Article 1 - Definitions for MNE Tax Executive Regulations

In applying the provisions of these Regulations, the words and phrases contained therein shall have the same meaning as stated in Article 1 of Decree-Law No. 11 of 2024 regarding the Implementation of Tax on Multinational Enterprises, and the following words and phrases shall have the meaning indicated next to each of them, unless the context requires otherwise.

The Law	:	The Implementation of Tax on Multinational Enterprises Law issued by Decree-Law No. 11 of 2024.
Transition Year	:	The first Fiscal Year for which a Multinational Enterprise Group comes within the scope of Tax, irrespective of whether the Multinational Enterprise Group had been within the scope of Tax in any Fiscal Year other than the immediately preceding Fiscal Year.
Reporting Fiscal Year	:	Means the Fiscal Year that is the subject of the Tax Return.
Parent Entity	:	Means an Ultimate Parent Entity that is not an Excluded Entity, an Intermediate Parent Entity, or a Partially-Owned Parent Entity.
Partially-Owned Parent Entity	:	Means a Constituent Entity (other than an Ultimate Parent Entity, Permanent Establishment, or Investment Entity) that satisfies all of the following: Owns (directly or indirectly) an Ownership Interest in another Constituent Entity of the same Multinational Enterprise Group. Has more than 20% of the Ownership Interests in its profits held directly or indirectly by persons that are not Constituent Entities of the Multinational Enterprise Group.
Intermediate Parent Entity	:	Means a Constituent Entity (other than an Ultimate Parent Entity, Partially-Owned Parent Entity, Permanent Establishment, or Investment Entity) that owns (directly or indirectly) an Ownership Interest in another Constituent Entity in the same Multinational Enterprise Group.
Investment Entity	:	Means an Entity that meets any of the following conditions: It is an Investment Fund or a Real Estate Investment Vehicle. It is an Entity that is at least 95% owned directly by an Investment Fund or a Real Estate Investment Vehicle or through a chain of such Entities and that operates exclusively or almost exclusively to hold assets or invest funds for the benefit of such Investment Entities. It is an Entity where at least 85% of the value of the Entity is owned by an Investment Fund or a Real Estate Investment Vehicle provided that substantially all of the Entity's income is Excluded Dividends or Excluded Equity Gain or Loss that is excluded from the computation of Constituent Entity Income or Loss in accordance with Article 12 of these Regulations.
Group Entity	:	In respect of any Entity or Group, means an Entity that is a member of the same Group.
Constituent Entity-owner	:	Means a Constituent Entity that directly or indirectly owns an Ownership Interest in another Constituent Entity of the same Multinational Enterprise Group.
Hybrid Entity	:	Means an Entity that is treated as a separate taxable person for income tax purposes in the jurisdiction where it is located with respect to its income, expenditure, profit or loss to the extent that it is fiscally transparent in the jurisdiction in which its owner is located.
Tax Transparent Entity	:	A Flow-through Entity is a Tax Transparent Entity if the tax laws of the jurisdiction in which the owner is located treats the Entity as fiscally transparent. Where the owner is a Flow-through Entity that is not a Flow-through Ultimate Parent Entity, such Entity shall not be considered the owner and instead the next owner further up the ownership chain that is not a Flow-through Entity shall be considered the owner for the purposes of determining whether a Flow-through Entity is a Tax Transparent Entity except where there is no such Entity in which case the owner shall be the Flow-through Ultimate Parent Entity.
Insurance Investment Entity	:	Means an Entity that would meet the definition of an Investment Fund or a Real Estate Investment Vehicle except that it is established in relation to liabilities under an insurance or annuity contract and is wholly owned by an Entity that is subject to regulation in its location as an insurance company.
Low-Taxed Constituent Entity	:	Means a Constituent Entity of the Multinational Enterprise Group that is located in a Low-Tax Jurisdiction or a Stateless Constituent Entity that, in respect of a Fiscal Year, has Constituent Entity Income and is subject to an Effective Tax Rate in that Fiscal Year which is lower than the Minimum Rate.
