintain sufficient controls over the recording of this summarized data to ensure that it accurately represents the underlying individual transactions.

For example, records must be maintained in respect of an MNE group containing sufficient information to allow the Minister to verify if the tax benefits of any tax credits or tax losses received by a constituent entity of the MNE group are qualified flow-through tax benefits where the provisions governing such benefits apply.

Minister may specify information

GMTA
80(2)

Subsection 80(2) allows the Minister to specify the form that a record is to take and any information that the record must contain.

Electronic records

GMTA
80(3)

Subsection 80(3) specifies that where a record that a person must keep is stored in an electronic format, the person must also keep any equipment and software that is necessary to make the record intelligible. This equipment and software must be available for the same period of time that the record must be kept.

General period for retention

GMTA
80(4)

Subsection 80(4) sets the general record retention period under the Act as eight years after the end of the fiscal year to which the records relate. Exceptions to this general retention period may be prescribed by regulation.

Exception — general period for retention

GMTA
80(5)

Subsection 80(5) sets out an exception to the general retention period. Where a person does not file a return for a fiscal year as and when required, and later files the return, the records relating to that year must be retained for eight years from the date on which the return is filed, rather than from the end of the year.

Inadequate records

GMTA
80(6)

Subsection 80(6) allows the Minister to require a person to keep any records that the Minister specifies if the person has failed to keep adequate records.

Objection or appeal

GMTA
80(7)

Subsection 80(7) sets out a rule that, in some circumstances, would extend the general retention period. Where a person required to keep records serves a notice of objection, or is a party to an appeal or a reference (that is, a reference to Tax Court – for instance, that made under section 95), they must retain the records that relate to the objection, appeal or reference until it is completed. This may result in a retention period longer than eight years, but will not result in a retention period shorter than eight years, even if the matter is resolved before the expiry of the 8-year period.

Demand by Minister

GMTA
80(8)

Subsection 80(8) allows the Minister to serve a demand on any person to require that person to keep records and retain them for any period specified in the demand. Such a demand may be served where Minister is of the opinion that is necessary for the administration or enforcement of the Act. This demand must be served personally, sent by confirmed delivery service (e.g., registered mail) or sent electronically.

Permission for earlier disposal

GMTA
80(9)

Subsection 80(9) allows a person to dispose of records prior to the expiry of the general 8-year retention period if permission for their disposal was obtained from the Minister.

Requirement to provide information or records

GMTA
81(1)

Subsection 81(1) allows the Minister to require any person to provide information or records to the Minister by serving a notice on the person. This notice must be served personally, sent by confirmed delivery service (e.g., registered mail) or sent electronically. The Minister may serve such a notice for any purpose related to the administration and enforcement of this Act.

Unnamed persons

GMTA
81(2)

While the Minister may require any information or record to be provided under subsection 81(1), subsection 81(2) requires that court authorization be obtained under subsection 81(3) if the information or records sought pertain to one or more unnamed persons.

Judicial authorization

GMTA
81(3)

Subsection 81(3) provides that a judge may grant the authorization required under subsection 81(2), and in granting the authorization, the judge may impose any conditions the judge considers appropriate.

Time period not to count

GMTA
81(4)

Subsection 81(4) extends the general seven-year limitation period for assessments in certain circumstances. If a person is served a notice of requirement under subsection 81(1), and applies for judicial review of that requirement, the period of time from the day of the application for judicial review to the day on which the application is finally disposed of will not be counted for the purposes of the seven-year limitation period.

Division 8
Assessments

Division 8 of Part 5 sets out rules relating to the assessment of tax and other amounts under the Act.

Assessment

GMTA
82(1)

Subsection 82(1) authorizes the Minister to assess a person for its liability under the Act. It also allows the Minister to vary an assessment, reassess a person, or make any additional assessments that might be required, regardless of any previous assessment of the same matter. Assessments can be issued by the Minister for all amounts that might be payable under the Act, including tax, interest, penalties, refund overpayments and amounts for which a person is jointly liable.

GAAR – notice of determination

GMTA
82(2)

Subsection 82(2) applies if, in consequence of the general anti-avoidance rule in section 54 applying, an amount is determined in respect of a person or entity (e.g., the total revenue of an MNE group). Where this subsection applies, a notice of determination must be sent to the relevant person or entity and the notice is to be subject to the administrative provisions of the Act as if it were a notice of assessment.

Liability not affected

GMTA
82(3)

Subsection 82(3) provides that the liability of a person to pay an amount under the Act is not affected by an incorrect or incomplete assessment or by a lack of an assessment.

Minister not bound

GMTA
82(4)

Subsection 82(4) provides that the Minister is not bound by any return, application, or information provided by or on behalf of any person. The Minister may make an assessment despite any return, application or information provided, or even in cases where no return, application or information is provided. In the latter case, the Minister can assess based on any information the Minister may have.

Determination of refunds

GMTA
82(5)

If, during an assessment, the Minister determines that a person has paid an amount in error, subsection 82(5) allows the Minister to consider whether a section 75 refund is payable to the person even if the person has not made an application under section 75. If the Minister determines that a section 75 refund is payable, the Minister is deemed to have received such an application from the person on the date of the notice of assessment. Additionally, the requirement for the application to be made within two years is deemed to have been met.

Irregularities

GMTA
82(6)

Subsection 82(6) specifies that no assessment can be vacated or varied on an appeal solely because of an irregularity, informality, error, defect or omission by any person in the observance of any directory provision of the Act.

Notice of assessment

GMTA
83(1)

Subsection 83(1) requires the Minister to send a notice of assessment to any person that has
been assessed under this Act.

Payment of remainder

GMTA
83(2)

Subsection 83(2) provides that an amount that remains unpaid at the time of assessment is due as of the date of the notice of assessment. This date is relevant for the calculation of interest on the unpaid amount.

Payment by Minister on assessment

GMTA
84

Section 84 sets out rules relating to refunds resulting from assessments. Such a refund might be payable, for example, when a person has overpaid tax, or when the assessment is a reassessment and the tax payable on reassessment is determined to be lower than that of the original assessment. Where such a refund is payable, the Minister is required to pay the refund.

The Minister must also pay interest on the refund for the period of time beginning on the later of 30 days following the GIR due date for the fiscal year in respect of which the assessment is made and the day the overpayment was made, and ending on the day on which the refund is paid to the person. The applicable interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require..

Limitation period for assessments

GMTA
85(1)

Subsection 85(1) sets out a seven-year limitation period for assessing tax or other amounts payable under the Act. In general, an assessment must not be made by the Minister more than seven years after the later of the day on which the return (to which the amount payable relates) was filed and the day on which the GIR was received by the Minister.

Exception — objection or appeal

GMTA
85(2)

Subsection 85(2) contains certain exceptions to the general limitation period for assessments. It provides that the Minister can assess a person at any time if:

• an assessment is needed to give effect to a decision on an objection or appeal;
• an appellant provides written consent to dispose of an appeal (e.g., by entering into a settlement with the Minister); or
• an assessment is needed to give effect to an alternative basis or argument advanced by the Minister under subsection 85(5).

Exception — neglect or fraud

GMTA
85(3)

Where a person has made a misrepresentation that is attributable to neglect, carelessness or wilful default, or has committed fraud in filing a return or an application for a refund or in providing information under the Act (either on their own behalf or on behalf of another person), subsection 85(3) provides that the general seven-year limitation period for assessments does not apply. In these cases, the Minister may make an assessment at any time.

Exception — other period

GMTA
85(4)

If the Minister determines on assessment that an amount paid in respect of one fiscal year was in fact payable in respect of another fiscal year, subsection 85(4) allows the Minister to make an assessment for that other year, even if, for that other year, the general seven-year limitation period for assessments has passed.

This subsection prevents the issuance of excessive refunds where, for example, the Minister determines that a refund is owed in respect of a particular fiscal year because the amount paid is actually attributable to tax owing in respect of an earlier fiscal year that may otherwise be barred from reassessment. In such a case, the Minister could, under this subsection, issue a reassessment of tax owing in respect of that earlier year beyond the general limitation period for assessments while also issuing a refund for the later year.

Alternative basis or argument

GMTA
85(5)

Subsection 85(5) provides that after the general seven-year limitation period for assessments has expired, the Minister may, subject to certain limitations, advance alternative arguments in support of an assessment.

Limitation — alternative basis or argument

GMTA
85(6)

Subsection 85(6) provides that a reassessment under subsection 85(5), to give effect to an alternative basis or argument advanced by the Minister, cannot be for an amount greater than the total amount of the original assessment. This would allow, for example, reduced liability in relation to one source included in the computation of an assessment to be offset by an increased liability in relation to another source. It should be noted that this limitation only applies to reassessments made after the general limitation period for assessments. If the Minister reassesses a person to give effect to an alternative basis or argument and that reassessment is made within the general limitation period for assessments, the Minister may reassess the person for an amount greater than the total amount of the original assessment.

Exception — alternative basis or argument

GMTA
85(7)

Subsection 85(7) sets out an exception to the limitation in subsection 85(6). It provides that subsection 85(6) does not limit the Minister's ability to reassess any portion of an amount determined on reassessment to be payable that the Minister would, if this Act were read without reference to subsection 85(5), be entitled to reassess after the general limitation period for assessments.

Filing waiver

GMTA
85(8)

Subsection 85(8) provides that a person may waive the general seven-year limitation period for assessments by filing a waiver in the form and manner prescribed by the Minister. The waiver must specify the matter to which it relates, and the period of time for which it is to apply.

Revoking waiver

GMTA
85(9)

Subsection 85(9) specifies how a waiver under subsection 85(8) may be revoked. A person that has filed a waiver may revoke it by filing a notice of revocation in the form and manner prescribed by the Minister. The waiver remains in effect for 180 days after the day on which the notice of revocation is filed.

Exception — waiver

GMTA
85(10)

Subsection 85(10) contains an exception to the general seven-year limitation period for assessments where a person has filed a waiver under subsection 85(8). The Minister can issue an assessment in respect of the matter covered in a waiver at any time while the waiver is in effect. If a waiver is revoked under subsection 85(9), the waiver will remain in effect for 180 days following the revocation, and the Minister may make an assessment during that time.

Assessment deemed valid and binding

GMTA
86

Section 86 provides that an assessment made by the Minister is deemed to be valid and binding (subject to being varied or vacated on an objection or appeal) despite any irregularity, informality, error, defect or omission in the assessment or in any proceeding under the Act relating to the assessment.

Division 9
Objections to Assessment

Division 9 of Part 5 sets out rules regarding how and when a person can make an objection to an assessment made by the Minister.

Objections to assessment

GMTA
87(1)

Subsection 87(1) provides that a person can object to an assessment by filing a notice of objection in the form and manner prescribed by the Minister. This notice must be filed within 90 days after the date of the notice of assessment, and must set out the reasons for the objection and all relevant facts.

Issue to be decided

GMTA
87(2)

Subsection 87(2) specifies that a notice of objection must meet three criteria set out in paragraphs (a) through (c). It must (a) reasonably describe each issue to be decided, (b) specify the relief sought in respect of each issue and (c) provide the facts and reasons relied on by the person making the objection.

Late compliance

GMTA
87(3)

If a notice of objection does not include the information required under paragraph 87(2)(b) or (c), subsection 87(3) allows the Minister to request the missing information. If the person provides the requested information within 60 days from the day the Minister makes the request, the person is deemed to have complied with subsection 87(2). It should be noted that this exception only applies to paragraphs (b) and (c) of subsection 87(2). If a person fails to comply with paragraph (a), and does not reasonably describe each issue to be decided, the notice of objection will be invalid.

