Article 35 - Loss Election

Article 33 of these Regulations shall not apply where a Filing Constituent Entity makes an election under this Article which shall be called a Loss Election.

Where a Loss Election is made, a Constituent Entity Loss Deferred Tax Asset shall be determined for each Fiscal Year in which the Constituent Entities located in the Kingdom which are members of the same Multinational Enterprise Group derive a Net Constituent Entity Loss.

For the purposes of applying the provisions of Paragraph B of this Article, the Constituent Entity Loss Deferred Tax Asset in the Kingdom in respect of a Fiscal Year shall be determined in accordance with the formula :

A Constituent Entity Loss Deferred Tax Asset in respect of a Fiscal Year shall be used in any subsequent Fiscal Year in which the Constituent Entities located in the Kingdom which are members of the same Multinational Enterprise Group derive Net Constituent Entity Income.

For the purposes of applying the provisions of Paragraph D of this Article, the amount of Constituent Entity Loss Deferred Tax Asset that shall be used shall be the lesser of:

1. The amount of Constituent Entity Loss Deferred Tax Asset that is available.

2. An amount determined in accordance with the formula :

   (C x D)

   where:

   C: The Net Constituent Entity Income for the Fiscal Year.

   D: The Minimum Rate.

The Constituent Entity Loss Deferred Tax Asset shall be reduced by the amount that is used for a Fiscal Year in accordance with Paragraphs D and E of this Article and the balance remaining, if any, shall be carried forward to subsequent Fiscal Years.

Where the Loss Election is revoked all of the following shall apply:

1. Any remaining Constituent Entity Loss Deferred Tax Asset shall be reduced to zero as at the first day of the Fiscal Year in which the Loss Election is no longer applicable.

2. The deferred tax assets and deferred tax liabilities of the Constituent Entities located in the Kingdom that are members of the same Multinational Enterprise Group shall be taken into account as if they had been computed in accordance with Article 33 and Article 91 of these Regulations for the prior Fiscal Year.

Subject to Paragraph I of this Article, the Loss Election shall be made by the Filing Constituent Entity in the Tax Return in the first Fiscal Year in which the Multinational Enterprise Group has a Constituent Entity located in the Kingdom for which an election is made.

Where the Loss Election applies to a Flow-through Entity that is an Ultimate Parent Entity of a Multinational Enterprise Group, the Constituent Entity Loss Deferred Tax Asset shall be computed in accordance with Paragraphs B to G of this Article, after the reduction is applied pursuant to Paragraphs C and D of Article 58 of these Regulations.

The election referred to in Paragraph A of this Article is an Annual Election which can be made in accordance with Article 20 of the Law.