Sovereign Wealth Fund	:	An Entity that has the principal purpose of managing or investing a government's or jurisdiction's assets through the making and holding of investments, asset management, and related investment activities for the government's or jurisdiction's assets.
Qualified Imputation Tax	:	Means a Covered Tax accrued or paid by a Constituent Entity that is refundable or creditable to the beneficial owner of a dividend distributed by such Constituent Entity (or, in the case of a Covered Tax accrued or paid by a Permanent Establishment, a dividend distributed by the Main Entity) to the extent that the refund is payable, or the credit is provided in any of the following cases: By a jurisdiction other than the jurisdiction which imposed the Covered Taxes under a foreign tax credit regime. The refund is payable, or the credit is provided to a beneficial owner of the dividend that is subject to tax at a nominal rate that equals or exceeds the Minimum Rate on the dividend on a current basis under the domestic law of the jurisdiction which imposed the Covered Taxes on the Constituent Entity. The refund is payable, or the credit is provided to a beneficial owner of the dividend who is a natural person and tax resident in the jurisdiction which imposed the Covered Taxes on the Constituent Entity and who is subject to tax on the dividends as ordinary income. The refund is payable, or the credit is provided to a Government Body, an International Organisation, a resident Non-profit Organisation, a resident Pension Fund, a resident Investment Entity that is not a Group Entity, or a resident life insurance company to the extent that the dividends are received in connection with a pension fund business and subject to tax in a similar manner as a dividend received by Pension Fund. For this purpose, a Non-profit Organisation or Pension Fund is resident in a jurisdiction if it is created and managed in that jurisdiction, an Investment Entity is resident in a jurisdiction if it is created and regulated in the jurisdiction, and a life insurance company is resident in the jurisdiction in which it is located.
Qualified Refundable Tax Credit	:	Means a refundable tax credit designed in a way such that it shall be paid as cash or available as cash equivalents within four years from when a Constituent Entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting the credit. A tax credit that is refundable in part is a Qualified Refundable Tax Credit to the extent it shall be paid as cash or available as cash equivalents within four years from when a Constituent Entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting the credit. A Qualified Refundable Tax Credit does not include any amount of tax creditable or refundable pursuant to a Qualified Imputation Tax or a Disqualified Refundable Imputation Tax.
Non-Qualified Refundable Tax Credit	:	Means a tax credit that is not a Qualified Refundable Tax Credit but that is refundable in whole or in part.
Disqualified Refundable Imputation Tax	:	Means any amount of Tax, other than a Qualified Imputation Tax, accrued or paid by a Constituent Entity that is refundable to any of the following: The beneficial owner of a dividend distributed by such Constituent Entity in respect of that dividend or creditable by the beneficial owner against a tax liability other than a tax liability in respect of such dividend. The distributing corporation upon distribution of a dividend.
Marketable Transferable Tax Credit	:	Means a tax credit, or portion of a tax credit, that meets all of the following, in line with the Administrative Guidance: Can be used by the holder of the credit to reduce its liability for a Covered Tax in the jurisdiction that issued the tax credit. Meets the legal transferability standard in the hands of the holder of the tax reduction. Meets the marketability standard in the hands of the holder of the tax reduction.
Ownership Interest	:	Any equity interest that carries rights to the profits, capital or reserves of an Entity, including the profits, capital or reserves of a Main Entity's Permanent Establishment(s).
Controlling Interest	:	Means an Ownership Interest in an Entity such that any of the following cases applies: The interest holder is required to consolidate the assets, liabilities, income, expenses and cash flows of the Entity on a line-by-line basis in accordance with an Acceptable Financial Accounting Standard. The interest holder would have been required to consolidate the assets, liabilities, income, expenses and cash flows of the Entity on a line-by-line basis if the interest holder had prepared Consolidated Financial Statements. A Main Entity is deemed to have the Controlling Interests of its Permanent Establishments.