Limitation on objections

GMTA
87(4)

If the Minister issues a particular assessment following a notice of objection to an earlier assessment, subsection 87(4) sets out the conditions under which a person may object to an issue in the particular assessment. The person may file a notice of objection in respect of the issue if:

• in the notice of objection to the earlier assessment, the person complied with the requirements in subsection 87(2) with respect to that issue; and
• the person is objecting only with respect to the relief sought for that issue as specified in the original notice of objection.

Application of limitations

GMTA
87(5)

If the Minister issues a particular assessment following a notice of objection to an earlier assessment, subsection 87(5) provides that subsection 87(4) does not limit a person's right to object to an issue in the particular assessment if that issue was not part of the earlier assessment.

Limitation on objections

GMTA
87(6)

Subsection 87(6) provides that where a person has waived the right of objection in respect of an issue, the person is not permitted to make an objection in respect of that issue.

Acceptance of objection

GMTA
87(7)

Subsection 87(7) allows the Minister to accept a notice of objection even if the notice was not filed in the form and manner prescribed by the Minister.

Consideration of objection

GMTA
87(8)

When the Minister receives a notice of objection to an assessment, subsection 87(8) requires the Minister to, without delay, reconsider the assessment and either vacate, confirm or vary it or make a reassessment.

Waiving reconsideration

GMTA
87(9)

Subsection 87(9) provides that if a person wishes to appeal directly to the Tax Court of Canada, and requests that the Minister not reconsider the assessment objected to, the Minister may confirm the assessment without reconsideration.

Notice of decision

GMTA
87(10)

After the Minister reconsiders an assessment under subsection 87(8), or confirms it under subsection 87(9), subsection 87(10) requires the Minister to, in writing, notify the person objecting to the assessment of the Minister's decision.

Payment by Minister on objection

GMTA
87(11)

Subsection 87(11) sets out rules relating to refunds resulting from variations of assessments following objections. If the variation of an assessment following an objection establishes that a person has paid an amount in excess of the amount determined by that varied assessment to be payable, the Minister must pay the person a refund. The Minister must also pay interest on the refund for the period of time beginning on the later of 30 days following the GIR-due date for the fiscal year to which the assessment relates and the day the excess was paid, and ending on the day on which the refund is paid to the person. The applicable interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require.

Extension of time by Minister

GMTA
88(1)

Subsection 88(1) provides that if a person does not file an objection within the 90-day time limit set out in subsection 87(1), the person may apply to the Minister to extend the time for filing a notice of objection. This subsection also allows the Minister to grant that application.

Contents of application

GMTA
88(2)

Subsection 88(2) provides that an application to extend the time limit for objecting must set out the reasons for which the notice of objection was not filed on time.

How application made

GMTA
88(3)

Subsection 88(3) specifies how an application to extend the time limit for objecting can be made. Such an application must be made to the Assistant Commissioner of the Appeals Branch of the Canada Revenue Agency. The application must be made in the form and manner prescribed by the Minister and must be accompanied by a copy of the notice of objection.

Defect in application

GMTA
88(4)

Subsection 88(4) allows the Minister to accept an application to extend the time limit for objecting even where the application was not made in accordance with subsection 88(3).

Duties of Minister

GMTA
88(5)

Subsection 88(5) provides that when the Minister receives an application to extend the time limit for objecting, the Minister must, without delay, consider the application. The Minister must then either grant or refuse it, and, in writing, notify the person of the decision.

Date of objection if application granted

GMTA
88(6)

Subsection 88(6) specifies that where an application to extend the time limit for objecting is granted, the notice of objection is deemed to have been filed on the day of the decision of the Minister.

Conditions for grant of application

GMTA
88(7)

Subsection 88(7) provides that an application to extend the time limit for objecting can only be granted if certain conditions are met. The application must be made within one year of the expiration of the time for objecting and as soon as circumstances permit. The person applying must demonstrate that within the 90-day time limit for objecting, the person was unable to act or give a mandate to act in their name or had a bona fide intention to object to the assessment. The person must also give the reasons why it would be just and equitable to grant the application.

Division 10
Appeal

Division 10 of Part 5 sets out rules regarding how and when a person can apply to the Tax Court of Canada to extend the time limit for objecting to an assessment, how and when a person can appeal an assessment made by the Minister, the potential consequences of an appeal and the process for referring questions that arise under the Act to the Tax Court for determination.

Extension of time by Tax Court of Canada

GMTA
89(1)

Subsection 89(1) specifies that if a person has made an application under section 88 to extend the time limit for objecting, and the Minister has either refused the application or 90 days have passed and the Minister has not yet notified the person of a decision, the person can apply to the Tax Court of Canada to have the application granted.

When application may not be made

GMTA
89(2)

Subsection 89(2) provides a time limit for applying to the Tax Court of Canada under subsection 89(1) to extend the time limit for objecting. The application must be made within 30 days from the day the Minister's decision under subsection 88(5) is sent to the person.

How application made

GMTA
89(3)

Subsection 89(3) specifies how an application to the Tax Court of Canada under subsection 89(1) can be made. Such an application must be made by filing in the Registry of the Tax Court of Canada, in accordance with the Tax Court of Canada Act, the documents referred to in subsection 88(3) and the notification, if any, referred to in subsection 88(5).

Copy to Commissioner

GMTA
89(4)

Subsection 89(4) provides that the Tax Court of Canada must send a copy of the application received under subsection 89(3) to the Commissioner.

Powers of Tax Court of Canada

GMTA
89(5)

Subsection 89(5) provides that the Tax Court of Canada may either dismiss or grant an application received under subsection 89(3). If the application is granted, the Court is permitted to impose any terms that it considers just or to order that the notice of objection be deemed to be a valid objection as of the date of the order.

Conditions for grant of application

GMTA
89(6)

Subsection 89(6) provides that an application to extend the time limit for objecting can only be granted if certain conditions are met. The original application to the Minister under subsection 88(1) must have been made within one year after the expiration of the time for objecting and as soon as circumstances permitted. The person applying must demonstrate that within the 90-day time limit for objecting, the person was unable to act or give a mandate to act in their name or had a bona fide intention to object to the assessment. The person must also give the reasons why it would be just and equitable to grant the application.

Appeal to Tax Court of Canada

GMTA
90(1)

Subsection 90(1) permits a person to appeal an assessment to the Tax Court of Canada. In order to do so, the person must have already filed a notice of objection to the assessment and either had the assessment confirmed or been reassessed by the Minister, or received no decision from the Minister within 180 days of filing the notice.

No appeal

GMTA
90(2)

Subsection 90(2) provides that an appeal under subsection 90(1) of an assessment must be made within 90 days of the sending of the notice that the Minister has reassessed or confirmed the assessment.

Amendment of appeal

GMTA
90(3)

Subsection 90(3) allows the Tax Court to authorize an appellant to amend an appeal to include any further relevant assessment.

Extension of time to appeal

GMTA
91(1)

Subsection 91(1) provides that if a person does not make an appeal under section 90 within the 90-day time limit set out in subsection 90(2), the person may apply to the Tax Court to extend the time limit for appealing. This subsection also allows the Tax Court of Canada to accept that application and extend the time for appealing, imposing any terms that it considers just.

Contents of application

GMTA
91(2)

Subsection 91(2) provides that an application to extend the time limit for appealing must set out the reasons why the appeal was not instituted on time.

How application made

GMTA
91(3)

Subsection 91(3) specifies how an application to extend the time limit for appealing can be made. Such an application must be made by filing in the Registry of the Tax Court of Canada the application and the notice of appeal, in accordance with the Tax Court of Canada Act.

Copy to Deputy Attorney General of Canada

GMTA
91(4)

Subsection 91(4) requires the Tax Court of Canada to send a copy of an application to extend the time limit for appealing to the office of the Deputy Attorney General of Canada.

Conditions for order to be made

GMTA
91(5)

Subsection 91(5) provides that an application to extend the time limit for appealing can only be granted if certain conditions are met. The application under subsection 91(1) must be made within one year of the expiration of the time for appealing, and as soon as circumstances permit. The person applying must demonstrate that within the 90-day time limit for appealing, the person was unable to act or give a mandate to act in their name or had a bona fide intention to appeal. The person must also give the reasons why it would be just and equitable to grant the application. Lastly, there must be reasonable grounds for the appeal.

Limitation on appeals

GMTA
92(1)

Subsection 92(1) provides that an appeal to the Tax Court of Canada may only pertain to an issue specified in the notice of objection to an assessment, as required under subsection 87(2), and the relief sought in the notice with respect to the issue. However, these restrictions do not apply if the issue was raised for the first time in the Minister's reconsideration of the assessment.

No appeal if waiver

GMTA
92(2)

Subsection 92(2) provides that a person is not permitted to appeal in respect of an issue for which the right of objection or appeal has been waived by the person.

Institution of appeals

GMTA
93

Section 93 provides that appeals to the Tax Court of Canada are to be instituted in accordance with the Tax Court of Canada Act.

Disposition of appeal

GMTA
94(1)

Subsection 94(1) allows the Tax Court to dispose of an appeal by either dismissing the appeal or allowing the appeal and either vacating the assessment, varying the assessment or referring the assessment back to the Minister for reconsideration and reassessment.

Partial disposition of appeal

GMTA
94(2)

Subsection 94(2) allows the Tax Court to dispose of a particular issue in an appeal without disposing of the entire appeal (where the appeal raises more than one issue). The Tax Court may dispose of a particular issue by either dismissing the appeal with respect to that issue, or allowing it and either varying the assessment or referring the assessment back to the Minister for reconsideration and reassessment.

Disposal of remaining issues

GMTA
94(3)

Subsection 94(3) clarifies that where a particular issue in an appeal has been disposed of under subsection 94(2), the remainder of the appeal may continue.

Appeal to Federal Court of Appeal

GMTA
94(4)

Subsection 94(4) permits an appeal to the Federal Court of Appeal in respect of an issue that has been disposed of in a partial disposition under subsection 94(2). Such a disposition can be appealed to the Federal Court as if it were a final judgment of the Tax Court.

References to Tax Court of Canada

GMTA
95(1)

Subsection 95(1) allows the Minister and another person to agree to have a question relating to an assessment or proposed assessment determined by the Tax Court of Canada.

Time during consideration not to count

GMTA
95(2)

Subsection 95(2) provides that the period of time during which a question is being determined under subsection 95(1) is not counted for the purposes of computing the limitation periods for issuing assessments, filing notices of objection and instituting appeals.

Reference of common questions to Tax Court

GMTA
96(1)

Subsection 96(1) provides that the Minister may apply to the Tax Court of Canada to determine a question concerning transactions or occurrences that are common to assessments or proposed assessments of two or more persons. Unlike section 95, this application does not require the agreement of those persons.

Contents of application

GMTA
96(2)

Subsection 96(2) requires an application for a determination of a common question to set out certain information. This information includes the question in respect of which the Minister is requesting a determination, the names of the persons that would be bound by the determination and the facts and reasons on which the Minister relies and on which the Minister intends to base the assessments.

Service

GMTA
96(3)

Subsection 96(3) requires a copy of the application for a determination of a common question to be served by the Minister on each person named in the application, as well as on any person that, in the opinion of the Tax Court, is likely to be affected by the determination of the question.

Determination of question by Tax Court

GMTA
96(4)

Subsection 96(4) provides that the Tax Court may determine a common question if the Tax Court is satisfied that the question will affect assessments of two or more persons. The Tax Court may make an order naming the persons in respect of which the question will be determined. If no person named in the order has appealed, the Tax Court may determine the question in any manner that it considers appropriate. However, if one or more of the persons named in the order have appealed, the Tax Court may, before determining the question, make any order or orders that it considers appropriate joining a party or parties to the appeals.

Determination final and conclusive

GMTA
96(5)

Subsection 96(5) provides that a determination by the Tax Court of a common question is final and conclusive for the purposes of any assessments of the persons named in the order made by the Tax Court under subsection 96(4).

Appeal

GMTA
96(6)

Subsection 96(6) provides that where a question has been determined by the Tax Court of Canada, the determination may be appealed to the Federal Court of Appeal.

