Article 48 - Eligible Tangible Assets

For the purposes of applying the provisions of Article 46 of these Regulations, Eligible Tangible Assets means tangible assets comprising any of the following:

1. Property, plant and equipment located in the Kingdom.

2. Natural resources located in the Kingdom including oil and gas deposits, timber tracts and mineral deposits.

3. A lessee's right of use of tangible assets located in the Kingdom.

4. A license or similar arrangement from the government of the Kingdom for the use of immovable property or exploitation of natural resources in the Kingdom that entails significant investment in tangible assets.

Notwithstanding Paragraph A of this Article, Eligible Tangible Assets excludes all of the following:

1. Property held for sale, lease or investment including land and buildings.

2. Tangible assets used to derive income that is excluded in accordance with Article 27 of these Regulations.

Notwithstanding Clause 1 of Paragraph B of this Article, where a Constituent Entity is the lessor of property, plant or equipment under an operating lease, the following shall apply:

1. Such property, plant or equipment shall be Eligible Tangible Assets where it is located in the same jurisdiction as the Constituent Entity.

2. For the purposes of Clause 2 of Paragraph A of Article 46 of these Regulations, the carrying value of such property, plant and equipment shall be computed in accordance with the formula

   (A - B)

   , where:

   A: The Constituent Entity's average carrying value of the property, plant or equipment at the beginning and at the end of the Fiscal Year.

   B: The average amount of the lessee's right-of-use asset determined at the beginning and end of the Fiscal Year in respect of that leased property.

3. For the purposes of Clause 3 of Paragraph A of this Article and subject to Clause 4 of this Paragraph, where the lessee is not a Constituent Entity, the lessee's right-of-use asset shall be equal to the undiscounted amount of payments remaining due under the operating lease agreement, including any extensions that would be taken into account in determining a right-of-use asset under the financial accounting standard used to determine the Constituent Entity Income.

4. For the purposes of Clause 3 of this Paragraph, the value of the lessee's right-of-use asset shall be deemed to be nil where the property, plant or equipment subject to the operating lease is regularly leased several times to different lessees during the Fiscal Year and the average lease period, including any renewals and extensions, with respect to lessee is 30 days, or less.

Where there is dual use of property, plant or equipment under an operating lease by both the lessor and the lessee, the carrying value of such asset shall be allocated between the lessor and the lessee on a fair basis taking into account the use of the asset by each party.

For the purposes of Paragraph A of this Article, an Eligible Tangible Asset shall be considered to be located in the Kingdom where the Eligible Tangible Asset is located within the Kingdom for more than 50% of the time in a Fiscal Year.

Notwithstanding the provisions of Paragraph E of this Article, where an Eligible Tangible Asset is located in the Kingdom for 50% or less of a Fiscal Year, the Eligible Tangible Asset shall be considered to be located in the Kingdom for that Fiscal Year, but the maximum carrying value of the Eligible Tangible Asset for the Fiscal Year shall be calculated in accordance with the formula

For the purposes of Clause 2 of Paragraph A of Article 46 of these Regulations, the carrying value of Eligible Tangible Assets shall be the average of the carrying value of Eligible Tangible Assets at the beginning and at the end of the Fiscal Year as per the financial accounts, reduced by any accumulated depreciation, amortisation and depletion and increased by any amount attributable to the capitalisation of payroll expenses.