Portfolio Shareholding	:	Means Ownership Interests in an Entity that are held by the Multinational Enterprise Group and that carry rights to less than 10% of the profits, capital, reserves, or voting rights of that Entity at the date of the distribution or disposition.
Short-term Portfolio Shareholding	:	Means a Portfolio Shareholding that has been economically held by the Constituent Entity that receives or accrues the dividends or other distributions for less than one year at the date of the distribution.
Intra-group Financing Arrangement	:	Means any arrangement entered into between two or more members of the Multinational Enterprise Group whereby a High-Tax Counterparty directly or indirectly provides credit or otherwise makes an investment in a Low-Tax Entity.
High-Tax Counterparty	:	Means a Constituent Entity that is located in a jurisdiction that is not a Low-Tax Jurisdiction or that is located in a jurisdiction that would not be a Low-Tax Jurisdiction if its Effective Tax Rate were determined without regard to any income or expense accrued by that Entity in respect of an Intra-group Financing Arrangement.
Low-Tax Jurisdiction	:	In respect of a Multinational Enterprise Group in any Fiscal Year, means a jurisdiction where the Multinational Enterprise Group has Net Constituent Entity Income and is subject to an Effective Tax Rate in that period which is lower than the Minimum Rate.
Excluded Equity Gain or Loss	:	Means the gain, profit or loss included in the Financial Accounting Net Income or Loss of the Constituent Entity arising from any of the following: Gains and losses from changes in fair value of an Ownership Interest, except for a Portfolio Shareholding. Profit or loss in respect of an Ownership Interest included under the equity method of accounting. Gains and losses from disposition of an Ownership Interest, except for a disposition of a Portfolio Shareholding.
Excluded Dividends	:	Means dividends or other distributions received or accrued in respect of an Ownership Interest, except for any of the following: A Short-term Portfolio Shareholding. An Ownership Interest in an Investment Entity that is subject to an election under Article 61 of these Regulations.
Generally Accepted Accounting Principles	:	Generally Accepted Accounting Principles shall include the generally accepted accounting principles of Australia, Brazil, Canada, Member States of the European Union, Member States of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, the People's Republic of China, the Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the United Kingdom, and the United States of America.
Controlled Foreign Company Tax Regime	:	Means a set of tax rules (other than an Income Inclusion Rule (IIR)) under which a direct or indirect shareholder of a foreign entity is subject to current taxation on its share of part or all of the income earned by the foreign entity, irrespective of whether that income is distributed currently to the shareholder.
Material Competitive Distortion	:	In respect of the application of a specific principle or procedure under a set of generally accepted accounting principles, means an application that results in a material variation in a Fiscal Year as compared to the amount that would have been determined by applying the corresponding IFRS principle or procedure only.
Additional Tier One Capital	:	Means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis.
Arm's Length Principle	:	Means the principle under which transactions between Constituent Entities shall be recorded by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances.
Other Comprehensive Income	:	Means items of income and expense that are not recognised in profit or loss as required or permitted by the Authorised Financial Accounting Standard used in the Consolidated Financial Statements.
Taxable Profit or Loss	:	The net income or loss determined by the Entity for the purposes of computing the amount of tax due under the corporate tax law (or equivalent) in the jurisdiction in which the Entity operates.
Passive Income	:	Means income included in Constituent Entity Income that is any of the following: A dividend or dividend equivalents. Interest or interest equivalent. Rent. Royalty. Annuity. Net gains from property of a type that produces income described in Clauses a to e of this definition, but only to the extent a Constituent Entity-owner is subject to tax on such income under a Controlled Foreign Company Tax Regime or as a result of an Ownership Interest in a Hybrid Entity.
Constituent Entity Loss Deferred Tax Asset	:	Is equal to the Net Constituent Entity Loss in a Fiscal Year for the jurisdiction multiplied by the Minimum Rate.