Parties to appeal

GMTA
96(7)

Subsection 96(7) provides that any parties bound by a determination by the Tax Court under subsection 96(4) are parties to any appeal from that determination.

Time during consideration not to count

GMTA
96(8)

Subsection 96(8) provides that certain periods of time (described in subsection 96(9)) during which a common question is being determined by the Tax Court are not counted for the purposes of computing limitation periods for issuing assessments, filing notices of objection and instituting appeals.

Excluded periods

GMTA
96(9)

Subsection 96(9) sets out the periods of time that are not counted in computing the limitation periods described in subsection 96(8). In the case of a person named in an order of the Tax Court, the period of time starts on the day the application is served on the person and ends on the day on which the determination becomes final and conclusive. In the case of any other person, the period of time starts on the day the application is served on the person and ends on the day the person is served with a notice that the person has not been named in an order of the Tax Court.

Payment by Minister on appeal

GMTA
97(1)

Where a court disposes of an appeal by referring an assessment back to the Minister for reconsideration and reassessment, or by varying or vacating an assessment, subsection 97(1) requires the Minister to, without delay, make a reassessment in accordance with the Court's decision (unless otherwise directed not to by the person involved). The Minister must also refund any overpayment resulting from the variation, vacation or reassessment. This subsection also clarifies that the Minister is allowed to appeal a decision of the Tax Court or the Federal Court of Appeal; however, the Minister must make the reassessment and refund any overpayment whether or not an appeal has been instituted.

The Minister may also repay any tax, interest, or penalties or surrender any security.

Interest on refund

GMTA
97(2)

Subsection 97(2) provides that where the Minister pays a refund following the disposition of an appeal, the Minister must also pay interest for the period of time beginning on the later of 30 days following the GIR due date for the fiscal year to which the assessment under appeal relates and the day on which the overpayment was made, and ending on the day on which the refund is paid. The applicable interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require.

Division 11
Penalties

Division 11 of Part 5 sets out the rules regarding penalties under the Act.

Failure to file a GIR

GMTA
98(1)

Subsection 98(1) implements a portion of Article 8.1.8. of the Model Rules, providing for a penalty for failing to satisfy the GIR filing obligation under subsection 60(1) or subparagraph 60(3)(b)(i), or failing to satisfy the notification requirements under subsection 60(4) or subparagraph 60(5)(b)(i), on or before the GIR due date for the fiscal year. This penalty can apply where the GIR is filed on time but is not complete or substantially complete.

Failure to file a GIR after notification

GMTA
98(2)

Subsection 98(2) implements a portion of Article 8.1.8. of the Model Rules, providing for a penalty for failing to satisfy the GIR filing obligation within 30 days of the Minister making the notification under paragraph 60(2)(b) that it has not received the GIR.

GIR transitional penalty relief

GMTA
98(3)

Subsection 98(3) implements the transitional penalty relief in connection with the GIR filing obligations and notification requirements as outlined in Chapter 3 of the document Safe Harbours and Penalty Relief: Global Anti-Base Erosion Rules (Pillar Two), published  by the Inclusive Framework in December 2022. It provides for penalties otherwise applicable under subsections 98(1) and (2) during the transitional period (i.e., fiscal years that begin before January 1, 2027 and end before July 1, 2028) to be waived where the Minister judges that an entity has used reasonable measures to ensure the correct application of the provisions of the Act.

Failure to file return under section 61

GMTA
99(1)

Subsection 99(1) sets out a penalty that applies if a taxpayer fails to file a return for a fiscal year as and when required by section 61 of this Act. The amount of the penalty is based on the tax for that fiscal year that was unpaid when the return was required to be filed and on the number of months that the return remains outstanding. Specifically, the penalty will first be calculated by taking 5% of the taxpayer's unpaid tax in respect of the fiscal year. An additional amount will be added equal to 1% of that unpaid tax multiplied by the number of complete months (not exceeding 12) that the return remains outstanding. A person is liable to pay this penalty if the person misses a due date for filing a return required under section 61 of this Act. The Minister is not required to first send a demand for the return.

Repeated failure to file — conditions

GMTA
99(2)

Subsection 99(2) provides three conditions to determine whether a taxpayer is subject to a repeated failure to file penalty (calculated under subsection 99(3)). This penalty will apply if:

• the taxpayer failed to file a return in respect of the fiscal year;
• the taxpayer failed to comply with a demand sent by the Minister to file the return; and
• the taxpayer was previously liable to pay a failure to file penalty under subsections 99(1) in respect of any of the three preceding fiscal years.

Repeated failure to file — penalty

GMTA
99(3)

Subsection 99(3) sets out the rules for calculating a repeated failure to file penalty. If a taxpayer meets the conditions in subsection 99(2), the penalty is 10% of the taxpayer's tax in respect of the fiscal year that was unpaid when a return was required to be filed for the year, plus an additional 2% of that unpaid tax multiplied by the number of complete months, not exceeding 20, that the return remains outstanding.

False statements or omissions

GMTA
99(4)

Subsection 99(4) sets out a penalty that applies if a person knowingly, or under circumstances amounting to gross negligence, is involved in making a false statement or omission in a return or other document. The penalty is equal to the greater of $5,000 and 25% of the amount by which any amount payable under this Act was reduced, or by which any payment that may be obtained under this Act was increased, as a result of the false statement or omission.

Failure to provide information

GMTA
100

Section 100 sets out a penalty that applies where a person fails to provide any information or record as and when required under this Act or as prescribed by regulation. The penalty is equal to $2,500 for each such failure, in addition to any other penalty payable by the person.

If the information required to be provided is in respect of another person due to a requirement to provide foreign-based information (section 119) or a general requirement to provide records or information (subsection 81(1)), the penalty will not apply if a reasonable effort was made to obtain the information. It should be noted that this exception does not apply if the person is required to keep the information in respect of another person under subsection 80(1) (that is, if the information is the person's records relating to another constituent entity of its group). Similarly, the exception does not apply if a designated entity is required to provide information in respect of the entities that it represents since it is acting on behalf of those entities with respect to the requirement.

Unreasonable appeal

GMTA
101

Section 101 sets out a penalty that may apply if the Tax Court of Canada determines that there were no reasonable grounds for an appeal and that one of the main purposes of the appeal was to defer the payment of any amount payable under this Act. This penalty can only apply on application by the Minister. Where it applies, the amount of the penalty is set by the Court and cannot exceed 10% of the amount that was in controversy and for which the Court found that there were no reasonable grounds for the appeal. This penalty can apply regardless of whether the Court awards costs.

Definitions

GMTA
102(1)

Section 102 sets out a penalty for section 67 avoidance planning. Subsection (1) provides definitions that apply for the purposes of section 102.

"planning activity"

The definition "planning activity" provides that the term generally includes organizing or creating an arrangement, entity, plan, or scheme. It also includes participating (directly or indirectly) in the selling of an interest in, or the promotion of, an arrangement, entity, plan,
property or scheme.

"section 67 avoidance planning"

The definition "section 67 avoidance planning" provides that the term refers to "planning activity" (see commentary above) by a transferor or transferee that consists of a "section 67 avoidance transaction" (see commentary below) that has as one of its purposes the reduction of a transferee's joint and several, or solidary, liability for tax payable under this Act by a transferor. This is planning activity that involves the removal of property of a taxpayer with the intention of rendering all or a portion of a current or future tax liability uncollectible, while attempting to circumvent the application of section 67.

"section 67 avoidance transaction"

The definition "section 67 avoidance transaction" is relevant for the definition "section 67 avoidance planning". A section 67 avoidance transaction is a transaction or series of transactions in respect of which the conditions set out in paragraph (a) or (b) of the definition are met.

Paragraph (a) refers to conditions in paragraphs 67(7)(a) and (b). For more information, see the note to subsection 67(7). Paragraph (b) is relevant where subsection 67(7) applied to the transaction. In that case, it looks to whether the amount determined under subparagraph 67(7)(c)(ii) exceeds the amount determined under subparagraph 67(7)(c)(i).

"transferee"

The definition "transferee" provides that the term refers to "transferee" as used in subsections 67(2) and (7).

"transferor"

The definition "transferor" provides that the term refers to "transferor" as used in subsections 67(2) and (7).

Section 67 avoidance penalty

GMTA
102(2)

Subsection 102(2) provides for a penalty for a transferor or transferee who engages in, participates in, assents to or acquiesces in a planning activity that the transferor or transferee, as the case may be, knows is "section 67 avoidance planning" (discussed above), or would reasonably be expected to know is section 67 avoidance planning but for circumstances amounting to gross negligence. The penalty is equal to the lesser of

• 50% of the joint and several, or solidary, liability payable under this Act (determined without reference to this subsection), which was sought to be avoided through the planning; and
• $100,000.

General penalty

GMTA
103

Section 103 imposes a $2,500 penalty where a person fails to comply with any provision of this Act (or its regulations) for which no other penalty is specified.

Payment of penalties

GMTA
104

Section 104 specifies the due dates for penalties under the Act. The due dates are:

• in the case of a penalty for a failure to file a return (sections 98 and 99), the day on which the taxpayer was required to file the return; and
• in any other case, the day on which the notice of the original assessment of the penalty was sent.

These due dates are relevant for the calculation of interest.

Waiving or canceling penalties

GMTA
105(1)

Subsection 105(1) allows the Minister, at the Minister's discretion, to waive or cancel penalties payable by a person. However, penalties cannot be waived more than ten years after the end of the fiscal year in which the penalty became payable.

This subsection also allows the Minister to make assessments outside of the general seven-year limitation period for assessments in order to give effect to the waiver or cancellation of the penalty.

Refund of amount waived or cancelled

GMTA
105(2)

Subsection 105(2) provides that where the Minister waives or cancels a penalty that a person has already paid, the Minister must refund the penalty. Additionally, the Minister must pay interest on the refund if that refund is not made within 30 days of receipt of the person's application to waive the penalty (or, if there is no such application, if that refund is not made on the day on which the Minister waives or cancels the penalty). The relevant interest rate is that prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require.

Division 12
Offences and Punishment

Division 12 of Part 5 sets out rules relating to offences and punishment.

Failure to file or comply

GMTA
106(1)

Subsection 106(1) makes it an offence to fail to:

• file a return as and when required under this Act;
• comply with an obligation under certain provisions relating to keeping books and records (subsection 80(6) or (8)) and requests for information by the Minister (section 81); or
• comply with a compliance order (section 112).

A person who is found guilty of an offence under this provision is liable on summary conviction to a fine of between $2,000 and $40,000, or to imprisonment for a term not exceeding 12 months, or to both.

Saving

GMTA
106(2)

Subsection 106(2) provides that where a person is convicted of an offence under subsection 106(1) for a particular failure the person will not also be liable to pay a penalty for that failure, unless a notice of assessment for the penalty was issued before the information or complaint giving rise to the conviction was laid or made.

Offences for false or deceptive statement

GMTA
107(1)

Subsection 107(1) provides that the following activities constitute offences:

• making false or deceptive statements in a return or other record;
• seeking to evade paying any amount payable under this Act, or seeking to obtain an improper refund, by destroying or altering records or making a false or deceptive entry or omission in a record;
• intentionally evading or attempting to evade compliance with this Act or payment of an amount payable under this Act;
• intentionally obtaining or attempting to obtain a refund to which the person is not entitled; or
• conspiring with any other person to commit an offence listed in the first four points.

Punishment

GMTA
107(2)

Subsection 107(2) provides that a person convicted with an offence under subsection 107(1) is liable to a fine of not less than 50% and not more than 200% of the amount the person sought to evade or obtain, or to imprisonment for a term not exceeding two years, or to both. If applied, the fine would apply in addition to any penalty otherwise provided for under the Act.

