Chapter 3 - Effective Tax Rate and Safe Harbour
Article 9 - Computation of the Tax
Where the Effective Tax Rate under Article 8 of this Law is less than the Minimum Rate for a Fiscal Year, the Additional Tax Rate for Constituent Entities located in the Kingdom and which are part of the same Multinational Enterprise Group shall be calculated according to the following formula:
(Minimum Rate – Effective Tax Rate as computed under Article 8 of this Law).
The Taxable Income for the Constituent Entities located in the Kingdom, and which are part of a Multinational Enterprise Group shall be calculated according to the following formula:
(Net Constituent Entity Income as computed under Article 8 of this Law – Substance-based Income Exclusion as computed under Article 10 of this Law).
The Taxable Income shall be considered as zero if the result of the formula is less than zero.
The Filing Constituent Entity may make an Annual Election for a Fiscal Year not to deduct the Substance-based Income Exclusion from the Net Constituent Entity Income in accordance with this formula.
The Tax Due by a Filing Constituent Entity for a Fiscal Year shall be calculated according to the following formula:
(Additional Tax Rate as calculated under Paragraph A of this Article × Taxable Income as calculated under Paragraph B of this Article) + (Additional Current Tax as described under Paragraph D of this Article + Additional Tax for Permanent Differences as described under Paragraph F of this Article).
For the purposes of Paragraph C of this Article, Additional Current Tax means any amount of Tax for a Fiscal Year resulting from an adjustment in Covered Taxes or the Constituent Entity Income or Loss as a result of the recomputation of the Effective Tax Rate for a prior Fiscal Year.
Additional Tax for Permanent Differences shall be payable if the following conditions are satisfied in a Fiscal Year for Constituent Entities which are located in the Kingdom and which are members of the same Multinational Enterprise Group, or for a Joint Venture located in the Kingdom and its Joint Venture Subsidiaries located in the Kingdom:
The Net Constituent Entity Income is equal to or less than zero.
The aggregate Adjusted Covered Taxes is less than zero.
The aggregate Adjusted Covered Taxes is lower than the product of the Net Constituent Entity Income and the Minimum Rate.
The computation of Additional Tax for Permanent Differences shall be in accordance with the following formula:
(The absolute value of the aggregate Adjusted Covered Taxes – the absolute value of the product of Net Constituent Entity Income and Minimum Rate.)
The Tax for each Stateless Constituent Entity shall be calculated, for each Fiscal Year, separately from the Effective Tax Rate for all other Constituent Entities.
The Regulations shall prescribe the rules, conditions and controls necessary to implement the provisions of this Article, including matters related to imposing Additional Current Tax in addition to the rules for calculating Tax for minority-owned Constituent Entities, multi-parented Multinational Enterprise Groups, investment entities and insurance investment entities in a manner consistent with the Model Rules, administrative guidance, and commentary issued by the OECD.