Article 29 - Allocation of Covered Taxes

Covered Taxes included in the financial accounts of a Constituent Entity and relate to the Constituent Entity Income or Loss of that Constituent Entity's Permanent Establishment shall be allocated to that Permanent Establishment.

Covered Taxes included in the financial accounts of a Tax Transparent Entity with respect to Constituent Entity Income or Loss allocated to its Constituent Entity-owners in accordance with Paragraph D of Article 11 of these Regulations shall be allocated to such Constituent Entity-owners.

Covered Taxes that are included in the financial accounts of a Constituent Entity-owner and relate to taxes paid under a Controlled Foreign Company Tax Regime on the Constituent Entity-owner's share of the Constituent Entity's income shall be allocated to the Constituent Entity.

Covered Taxes that are included in the financial accounts of a Constituent Entity-owner and relate to the Constituent Entity Income or Loss of a Hybrid Entity shall be allocated to the Hybrid Entity.

Notwithstanding Paragraphs C and D of this Article, a Constituent Entity that is allocated Covered Taxes under Paragraphs C and D of this Article in respect of its Passive Income shall include in its Adjusted Covered Taxes in relation an amount equal to the lesser of the following:

1. The Covered Taxes allocated in respect of such Passive Income.

2. An amount determined in accordance with the formula :

   (A x B)

   where:

   A: The Additional Tax Rate for the Fiscal Year determined without regard to Covered Taxes incurred with respect to such Passive Income by the Constituent Entity-owner.

   B: The amount of the Constituent Entity's Passive Income that is included under a Controlled Foreign Company Tax Regime or a fiscal transparency rule.

Any Covered Taxes of the Constituent Entity-owner incurred with respect to Passive Income that remains after the application of Paragraph E of this Article shall not be allocated under Paragraphs C and D of this Article.

Covered Taxes accrued in the financial accounts of a Constituent Entity's direct owner on a distribution from the Constituent Entity that has been made during the Fiscal Year shall be allocated to the Constituent Entity that made the distribution.

Where Constituent Entity Income of a Permanent Establishment is treated as Constituent Entity Income of the Main Entity in accordance with Paragraph H of Article 10 of these Regulations, any Covered Taxes arising in the jurisdiction where the Permanent Establishment is located which is related to such income shall be treated as Covered Taxes of the Main Entity up to an amount determined in accordance with the formula :