Prosecution on indictment

GMTA
107(3)

Subsection 107(3) provides that a person charged with an offence under subsection 107(1) may, on election by the Attorney General of Canada, be prosecuted on indictment. If convicted, the person would be liable to a fine of not less than 100% and not more than 200% of the amount the person sought to evade or obtain, or to imprisonment for a term not exceeding five years, or to both. If applied, the fine would apply in addition to any penalty otherwise provided for under the Act.

Penalty on conviction

GMTA
107(4)

Subsection 107(4) provides that if a person is convicted of an offence under subsection 107(1) for a particular evasion or attempt they will not also be liable to a penalty for that evasion or attempt, unless a notice of assessment for the penalty was issued before the information or complaint giving rise to the conviction was laid or made.

Stay of appeal

GMTA
107(5)

Subsection 107(5) allows the Minister to file a stay of proceedings for an appeal under this Act where there is an ongoing prosecution under this section with substantially the same facts at issue. The proceedings before the Tax Court will be stayed until a final determination of the outcome of the prosecution is reached.

Failure to pay tax

GMTA
108

Section 108 makes it an offence for a person to intentionally fail to pay tax as and when required under this Act. A person found guilty of this offence is liable, on summary conviction, to a fine not exceeding 20% of the amount of the tax that should have been paid (in addition to any penalty or interest otherwise provided for under the Act), or to imprisonment for a term not exceeding 12 months, or to both.

Offence — confidential information

GMTA
109(1)

Subsection 109(1) makes it an offence to contravene subsection 123(2), which disallows officials from disclosing or using confidential information except in certain circumstances, or to knowingly contravene an order made under subsection 123(7), which allows certain orders to protect confidentiality to be made during legal proceedings. A person found guilty is liable, on summary conviction, to a fine of up to $5,000, or to imprisonment for a term not exceeding 12 months, or to both.

Offence

GMTA
109(2)

Where information that is authorized to be disclosed for a particular purpose under subsection 123(6) is disclosed or used inappropriately, subsection 109(2) makes the inappropriate disclosure or use an offence. A person found guilty is liable, on summary conviction, to a fine of up to $5,000, or to imprisonment for a term not exceeding 12 months, or to both.

Definition of confidential information

GMTA
109(3)

Subsection 109(3) provides that in subsection 109(2), the term "confidential information" has the same meaning as in subsection 123(1).

General offence

GMTA
110

Section 110 provides that every person that contravenes a provision of this Act, the contravention of which is not specified elsewhere in this Act to be an offence, is guilty of an offence. A person found guilty is liable, on summary conviction, to a fine of up to $100,000, or to imprisonment for a term not exceeding 12 months, or to both.

Defence of due diligence

GMTA
111

Section 111 provides that in the case of a failure to file (section 106) or a general failure to comply (section 110), a person cannot be found guilty of an offence if they prove to the court that they exercised all due diligence to prevent the offence from occurring. This section does not apply in relation to offences where the intent of the person accused of the offence has to be proven.

Compliance orders

GMTA
112

If a person has been convicted for non-compliance with a provision of this Act, section 112 provides that the court has the authority to make any order to enforce compliance with the provision.

Officers of corporations, etc.

GMTA
113

Section 113 provides that where a person other than an individual is convicted of an offence under this Act, every officer, director and representative of that person who assented to or participated in the commission of the offence is also guilty of the offence and liable to the punishment provided for the offence.

Power to decrease punishment

GMTA
114

Section 114 provides that the court has no authority, in respect of any prosecution or proceeding under this Act, to impose less than the minimum fine specified for an offence under this Act.

Information or complaint

GMTA
115(1)

Subsection 115(1) allows any official of the Canada Revenue Agency, member of the Royal Canadian Mounted Police or person authorized by the Minister to make an information or complaint concerning an offence under this Act. This subsection also provides that only the Minister or a person acting for the Minister or for His Majesty in right of Canada can call into question the authority of the person making an information or complaint.

Two or more offences

GMTA
115(2)

Subsection 115(2) provides that an information or complaint in respect of an offence under this Act may be for one or more offences.

Territorial jurisdiction

GMTA
115(3)

Subsection 115(3) provides that an information or complaint in respect of an offence under this Act may be heard, tried or determined by any court having territorial jurisdiction where the accused is resident, carrying on a commercial activity, found, apprehended or in custody regardless of where the matter of the information or compliant arose.

Limitation of prosecutions

GMTA
115(4)

Subsection 115(4) sets out a limitation on instituting a proceeding by way of summary conviction. No such proceeding may be instituted more than eight years after the day on which the subject matter of the proceeding arose. This limitation period can only be extended if the prosecutor and the defendant agree to extend it.

Division 13
Inspections

Division 13 of Part 5 sets out rules regarding inspections, compliance orders, search warrants, requirements to provide foreign-based information and inquiries.

Authorized person

GMTA
116(1)

Subsection 116(1) provides that a person authorized by the Minister to do so may, for the purposes of the administration or enforcement of this Act, inspect, audit or examine records, processes, property or premises in order to determine whether a person is in compliance with this Act.

Powers of authorized person

GMTA
116(2)

Subsection 116(2) specifies that a person authorized under subsection 116(1) may, at all reasonable times,

• enter any place where it can be reasonably expected that records would be kept or where activities relevant to this Act would be carried on;
• require any person to provide reasonable assistance and to answer all proper questions orally either in-person or by video-conference or other form of electronic communication, or in writing; and
• require any person to provide reasonable assistance with anything the authorized person is authorized to do under this Act.

Prior authorization

GMTA
116(3)

Subsection 116(3) provides an exception to subsection 116(2). Where the place is a dwelling-house, the authorized person cannot enter without the consent of the occupant or a warrant issued by a judge.

Warrant to enter dwelling-house

GMTA
116(4)

Subsection 116(4) provides that a judge may issue a warrant authorizing a person to enter a dwelling-house, on ex parte application by the Minister. To issue the warrant, the judge must be satisfied that the dwelling-house is a place where records are kept or activities to which this Act applies are performed, that entry is necessary for any purpose relating to administering or enforcing this Act and that there are reasonable grounds to believe that entry will be refused.

Orders if entry refused

GMTA
116(5)

Subsection 116(5) provides that if a judge is not satisfied that entering a dwelling-house is necessary for administering or enforcing this Act, but that a relevant record or property is likely kept in the dwelling-house, the judge may order the occupant to provide reasonable access to the record or property or make any other order that is appropriate in the circumstances.

Definition of dwelling-house

GMTA
116(6)

Subsection 116(6) provides the definition of the term "dwelling-house" for the purposes of section 116. In general, a dwelling-house is a structure, whether fixed or mobile, that is a permanent or temporary residence.

Compliance order

GMTA
117(1)

Subsection 117(1) provides that on application by the Minister, a judge may order a person to provide any access, assistance, information or records sought by the Minister under section 81 (requirement to provide records or information) or 116 (inspections). The judge must be satisfied that the person was required to provide the access, assistance, information or records, and did not do so.

Notice required

GMTA
117(2)

Subsection 117(2) provides that five clear days must pass from service of a notice of application under subsection 117(1) before the application is heard.

Judge may impose conditions

GMTA
117(3)

Subsection 117(3) provides that the judge may impose any conditions on the compliance order under subsection 117(1) that the judge considers appropriate.

Contempt of court

GMTA
117(4)

Subsection 117(4) allows a judge to find that a person that fails or refuses to comply with an order under subsection 117(1) is in contempt of court. The processes and punishments of the court to which the judge is appointed would then apply.

Appeal

GMTA
117(5)

Subsection 117(5) provides that a compliance order under subsection 117(1) may be appealed to a higher court. However, an appeal would not suspend the execution of the order unless such a suspension is ordered by a judge of the appellate court.

Time period not to count

GMTA
117(6)

Subsection 117(6) extends the general seven-year limitation period for assessments in certain circumstances. If the Minister makes an application for a compliance order under subsection 117(1), and the person to which the order would apply files a notice of appearance, or otherwise opposes the application, the period of time from the day of filing of a notice of appearance or otherwise opposing the application to the day on which the application is finally disposed of will not be counted for the purposes of the seven-year limitation period.

Search warrants

GMTA
118(1)

Subsection 118(1) provides that a judge may, on ex parte application by the Minister, issue a warrant authorizing a person to enter and search any building, receptacle or place, seize any record or thing that may afford evidence of the commission of an offence under the Act and bring that record or thing before the judge, or another judge of the same court, as soon as is practicable.

Evidence on oath

GMTA
118(2)

Subsection 118(2) provides that an application by the Minister for a search warrant must be supported by information on oath establishing the facts on which the application is based.

Issue of warrants

GMTA
118(3)

Subsection 118(3) provides that a judge may issue a search warrant if the judge is satisfied that there are reasonable grounds to believe that an offence under the Act has been committed and that evidence of the offence is likely to be found in the building, receptacle or place specified in the Minister's application.

Contents of warrant

GMTA
118(4)

Subsection 118(4) specifies that a search warrant issued under subsection 118(1) must:

• refer to the offence for which it is issued;
• identify the place to be searched and the person alleged to have committed the offence; and
• be reasonably specific as to any record or thing that is to be searched for and seized.

Seizure

GMTA
118(5)

Subsection 118(5) provides that a person who is executing a warrant under subsection 118(1) may also seize records or things other than those specified in the warrant if those items afford evidence of the commission of an offence under this Act. The person must bring the other records or things before the judge who issued the warrant, or another judge of the same court, as soon as is practicable.

Retention

GMTA
118(6)

Subsection 118(6) requires a judge to order the Minister to retain any record or thing seized under subsection 118(1) or (5), unless the Minister has waived retention. When so ordered, the Minister must take reasonable care to ensure the record or thing is preserved until the conclusion of the investigation or until it is required to be produced for the purposes of a criminal proceeding.

Return of records or things seized

GMTA
118(7)

Subsection 118(7) provides that a judge may order the Minister to return any record or thing seized under subsection 118(1) or (5) if the judge is satisfied that the item will not be required for an investigation or a criminal proceeding, or is satisfied that the item was not seized in accordance with the warrant or this section. Such an order can be initiated either on the judge's own motion or on application by a person with an interest in the record or thing.

Access and copies

GMTA
118(8)

Subsection 118(8) specifies that a person from which any record or thing is seized has the right to inspect the record or thing, or if it is a document, obtain one copy of the record. This right is subject to any reasonable conditions imposed by the Minister. Copies are to be produced at the expense of the Minister.

Definition of foreign-based information or record

GMTA
119(1)

Subsection 119(1) provides the definition of the term "foreign-based information or record" for the purposes of this section. In general, the term refers to any relevant information or record that is available or located outside Canada.

Requirement to provide foreign-based information

GMTA
119(2)

Subsection 119(2) provides that the Minister may, by notice, require a person resident in Canada, or a non-resident carrying on business in Canada, to provide any foreign-based information or record.

Content of notice

GMTA
119(3)

Subsection 119(3) provides that a notice from the Minister under subsection 119(2) requiring the production of foreign-based information or records must set out a reasonable deadline by which the information or record must be provided (which cannot be less than 90 days), a description of the information or record being sought and the consequences of failing to provide the information by the deadline. The consequences are set out in subsection 119(8).

Review by judge

GMTA
119(4)

Subsection 119(4) permits a person who was served or sent a notice of a requirement under subsection 119(2) to, within 90 days of the service or sending, apply to a judge for a review of the requirement.

Powers on review

GMTA
119(5)

Subsection 119(5) provides that a judge who receives an application under subsection 119(4) for review of a requirement may either confirm the requirement, vary the requirement, or set aside the requirement if it is unreasonable.

Related person

GMTA
119(6)

Subsection 119(6) clarifies that a requirement under subsection 119(2) will not be considered unreasonable because the information or record is under the control of, or available to, a non-resident person that is not controlled by, but that is related to, the person who was served or sent the notice of the requirement. The term "related" is given its meaning in subsection 55(4).