Recaptured Deferred Tax Liability	:	For the current Fiscal Year is the amount of the increase in the category of deferred tax liability that was included in the Total Deferred Tax Adjustment Amount in the fifth year preceding the current Fiscal Year that has not reversed by the end of the last day of the current Fiscal Year.
Qualified Domestic Minimum Top-up Tax	:	Means a minimum tax that is included in the domestic law of a jurisdiction and all of the following conditions are met: The minimum tax determines the excess profits of the Constituent Entities located in the jurisdiction in a manner that is equivalent to the Model Rules. The minimum tax operates to increase domestic tax liability with respect to domestic excess profits to the Minimum Rate for the jurisdiction and Constituent Entities for a Fiscal Year. The minimum tax is implemented and administered in a way that is consistent with the outcomes provided for under the Model Rules and the Commentary, provided that such jurisdiction does not provide any benefits that are related to such rules.
Income Inclusion Rule (IIR)	:	Means the rules set out in Article 2.1 to 2.3 of the Model Rules.
Qualified Income Inclusion Rule (IIR)	:	Means a set of rules equivalent to Article 2.1 to Article 2.3 of the Model Rules (including any provisions of the Model Rules associated with those Articles) that are included in the domestic law of a jurisdiction and that are implemented and administered in a way that is consistent with the outcomes provided for under the Model Rules and the Commentary provided that such jurisdiction does not provide any benefits that are related to those rules.
Undertaxed Payments Rule (UTPR)	:	means the rules set out in Article 2.4 to Article 2.6 of the Model Rules.
Qualified Undertaxed Payments Rule (Qualified UTPR)	:	Means a set of rules equivalent to Article 2.4 to Article 2.6 of the Model Rules (including any provisions of the Model Rules associated with those Articles) that are included in the domestic law of a jurisdiction and that are implemented and administered in a way that is consistent with the outcomes provided for under the Model Rules and the Commentary provided that the jurisdiction does not provide any benefits that are related to such rules.
Administrative Guidance	:	Means the guidance issued by the OECD named "Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two)" published in February 2023, July 2023, December 2023 and June 2024, and any subsequent versions as approved by a decision of the Chief Executive Officer.
Transfer Pricing Guidelines	:	The document named "OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations of the Organisation for Economic Co-operation and Development (2022)", OECD Publishing, Paris or subsequent versions as approved by a decision by the Chief Executive Officer.
Commentary	:	Means the document named "OECD (2022), Tax Challenges Arising from the Digitalisation of the Economy - Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two)" first published on 14 March 2022 and the latest version published on 25 April 2024, or any subsequent versions as approved by a decision of the Chief Executive Officer.
Tax Treaty	:	An agreement for the avoidance or elimination of double taxation with respect to taxes on income and on capital.
Presentation Currency	:	The currency in which the financial statements are presented.
Flow-through Entity	:	An Entity to the extent it is fiscally transparent with respect to its income, expenditure, profit or loss in the jurisdiction where it was created unless it is tax resident and subject to a Covered Tax on its income or profit in another jurisdiction. A Flow-through Entity may be a Tax Transparent Entity with respect to its income, expenditure, profit or loss to the extent that it is fiscally transparent in the jurisdiction in which its owner is located, or a Flow-through Entity is a Reverse Hybrid Entity with respect to its income, expenditure, profit or loss to the extent that it is not fiscally transparent in the jurisdiction in which the owner is located. A Constituent Entity that is not a tax resident and not subject to a covered tax or taxation based on its place of management, establishment, or similar criteria shall be treated as an income Flow-through entity and a Tax Transparent Entity with respect to its income, expenses, profits, or losses, to the extent that all the following conditions are met: The owners of the entity are located in a jurisdiction that treats the Entity as fiscally transparent. The entity does not have a place of business in the jurisdiction where it was created. The income, expenditure, profit or loss is not attributable to a Permanent Establishment.