Time during consideration not to count

GMTA
119(7)

Subsection 119(7) specifies that where a person has made an application to a judge under subsection 119(4) for a review of a requirement, the period of time from when the application is made to the day on which the review is decided is not counted for the purposes of the time limit in the notice of requirement or for the general seven-year limitation period for assessments.

Consequence of failure

GMTA
119(8)

Subsection 119(8) provides that a person who fails to comply substantially with a notice of requirement (or any constituent entity in the person's MNE group) will be prohibited from introducing any information covered by the notice as evidence in any civil proceeding under this Act.

Inquiry

GMTA
120(1)

Subsection 120(1) provides that the Minister may authorize any person to make any inquiry relating to the administration or enforcement of the Act.

Appointment of hearing officer

GMTA
120(2)

Subsection 120(2) provides that where a person is authorized to make an inquiry under subsection 120(1), the Minister will apply to the Tax Court of Canada for the appointment of a hearing officer.

Powers of hearing officer

GMTA
120(3)

Subsection 120(3) provides that a hearing officer appointed under subsection 120(2) has the powers of a commissioner under sections 4, 5 and 11 of the Inquiries Act.

When powers to be exercised

GMTA
120(4)

Subsection 120(4) provides that a hearing officer must exercise the powers conferred on a commissioner under section 4 of the Inquiries Act. However, the hearing officer may not punish any person unless certified to do so on application to a judge. The person who would be punished must be given 24 hours' notice of the hearing of the application, or any shorter notice that the judge considers reasonable.

Rights of witnesses

GMTA
120(5)

Subsection 120(5) specifies the rights of witnesses during an inquiry. Witnesses are entitled to be represented by counsel and to receive a transcript of any testimony or other evidence they provide.

Rights of person investigated

GMTA
120(6)

Subsection 120(6) specifies that persons being investigated in an inquiry are entitled to be present and represented by counsel throughout the inquiry unless the hearing officer orders otherwise on application by the Minister or a witness. A hearing officer can only make such an order if they find that the presence of the person and their counsel, or either of them, would negatively impact the effectiveness of the inquiry.

Copies

GMTA
121

Section 121 provides that copies may be made of records seized, inspected, audited, examined or provided under sections 81, 116, 117 and 120. This includes records obtained from a requirement to provide records or information, inspections, compliance orders, search warrants and inquiries.

Compliance

GMTA
122

Section 122 makes it an offence to interfere with, hinder or molest an official who is carrying out the official's duties or functions under this Act. This section also requires a person to do everything required to be done under sections 81, 116 to 119 and 121 unless the person is unable to do so. This includes providing records or information, complying with inspections, compliance orders and search warrants, providing foreign-based information and providing copies of records.

Division 14
Confidentiality of Information

Division 14 of Part 5 sets out rules to protect the confidentiality of information obtained in the course of the administration or enforcement of the Act. It also sets out the circumstances under which such information can be disclosed and who it can be disclosed to.

Definitions

GMTA
123(1)

Subsection 123(1) provides definitions that apply for the purposes of section 123, which addresses the confidentiality of information.

"authorized person"

The definition "authorized person" essentially provides that the term refers to government employees, and former government employees, that carry out the provisions of the Act. This would include employees of the Canada Revenue Agency.

"confidential information"

The term "confidential information" is defined as any information that

• relates to one or more persons and reveals, directly or indirectly, the identity of at least one of those persons; and
• is obtained by or on behalf of the Minister for the purposes of this Act, or is prepared from such information.

"court of appeal"

The term "court of appeal" is defined as having the same meaning as in section 2 of the Criminal Code.

Provision of confidential information

GMTA
123(2)

Subsection 123(2) provides that an official must not provide, allow access to or use (other than in enforcing or administering the Act) confidential information except where specifically authorized under one or more of the exceptions contained in this section.

Confidential information evidence not compellable

GMTA
123(3)

Subsection 123(3) provides that no official is required to give or produce evidence relating to any confidential information in connection with any legal proceeding. However, certain exceptions to this provision are outlined in subsection 123(4).

Communications — proceedings

GMTA
123(4)

Subsection 123(4) sets out exceptions to the restrictions in subsections 123(2) and (3). Under subsection 123(4), officials may disclose, or may be required to disclose, confidential information in respect of

• criminal proceedings;
• legal proceedings relating to the administration of this Act, the Canada Pension Plan, the Employment Insurance Act, or any other Canadian statute involving taxes or duties; or
• legal proceedings under international trade agreements.

Authorized provision of confidential information

GMTA
123(5)

Subsection 123(5) sets out another exception where the Minister may disclose confidential information. Confidential information may be disclosed to appropriate persons if the information is regarded as necessary solely for a purpose relating to the life, health and safety of an individual.

Disclosure of confidential information

GMTA
123(6)

Subsection 123(6) specifies a number of limited exceptions where officials are permitted to provide, allow access to or use confidential information.

Under paragraph (a), confidential information may be disclosed for administering or enforcing this Act or for determining a person's liability or entitlement to a refund under this Act.

Under paragraph (b), confidential information may be provided to or inspected by any person that the Minister may authorize, subject to any conditions the Minister may specify. It may also be provided to or inspected by a person that is legally entitled to the information because of an Act of Parliament, but only for the purposes for which that person is entitled to the information.

Under paragraph (c), confidential information may also be disclosed for the purposes of research, analysis and the formulation of fiscal policy and for negotiating, administering or enforcing various specified agreements and statutes.

Under paragraph (d), confidential information may be provided to officials of foreign governments, or international organizations established by governments, if it is provided

• in accordance with an international agreement relating to trade; and
• only for the purposes set out in the agreement.

Under paragraph (e), confidential information may be disclosed for the purposes of a provision in a tax treaty or a listed international agreement (as defined in subsection 248(1) of the Income Tax Act).

Under paragraph (f), confidential information may be provided for the purposes of sections 23 to 25 of the Financial Administration Act.

Under paragraph (g), confidential information may be compiled into a form that does not reveal the identity of the person to whom the information relates. This permits the use of aggregate data for research and analysis.

Under paragraph (h), confidential information may be disclosed for a purpose relating to supervising, evaluating or disciplining an authorized person in respect of a period of time when the person was employed to assist in the administration or enforcement of this Act.

Under paragraph (i), the Librarian and Archivist of Canada is permitted to access records of confidential information solely for the purposes of section 12 of the Library and Archives of Canada Act.

Under paragraph (j), confidential information about a person can be used to provide information to that person.

Under paragraph (k), confidential information may be provided to a police officer solely for the purpose of investigating whether an offence, with respect to an official, has been committed under the Criminal Code (or for the laying of an information or the preferring of an indictment). However, certain criteria must be met. First, the information must be relevant for ascertaining the circumstances of the offence or the identity of the person who may have committed the offence. Second, the official with respect to which the offence was committed must be or have been engaged in the administration or enforcement of this Act. Lastly, the offence must be related to the administration or enforcement of the Act by that official.

Under paragraph (l), confidential information may be provided to a law enforcement officer of an appropriate police organization in the circumstances described in subsection 211(6.4) of the Excise Act, 2001. In general, subsection 211(6.4) of that statute permits confidential information to be provided to law enforcement if the information will afford evidence of an offence listed in the subsection. This provision does not provide the Canada Revenue Agency with a mandate to use the information-collection authorities in the Act to conduct, or assist in the conduct of, criminal investigations.

Measures to prevent unauthorized use or disclosure

GMTA
123(7)

Subsection 123(7) provides that when legal proceedings deal with the supervision, evaluation or discipline of an authorized person, the person presiding over the proceeding may order any measures necessary to protect confidential information. Such measures could include: holding a hearing in camera, banning publication of the information, concealing the identity of a person or sealing the records of the proceeding. This list is non-exhaustive; other measures may be reasonable.

Disclosure to person or on consent

GMTA
123(8)

Subsection 123(8) provides that confidential information may be released to the person to whom it relates and to other persons with that person's consent.

Appeal from order or direction

GMTA
123(9)

Subsection 123(9) provides that an order or direction made in connection with the production of confidential information in any legal proceedings may be appealed by the Minister or the person against whom the order or direction is made.

Disposition of appeal

GMTA
123(10)

When an order or direction is appealed under subsection 123(9), subsection 123(10) allows the court to either allow the appeal and quash the order or direction or dismiss the appeal.

Stay

GMTA
123(11)

Subsection 123(11) provides that when an order or direction is appealed under subsection 123(9), the order or direction is stayed pending the determination of the appeal.

Division 15
Collections

Division 15 of Part 5 sets out rules regarding the collection of amounts owing under this Act.

Definitions

GMTA
124(1)

Subsection 124(1) provides definitions that apply for the purposes of section 124, which sets out rules relating to the commencement of collection procedures.

"action"

The term "action" is defined as any action to collect a tax debt of a person. This includes court proceedings, as well as anything done by the Minister under any of sections 127 to 132. These sections include certifying amounts as payable, garnishment, recovery by deduction or set-off, acquisition of debtor's property and seizure of property.

"legal representative"

The term "legal representative" of a person is defined as someone who administers, winds up, controls or otherwise deals in a representative or fiduciary capacity with any property, business, commercial activities or estate or succession of the person. This includes a trustee in bankruptcy, an assignee, a liquidator, a curator, a receiver of any kind, a trustee, an heir, an administrator, an executor, a liquidator of a succession, a committee or any other similar person.

"tax debt"

The definition "tax debt" provides that the term refers to any amount payable by a person under the Act. This includes not only tax, but also amounts payable for penalties and interest.

Debts to His Majesty

GMTA
124(2)

Subsection 124(2) provides that a tax debt is a debt due to His Majesty in right of Canada and may be recovered through the court process.

Court proceedings

GMTA
124(3)

Subsection 124(3) provides that a proceeding in court to recover a tax debt of a person may only be commenced if the person has been assessed for that amount under the Act.

No actions after limitation period

GMTA
124(4)

Subsection 124(4) provides that collection actions cannot be commenced after the end of the limitation period for collection. This limitation period is set out in subsection 124(5).

Limitation period

GMTA
124(5)

Subsection 124(5) specifies the period of time during which collection actions generally commence. This period typically begins 90 days after the day on which the last notice of assessment was sent, and ends ten years later.

Limitation period restarted

GMTA
124(6)

Subsection 124(6) provides that the limitation period referred to in subsection 124(5) will restart in the following circumstances:

• the person acknowledges the tax debt;
• the tax debt is reduced by the application of a refund,
• a collection action commences; or
• another person is assessed in respect of the tax debt.

Once the limitation period restarts, collection actions may be commenced for a further ten years.

Acknowledgement of tax debts

GMTA
124(7)

Subsection 124(7) sets out the actions that constitute acknowledging a tax debt (which would restart the limitation period under subsection 124(6)). A person acknowledges a tax debt if the person promises, in writing, to pay the tax debt, makes a written acknowledgement of the tax debt or makes a payment on account of the tax debt.

Agent or mandatary or legal representative

GMTA
124(8)

Subsection 124(8) provides that where an acknowledgement is made by a person's agent or mandatary or legal representative, that acknowledgement has the same effect, for the purposes of this section, as if the person had made it themselves.

Extension of limitation period

GMTA
124(9)

Subsection 124(9) extends the limitation period for collection by the number of days during which the following circumstances exist:

• the collection action has been postponed;
• the Minister has accepted and holds security in lieu of payment;
• the debtor was a resident when assessed for the debt and is currently a non-resident;
• the Minister may not take collection actions due to certain restrictions set out in subsections 125(2) to (5); or
• the Minister may not take collection actions due to provisions under various bankruptcy protection statutes.

Assessment before collection

GMTA
124(10)

Subsection 124(10) generally provides that the Minister must assess an amount payable before taking collection actions for it. An exception to this is interest, as interest is calculated on a compound basis and continual assessment would be impractical.

The inclusion of "or may be assessed" is intended to address amounts covered by authorizations to proceed without delay under section 134.

Postponement of collection

GMTA
124(11)

Subsection 124(11) allows the Minister to postpone the collection of an amount in dispute. Such a postponement may be subject to any terms and conditions that the Minister may stipulate.

Interest on judgments

GMTA
124(12)

Subsection 124(12) provides that interest applies to judgment debts, and the interest is recoverable in the same manner as the judgment debt.

Litigation costs

GMTA
124(13)

Subsection 124(13) provides that where a person is required to pay litigation costs following litigation relating to a matter to which the Act applies, the collection provisions in sections 127 to 133 apply to the litigation costs.

Collection restrictions

GMTA
125(1)

Subsection 125(1) restricts the actions the Minister may take to collect an amount from a person until 90 days have passed from the date of a notice of assessment in respect of the amount. During the 90 days, the Minister may not:

• commence legal proceedings;
• certify the amount (section 127);
• require payment (subsections 128(1) and (2));
• require money seized from the person, restorable to the person, to be turned over to the Receiver General (subsection 131(1)); or
• take action towards the seizure and sale of the person's things (subsection 132(1)).

No action after service of notice of objection

GMTA
125(2)

Subsection 125(2) provides that the collection actions restricted in subsection 125(1) are also restricted if a person has served a notice of objection. In that case, these collection actions cannot be taken in respect of the amount in controversy until after 90 days from the date of the notice of the Minister's decision regarding the objection.

No action after appeal

GMTA
125(3)

Subsection 125(3) provides that the collection actions restricted in subsection 125(1) are also restricted if a person has appealed to the Tax Court from an assessment. In that case, these collection actions cannot be taken in respect of the amount in controversy until either the Tax Court's decision has been mailed or the appeal has been discontinued.

No action pending determination

GMTA
125(4)

Subsection 125(4) provides that the collection actions restricted in subsection 125(1) are also restricted if the amount to be collected could be affected by the determination of a question by the Tax Court. In that case, these collection actions cannot be taken until the question is determined by the Court.

Action after judgment

GMTA
125(5)

Subsection 125(5) provides that the collection actions restricted in subsection 125(1) are also restricted if there is a written agreement to delay proceedings, on an objection or appeal, until the decision in a similar action has been given. In that case, these collection actions cannot be taken until the Minister has notified the person of the judgment in the similar action.

Collection of large amounts

GMTA
125(6)

Subsection 125(6) provides an exception to the restrictions in subsections 125(1) through (5). This exception applies if at any time the total of all unpaid amounts that a person has been assessed under this Act exceeds $1 million. In this case, the Minister may collect up to 50% of the total, regardless of the collection restrictions that would otherwise apply.

Security

GMTA
126(1)

Subsection 126(1) provides that the Minister may accept security for the payment of any amount that is, or that may become, payable under the Act. The security must be in an amount and form satisfactory to the Minister.

Surrender of excess security

GMTA
126(2)

Subsection 126(2) provides that where the amount of security exceeds the amount payable for which the security was furnished, then, on request, the Minister must surrender the excess security.

Additional security

GMTA
126(3)

Subsection 126(3) provides that the Minister determines whether security is adequate. If the Minister determines, at any time, that the security is no longer adequate, the Minister may require additional security.

Certificates

GMTA
127(1)

Subsection 127(1) allows the Minister to certify amounts payable under this Act.

Registration in court

GMTA
127(2)

Subsection 127(2) provides that on production to the Federal Court, a certificate under subsection 127(1) is to be registered in the Court. Upon registration, proceedings may be taken to collect the amount certified as if the certificate were a judgment of the Court.

Costs

GMTA
127(3)

Subsection 127(3) sets out that any reasonable costs and charges for registering a certificate, or in respect of proceedings to collect the amount certified, are recoverable as if they had been included in the amount certified.

Charge on property

GMTA
127(4)

Under subsection 127(4), the Court may issue a memorial (that is evidence of a registered certificate) that may be recorded in a province to create a charge, lien or priority on, or binding interest in (or for civil law, a right in) property of the debtor. Such a memorial is to be filed, registered, or otherwise recorded in the same manner as a document that is evidence of a judgment of the superior court or a debt owing to the province.

Creation of charge

GMTA
127(5)

Subsection 127(5) provides that a memorial filed under subsection 127(4) creates a charge, lien or priority on, or binding interest in (or for civil law, a right in) the property held by the debtor in the same manner as if the memorial were a document that is evidence of a judgment or a debt owing to the province.

Proceedings in respect of memorial

GMTA
127(6)

Subsection 127(6) provides that proceedings may be taken in the province in respect of a memorial filed under subsection 127(4) including proceedings:

• to enforce payment;
• to renew the memorial;
• to cancel or withdraw the memorial; or
• to postpone the effectiveness of the memorial in favour of another right, charge, lien or priority in respect of any property, interest or rights affected by the memorial.

Presentation of documents

GMTA
127(7)

Subsection 127(7) requires a memorial to be accepted for filing, registration or other recording in a registry system of the province in the same manner as if the memorial were a document that is evidence of a judgment by a superior court or a debt owing to the province.

Prohibition — sale, etc., without consent

GMTA
127(8)

Under subsection 127(8), steps may not be taken towards the sale or disposal of any property affected by the registration of a certificate or memorial without the written consent of the Minister.

Completion of notices, etc.

GMTA
127(9)

Subsection 127(9) deems sheriffs and other persons to have complied with certain rules regarding documents where they were not initially able to comply due to subsection 127(8). Such deemed compliance would occur in situations where a sheriff or other person must set out information in a minute, notice or document, but cannot do so without getting consent from the Minister. In such a case, the sheriff or other person must complete the information to the extent possible, and then, when consent is given by the Minister, complete the minute, notice or document a second time.

Application for order

GMTA
127(10)

Subsection 127(10) provides that, on ex parte application by the Minister, a sheriff or other person who is unable, because of subsection 127(8) or (9), to comply with a law or rule of court is bound by any order made by a judge of the Federal Court for the purpose of giving effect to the proceeding, charge, lien, priority or binding interest.

Deemed security

GMTA
127(11)

Subsection 127(11) deems a charge, lien, priority or binding interest created by recording a memorial under subsection 127(4) to be a secured claim under the Bankruptcy and Insolvency Act if the memorial is registered in accordance with subsection 87(1) of that Act.

Details in certificates and memorials

GMTA
127(12)

Subsection 127(12) provides that it is sufficient for a certificate or memorial to set out the total amount payable by the debtor without setting out separate amounts making up the total and to refer to the rate of interest as the rate prescribed in section 4301 of the Income Tax Regulations, with any modifications that the circumstances require, without indicating the specific rates of interest that will be charged.

Garnishment

GMTA
128(1)

Subsection 128(1) authorizes the collection of any amount payable under the Act by way of garnishment. In general, garnishment may be used in respect of amounts owing to a debtor. Where the Minister has knowledge or suspects that a particular person is or will become, within one year, liable to make a payment to a debtor, the Minister may, by notice in writing, require the payment to be made to the Receiver General on account of the liability of the debtor.

Garnishment of loans or advances

GMTA
128(2)

Subsection 128(2) allows the Minister, by notice in writing, to garnish certain amounts that are expected to be loaned or advanced to, or paid on behalf of, the debtor within 90 days.

Effect of receipt

GMTA
128(3)

Subsection 128(3) provides that if the Minister issues a receipt for an amount that has been garnished, that receipt is good and sufficient discharge of the original liability to the extent of the amount. That is, the person otherwise liable to make a payment to the debtor, who instead makes a payment to the Minister in accordance with a garnishment notice, is no longer liable to pay the debtor that amount.

Effect of requirement

GMTA
128(4)

Subsection 128(4) provides that where the amount being garnished is interest, rent, remuneration, a dividend, an annuity or another periodic payment, the Minister may, under one garnishment notice, garnish any amount of each such periodic payment until the liability under this Act is satisfied.

Failure to comply

GMTA
128(5)

Subsection 128(5) provides that every person that fails to comply with a garnishment notice is liable for the amount that was required to be paid.

Other failures to comply

GMTA
128(6)

Subsection 128(6) provides that an institution or person that fails to comply with a garnishment notice under subsection 128(2) is liable for the lesser of the total amount loaned, advanced, or paid, and the amount that they were required, under the garnishment notice, to pay to the Receiver General.

Assessment

GMTA
128(7)

Under subsection 128(7), the Minister may assess any person for an amount payable in respect of a garnishment. If the Minister sends a notice of assessment, sections 70 (small amounts owing) and 82 to 97 (assessments, objections and appeals) apply with any modifications that the circumstances require.

Time limit

GMTA
128(8)

Subsection 128(8) specifies that an assessment under subsection 128(7) in respect of a garnishment notice must be made within four years of receipt of the notice.

Effect of payment as required

GMTA
128(9)

Subsection 128(9) sets out that amounts paid in respect of a garnishment notice are deemed, for all purposes, to have been advanced, loaned or paid to or on behalf of the debtor, as they otherwise would have been absent the garnishment requirement.

Recovery by deduction or set-off

GMTA
129

Section 129 provides that if a person is indebted to His Majesty in right of Canada under the Act, the Minister may require the retention, by way of deduction or set-off, of any amount payable to such person by His Majesty in right of Canada.

Acquisition of debtor's property

GMTA
130

Section 130 authorizes the Minister to acquire and dispose of any interest in property of a person indebted under the Act for the purpose of collecting the debt, provided that the Minister is given a right, in legal proceedings or under a court order, to acquire the interest, or the interest is offered for sale or redemption.

Money seized from debtor

GMTA
131(1)

Subsection 131(1) provides a collection option if:

• a person is holding money seized in the administration or enforcement of the criminal law of Canada;
• the money was seized from a debtor under the Act; and
• the money would otherwise be restorable to the debtor.

In this case, the Minister may, in writing, require the money to be turned over to the Receiver General on account of the debtor's indebtedness under the Act.

Receipt of Minister

GMTA
131(2)

Subsection 131(2) provides that if the Minister issues a receipt for money turned over, as required under this section, the receipt is good and sufficient discharge of the requirement to restore the money to the debtor.

Seizure if failure to pay

GMTA
132(1)

Subsection 132(1) provides that if a person fails to pay an amount as required under the Act, the Minister is authorized to give 30 days' written notice that the person's property will be seized. If payment is not made within the 30 days, the Minister may issue a certificate of failure and direct that the person's property be seized. The type of property that may be seized is limited to goods and chattels, or movable property.

Disposition

GMTA
132(2)

Subsection 132(2) provides that seized property is to be held for ten days at the person's expense. If payment is not made within the ten days, the property may be disposed of as the Minister considers appropriate and the proceeds applied to the amount owing and all expenses.

Proceeds of disposition

GMTA
132(3)

Subsection 132(3) provides that when seized property is disposed of, if there is any surplus after deducting the amount owing and all expenses, that surplus must be returned to the owner of the property seized.

Exemptions from seizure

GMTA
132(4)

Subsection 132(4) provides that if particular goods and chattels, or movable property, would be exempt from seizure under applicable provincial laws, that property is exempt from seizure under this section.

Person leaving Canada

GMTA
133(1)

If the Minister suspects that a person has left or is about to leave Canada in advance of the due date for payment of an amount under this Act, subsection 133(1) provides that the Minister may, by notice, demand that the person pay without delay all amounts for which they are liable or will be liable under this Act. Such a notice must either be served personally or sent by confirmed delivery service to their latest known address.

Seizure

GMTA
133(2)

Subsection 133(2) provides that if the person fails to pay an amount demanded under subsection 133(1), the Minister is authorized to seize and dispose of the person's property, and subsections 133(2) to (4) apply with any modifications that the circumstances require.

Authorization to proceed without delay

GMTA
134(1)

Subsection 134(1) sets out an exception to the general requirement, under section 125, that the Minster wait until 90 days have passed from the date of a notice of assessment to commence collection actions. Under this exception, the Minister may obtain judicial authorization, by ex parte application, to immediately take any of the collection actions set out in sections 127 to 132 if there are reasonable grounds to believe that the collection of an amount assessed would be jeopardized if there were a delay in its collection.

Notice of assessment not sent

GMTA
134(2)

Subsection 134(2) provides that a judge may grant an authorization under subsection 134(1) where no notice of assessment has been sent if the judge is satisfied that the receipt of a notice of assessment would further jeopardize the collection of the amount. The amount in respect of which such an authorization is granted is deemed to be an amount payable under the Act for the purposes of the sections relating to collection: section 124 (general collection), 127 (certificates), 128 (garnishment), 129 (deduction or set-off), 131 (money seized from debtor) and 132 (seizure).

Affidavits

GMTA
134(3)

Subsection 134(3) provides that an affidavit filed in the context of an application to proceed without delay may contain statements based on belief. However, the affidavit must include the grounds for the belief.

Service of authorization and notice of assessment

GMTA
134(4)

Where an authorization to proceed without delay has been granted, subsection 134(4) provides that the Minister must serve the authorization on the affected person within 72 hours of it being granted (unless the judge orders otherwise). If a notice of assessment has not been sent to the person before the time of the application to proceed without delay, a notice of assessment must be served with the authorization.

How service effected

GMTA
134(5)

Subsection 134(5) provides that service of an authorization under subsection 134(4) must be effected by either personal service or service in accordance with the directions, if any, of a judge.

Application to judge for direction

GMTA
134(6)

Subsection 134(6) provides that if service cannot be reasonably effected as required under subsection 134(5), the Minister may apply to a judge for further direction.

Review of authorization

GMTA
134(7)

Where an authorization to proceed without delay has been granted, subsection 134(7) provides that the affected person may apply to a judge of the court to review that authorization. Before making such an application the person must notify the Deputy Attorney General of Canada, and the application must be made at least seven days after the notification.

Limitation period for review application

GMTA
134(8)

Subsection 134(8) provides that an application under subsection 134(7) must be made within 30 days after the day on which the authorization was served, or within any further time that a judge may allow (provided that the judge is satisfied that the application was made as soon as practicable).

Hearing in camera

GMTA
134(9)

Subsection 134(9) provides that an application under subsection 134(7) may be heard in camera, provided that the judge is satisfied that the circumstances of the case justify in camera proceedings.

Disposition of application

GMTA
134(10)

Subsection 134(10) provides that a judge must dispose of an application under subsection 134(7) by determining the question summarily, and either confirming, varying or setting aside the authorization. The judge may also make any other order that the judge considers appropriate.

Directions

GMTA
134(11)

Subsection 134(11) allows a judge to give any direction with regard to the course to be followed in respect of this section where this section does not otherwise provide for relevant direction.

No appeal from review order

GMTA
134(12)

Subsection 134(12) provides that an order of a judge under subsection 134(10) (that is, disposing of an application to review an authorization to proceed without delay) cannot be appealed.

Division 16
Evidence and Procedure

Division 16 of Part 5 sets out rules relating to evidence and procedures.

Service

GMTA
135(1)

Subsection 135(1) sets out rules relating to which name a notice or document served, issued or sent by the Minister may be addressed to in certain situations. If a notice or other document is served on or sent to a partnership, it may be addressed to the name of the partnership, if served on or sent to a union it may be addressed to the name of the union, if served on another body it may be addressed to the name of the body and if served on or sent to a business not carried on in the person's name, it may be addressed to the name under which the business is carried on.

Personal service

GMTA
135(2)

Subsection 135(2) sets out rules relating to who a notice or document served, issued or sent by the Minister may be served on in certain situations. In general, a notice is validly served on a person if it is left with an adult person employed at the place of business of the person. Additionally, if the person is a partnership, it may be served on one of the partners.

Timing of receipt

GMTA
136(1)

Subsection 136(1) provides that anything sent by first class mail or confirmed delivery service is deemed to have been received on the day it was mailed or sent.

Timing of payment

GMTA
136(2)

Subsection 136(2) sets out an exception to subsection 136(1). It provides that an amount payable under this Act to the Receiver General is only considered to have been paid when it is actually received, regardless of the day it was mailed or sent.

Proof of sending or service by mail

GMTA
137(1)

Subsection 137(1) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that a request, notice or demand was sent by confirmed delivery service to a named person on a stated day.

Proof of personal service

GMTA
137(2)

Subsection 137(2) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that a request, notice, or demand was personally served on a named person on a stated day.

Proof of electronic delivery

GMTA
137(3)

Subsection 137(3) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that a notice was sent electronically to a named person on a stated day.

Proof of failure to comply

GMTA
137(4)

Subsection 137(4) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that a named person has not filed a return, or made an application, a statement, an answer or a certificate. The affidavit must set out that the official has charge of the appropriate records and that after a careful examination, the return, application, statement, answer or certificate could not be found.

Proof of time of compliance

GMTA
137(5)

Subsection 137(5) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that a named person filed a return, or made an application, statement, answer or certificate on a stated day. The affidavit must set out that the official has charge of the appropriate records and that a careful examination has indicated that the return, application, statement, answer or certificate was filed or made on that stated day.

Proof of documents

GMTA
137(6)

Subsection 137(6) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that the nature and contents of an attached document or copy are as they appear to be. In addition to verifying the document or copy, the affidavit must set out that the official has charge of the appropriate records.

Proof of no appeal

GMTA
137(7)

Subsection 137(7) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that no notice of objection or appeal from an assessment was received within the time allowed. The affidavit must set out that the official has charge of the appropriate records, the official has knowledge of Agency practices, an examination of records shows that a notice of assessment was sent and a careful examination has not indicated that a notice of objection or appeal was received within the time allowed.

Presumption

GMTA
137(8)

Subsection 137(8) specifies that if evidence is offered under section 137 by way of an affidavit of an official of the Canada Revenue Agency, it is not necessary to prove the signatures or the official characters of the official or of the person before whom the affidavit was sworn.

Proof of documents

GMTA
137(9)

Subsection 137(9) deems every document executed over the name in writing of the Minister, the Commissioner or an official authorized to exercise the powers or perform the duties of the Minister to be a document signed, made and issued by the Minister, Commissioner or official. Only the Minister, a person acting for the Minister or His Majesty in right of Canada may call into question whether the document has been executed as purported.

Mailing or sending date

GMTA
137(10)

Subsection 137(10) provides that if the Minister mails, or sends electronically, a notice or demand, the date of mailing or electronic sending is presumed to be the date of the notice or demand.

Date electronic notice sent

GMTA
137(11)

Subsection 137(11) specifies the date that a notice or other communication made available electronically (such as on the CRA My Account website) is presumed to be sent to and received by a person. The day on which an electronic message is sent to the electronic address most recently provided by the person informing them that the notice or other communication is available in the person's secure electronic account is presumed to be the date of sending and receipt.

A notice or other document is considered to have been made available if it has been posted on the person's secure electronic account, the person has authorized that notices be made available in that manner and the person has not revoked that authorization.

This section does not apply to notices or communications that refer to the business number of the person (see instead the commentary on subsection 137(12)).

Date electronic notice sent — business account

GMTA
137(12)

Subsection 137(12) specifies the date that a notice or other communication (which refers to a business number of a person) made available electronically is presumed to be sent to and received by the person. The day on which the notice or other communication is posted by the Minister in the person's CRA My Business Account is presumed to be the date of sending and receipt. However, if the person has requested, at least 30 days prior, for such notices or communications to be sent by mail, the normal rule for receipt of mail in section 137(10) applies.

Date of assessment

GMTA
137(13)

Subsection 137(13) deems an assessment to have been made on the day on which the notice of assessment was sent.

Proof of return — prosecutions

GMTA
137(14)

Subsection 137(14) provides that, in a prosecution for an offence under this Act, if a return, application, certificate, statement or answer is purported to have been filed, delivered, made or signed by or on behalf of a person, the production of this document is evidence that this filing, delivery, making or signing occurred.

Proof of return — production of returns, etc.

GMTA
137(15)

Subsection 137(15) provides that, in a proceeding under this Act, if a return, application, certificate, statement or answer is purported to have been filed, delivered, made or signed by or on behalf of a person, the production of this document is evidence that this filing, delivery, making or signing occurred.

Evidence

GMTA
137(16)

Subsection 137(16) describes how officials of the Canada Revenue Agency may use duly sworn affidavits as evidence that an amount required to be paid has not been received by the Receiver General. The affidavit must set out that the official has charge of the appropriate records, and that an examination of the records shows that the amount has not been received.

Part 6 – Regulations

Part 6 of the Act sets out rules regarding the making of regulations under the Act.

Regulations

GMTA
138(1)

Subsection 138(1) provides the Governor in Council with the authority to make regulations as described in paragraphs (a) to (d) of this subsection, namely to:

• prescribe anything that, under the Act, is to be prescribed, determined or regulated by regulation;
• prescribe the evidence required to establish facts relevant to assessments;
• require classes of persons to make information returns; and
• generally carry out the purposes and provisions of the Act.

Effect

GMTA
138(2)

Subsection 138(2) specifies when a regulation made by the Governor in Council will have effect. Generally, a regulation has effect from the day on which it is published in the Canada Gazette or at any later time as specified in the regulation. A regulation can only take effect at a time prior to publishing if the regulation provides otherwise, and the regulation:

• has a relieving effect only;
• corrects an ambiguous or deficient enactment;
• is consequential to an amendment to this Act and the amendment was applicable prior to the day on which the regulation is published; or
• gives effect to a budgetary or other public announcement, in which case the effective date cannot be earlier than the date of that announcement.

Positive or negative amount — regulations

GMTA
139

Section 139 provides, for greater certainty, that the Governor in Council may prescribe positive or negative amounts. Additionally, in prescribing a manner of determining an amount under subsection 138(1), the Governor in Council may prescribe a manner that could result in a positive or negative amount.

Incorporation by reference — limitation removed

GMTA
140

Section 140 provides that when a document is incorporated by reference as part of regulations made under the Act, the incorporated document does not have to remain static, and may change over time.

Certificates, etc. not statutory instruments

GMTA
141

Section 141 clarifies that any registration or certificate issued under this Act is not a statutory instrument for the purposes of the Statutory Instruments Act. This provision ensures that registrations and certificates may be issued without meeting the requirements of the Statutory Instruments Act, such as pre-publication.

Consequential Amendments

Access to Information Act

Clause 82

AIA
Schedule II

Consequential to the coming into force of the Act, a reference to the "Global Minimum Tax Act" is to be added in alphabetical order to the column labelled "Act" in Schedule II of the Access to Information Act. A corresponding reference is to be made in that Schedule to "section 121".

Bankruptcy and Insolvency Act

Clause 83

BIA
149(3)

Consequential to the coming into force of the Act, subsection 149(3) of the Bankruptcy and Insolvency Act is to be amended to add a reference to the "Global Minimum Tax Act" in that subsection. This would provide that claims in bankruptcy by the Crown can be filed within three months after a return under the GMTA is filed. In these circumstances, the Crown, despite other limitations that would otherwise apply, can file claims against the insolvent debtor.

Criminal Code

Clause 84

CC
462.48(2)(c)

Consequential to the coming into force of the Act, paragraph 462.48(2)(c) of the Criminal Code is to be amended to add a reference to the "Global Minimum Tax Act" in order to allow the Attorney General to seek disclosure of tax information for the purpose of investigating an offence relating to, among others, money laundering, terrorist financing, participation in a criminal organization or possession or trafficking of property obtained by crime or controlled substances as set out in section 462.48 of the Criminal Code.

Excise Tax Act

Clause 85

ETA
77

Consequential to the coming into force of the Act, section 77 of the Excise Tax Act is to be amended to provide that no refunds are paid or any credits allowed under Parts I to VII of that Act to a person until all returns and other records of which the Minister of National Revenue has knowledge and that are required to be filed by the person under theGMTA have been filed with the Minister of National Revenue.

Clause 86

ETA
229(2)

Consequential to the coming into force of the Act, subsection 229(2) of the Excise Tax Act is to be amended to provide that Goods and Services Tax/Harmonized Sales Tax (GST/HST) net tax refunds for a reporting period of a person are not paid to the person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed by the person under the GMTA have been filed with the Minister of National Revenue.

Clause 87

ETA
230(2)

Consequential to the coming into force of the Act, subsection 230(2) of the Excise Tax Act is to be amended to provide that an amount paid on account of GST/HST net tax for a reporting period of a person is not refunded to the person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed by the person under the GMTA have been filed with the Minister of National Revenue.

Clause 88

ETA
238.1(2)(c)(iii)

Consequential to the coming into force of the Act, subparagraph 238.1(2)(c)(iii) of the Excise Tax Act is to be amended to provide that, prior to the Minister of National Revenue designating a particular period requested by a GST/HST registrant as an eligible reporting period for the purposes of not having to file a GST/HST return for that period under section 238 of that Act, all amounts required to be paid under the GMTA must first be paid.

Clause 89

ETA
263.02

Consequential to the coming into force of the Act, section 263.02 of the Excise Tax Act is to be amended to provide that rebates of GST/HST are not paid to a person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed by the person under the GMTA have been filed with the Minister of National Revenue. 

Clause 90

ETA
296(7)

Consequential to the coming into force of the Act, subsection 296(7) of the Excise Tax Act is to be amended. Section 296 of that Act provides that where a person has paid an amount on account of tax, net tax, penalty, interest or other amount assessed under that section and the amount paid exceeds the amount determined on reassessment to be payable or remittable by the person, the Minister of National Revenue shall refund to the person the amount of the excess, together with interest thereon at the prescribed rate. 

The amendment provides that no amount is refunded to a person under section 296 of the Excise Tax Act, unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed by the person under the GMTA have been filed with the Minister of National Revenue.  

Export Development Act

Clause 91

EDA
24.3(2)(c)

Consequential to the coming into force of the Act, paragraph 24.3(2)(c) of the Export Development Act is to be amended to add the GMTA to the list of statutes for which privileged information may be communicated to the Minister of National Revenue, for the purpose of administration or enforcement.

Financial Administration Act

Clause 92

FAA
155.2(6)(c)

Consequential to the coming into force of the Act, paragraph 155.2(6)(c) of the Financial Administration Act is to be amended to provide that certain amounts owed under the GMTA are not subject to the low-value amounts legislation, consistent with the treatment of amounts owed under other tax statutes. 

Tax Court of Canada Act

Clause 93

TCCA
12

Consequential to the coming into force of the Act, section 12 of the Tax Court of Canada Act is to be amended as a result of the appeals system under the GMTA which allows a person to appeal the Minister of National Revenue's decision on an objection relating to an assessment to the Tax Court of Canada.
This section extends the exclusive original jurisdiction of the Court:

• in subsection 12(1) of the Tax Court of Canada Act to include references and appeals arising under the GMTA;
• in subsection 12(3) to include questions referred to the Court under section 94 or 95 of the GMTA; and
• in subsection 12(4) to include applications for extensions of time under section 88 or 90 of the GMTA.

Clause 94

TCCA
18.29(3)(a)

Consequential to the coming into force of the Act, paragraph 18.29(3)(a) of the Tax Court of Canada Act is to be amended to add applications for extensions of time under section 88 or 90 of the GMTA to those to which the informal procedural rules, referred to in subsection 18.29(1), apply.

Clause 95

TCCA
18.31(2)

Consequential to the coming into force of the Act, subsection 18.31(2) of the Tax Court of Canada Act is to be amended. In that subsection, applications for the determination of questions under section 94 of the GMTA are to be added to those to which the general procedure applies under sections 17.1, 17.2 and 17.4 to 17.8 of the Tax Court of Canada Act.

Clause 96

TCCA
18.32(2)

Consequential to the coming into force of the Act, subsection 18.32(2) of the Tax Court of Canada Act is to be amended. In that subsection, applications for the determination of questions under section 95 of the GMTA are to be added to those to which the general procedure applies under sections 17.1, 17.2 and 17.4 to 17.8 of the Tax Court of Canada Act, provided that neither the Attorney General of Canada nor a person concerned requests the application of the informal procedure.

Customs Act

Clause 97

CA
97.29(1)(a)

Consequential to the coming into force of the Act, paragraph 97.29(1)(a) of the Customs Act is to be amended. Under this paragraph, non-arm's length transfers of property result in joint and several liability of the transferor and transferee in an amount equivalent to the extent the fair market value of the property at the time of transfer exceeds the fair market value at that time of the consideration given by the transferee for the transfer of the property. This amendment provides that the joint and several liability is reduced for purposes of the Customs Act to reflect amounts already assessed in respect of the same transfer of property under similar joint and several liability rules in certain other acts.

Income Tax Act

Clause 98

ITA
18(1)(t)

Consequential to the coming into force of the Act, paragraph 18(1)(t) of the Income Tax Act is to be amended to add a reference to the GMTA to provide that amounts paid or payable as interest under that Act are not deductible for income tax purposes. 

Clause 99

ITA
164(2.01)

Consequential to the coming into force of the Act, subsection 164(2.01) of the Income Tax Act is to be amended to add a reference to the GMTA. This amendment provides that the Minister of National Revenue shall not, in respect of a taxpayer, refund, repay, apply to other debts or set-off amounts under the Income Tax Act unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed by the taxpayer under the GMTA have been filed with the Minister of National Revenue.

Clause 100

ITA
221.2(2)

Consequential to the coming into force of the Act, subsection 221.2(2) of the Income Tax Act is to be amended to add the GMTA to the list of statutes for which particular amounts appropriated to the debts of a person under listed statutes can, on application by the person to the Minister of National Revenue, be re-appropriated to the payment of amounts that are or may become payable under the GMTA or other listed statutes.

Canada Revenue Agency Act

Clause 101

CRAA
2

Consequential to the coming into force of the Act, paragraph (a) of the definition "program legislation" in section 2 of the Canada Revenue Agency Act is to be amended to add a reference to the GMTA. This amendment results in the Canada Revenue Agency becoming responsible for the enforcement and administration of the GMTA alongside the other legislation it administers.

Air Travellers Security Charge Act

Clause 102

ATSCA
40(4)

Consequential to the coming into force of the Act, subsection 40(4) of the Air Travellers Security Charge Act is to be amended to add a reference to the GMTA. This amendment provides that no refunds are paid to a person under the Air Travellers Security Charge Act until that person has filed with the Canada Revenue Agency all returns and other records that are required to be filed under the GMTA.

Excise Act, 2001

Clause 103

EA, 2001
188

Consequential to the coming into force of the Act, paragraph 188(6)(a) of the Excise Act, 2001 is to be amended to add a reference to the GMTA. This amendment provides that an overpayment of duty payable for a reporting period of a person and interest on the overpayment are not off-set or refunded under the Excise Act, 2001 unless the person has filed all returns and other records of which the Minister of National Revenue has knowledge and that are required to be filed with the Minister of National Revenue under the GMTA.

Consequential to the coming into force of the Act, clause 188(7)(b)(ii)(A) of the Excise Act, 2001 is to be amended to add a reference to the GMTA. This amendment provides that, in assessing the duty payable by a person for a reporting period of the person or an amount payable by a person under the Excise Act, 2001, if a refund would be payable to the person if it were claimed in an application under that Act, the Minister of National Revenue would pay a refund only if the person has filed all returns and other records of which the Minister of National Revenue has knowledge and that are required to be filed with the Minister of National Revenue under the GMTA.

Clause 104

EA, 2001
189(4)

Consequential to the coming into force of the Act, subsection 189(4) of the Excise Act, 2001 is to be amended to add a reference to the GMTA. This amendment provides that no refund under the Excise Act, 2001 is paid until the person claiming it has filed with the Minister of National Revenue all returns and other records of which the Minister of National Revenue has knowledge and that are required to be filed under the GMTA.

Underused Housing Tax Act

Clause 105

UHTA
34

Consequential to the coming into force of the Act, section 34 of the Underused Housing Tax Act is to be amended to add a reference to the GMTA This amendment provides that a refund under section 33 of the Underused Housing Tax Act is not to be paid to a person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed under the GMTA by the person have been filed with the Minister of National Revenue.

Select Luxury Items Tax Act

Clause 106

SLITA
45

Consequential to the coming into force of the Act, section 45 of the Select Luxury Items Tax Act is to be amended to add a reference to the GMTA. This amendment provides that a rebate under Subdivision B of Division 4 of the Select Luxury Items Tax Act is not to be paid to a person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed under the GMTA by the person have been filed with the Minister of National Revenue.

Clause 107

SLITA
48

Consequential to the coming into force of the Act, section 48 of the Select Luxury Items Tax Act is to be amended to add a reference to the GMTA. This amendment provides that if a trustee is appointed under the Bankruptcy and Insolvency Act to act in the administration of the estate or succession of a bankrupt debtor, a rebate under Division 4 of the Select Luxury Items Tax Act that the bankrupt debtor was entitled to claim before the appointment is not to be paid after the appointment unless all returns required to be filed in respect of the bankrupt debtor under the GMTA in respect of periods ending before the appointment have been filed and all amounts required under those Acts to be paid by the bankrupt debtor in respect of those periods have been paid.

Clause 108

SLITA
53(3)

Consequential to the coming into force of the Act, subsection 53(3) of the Select Luxury Items Tax Act is to be amended to add a reference to the GMTA. This amendment provides that the Minister of National Revenue may retain amounts payable to a person under the GMTA as security where the current security provided by the person is insufficient.

Clause 109

SLITA
57(6)

Consequential to the coming into force of the Act, subsection 57(6) of the Select Luxury Items Tax Act is to be amended to add a reference to the GMTA. This amendment provides that a rebate under subsection 57(4) of the Select Luxury Items Tax Act is not to be paid to a person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed under the GMTA by the person have been filed with the Minister of National Revenue.

Clause 110

SLITA
94

Consequential to the coming into force of the Act, section 94 of the Select Luxury Items Tax Act is to be amended to add a reference to the GMTA. This amendment provides that an amount under section 92 or 93 of the Select Luxury Items Tax Act is not to be paid to a person unless all returns of which the Minister of National Revenue has knowledge and that are required to be filed under the GMTA by the person have been filed with the Minister of National Revenue.

Clause 111

Clause 111 includes amendments that would apply if Bill C-59, which is currently before Parliament, receives royal assent.

Subclauses (2) to (29) include amendments to various statutes to add cross-references to both the GMTA and the Digital Services Tax Act (which is included in Bill C-59). See the commentary accompanying clauses 83 to 110 for a discussion of the impact of these various amendments as they relate to the GMTA.

Subsections (30) to (32) amend various sections of the GMTA to add references to the Digital Services Tax Act. See the commentary accompanying clause 81 for a discussion of each of those sections.

Subsection (33) replaces section 54 of the GMTA with a more detailed version that includes specific cross-references to the Income Tax Act. These amendments clarify that the penalty in the general anti-avoidance rule in the Income Tax Act, including the exception for transactions properly reported to the Minister of National Revenue, apply for the purposes of the GMTA. This amendment applies to fiscal years of MNE groups that begin on or after December 31, 2023, except that any penalty imposed under the general anti-avoidance rule applies to transactions that occur on or after the first day on which both bill C-59 and the GMTA have received royal assent.