Article 54 - De Minimis Exclusion

For the purposes of Paragraph A of Article 12 of the Law, where there were no Constituent Entities located in the Kingdom with either Constituent Entity Revenue or Constituent Entity Losses in the first or second Fiscal Years preceding the current Fiscal Year, such year or years shall be excluded when computing the Average Constituent Entity Revenue and Average Constituent Entity Income or Loss for a Fiscal Year.

Where any of the Fiscal Years referred to in Paragraph B of Article 12 of the Law are shorter than 12 months, the Constituent Entity Revenue and Constituent Entity Income or Loss shall be adjusted in proportion to the period covered by the short Fiscal Year over a calendar year, for the purposes of determining the Average Constituent Entity Revenue and Average Constituent Entity Income or Loss for that Fiscal Year.

Where a Multinational Enterprise Group acquires an Entity located in the Kingdom through a merger, the Constituent Entity's revenue and Constituent Entity Income or Loss attributable to that Entity determined for Fiscal Years prior to the merger shall not be taken into account for the purposes of determining the Average Constituent Entity Revenue and Average Constituent Entity Income or Loss.

Where a Constituent Entity located in the Kingdom leaves a Multinational Enterprise Group, the Constituent Entity's revenue and Constituent Entity Income or Loss attributable to that Entity determined for Fiscal years prior to the disposal shall be taken into account for the purposes of determining the Average Constituent Entity Revenue and Average Constituent Entity Income or Loss.

Where, under any Article of the Law, adjustments are made to Constituent Entity Income or Loss in a prior Fiscal Year all of the following shall apply:

1. A Filing Constituent Entity shall not be entitled to apply the provisions of Article 12 of the Law following the adjustments if it had not been entitled to apply those provisions prior to the adjustments having been made.

2. Where the adjustments increase Constituent Entity Income or Loss in a prior Fiscal Year, and the Filing Constituent Entity had made an Annual Election under Article 12 of the Law, the Tax shall only be equal to zero under that Article if the conditions of Article 12 claimed will make a Multinational Enterprise Group non-eligible for the De Minimis Exclusion for that Fiscal Year if following the adjustments the Revenue Test is satisfied.

Where the Filing Constituent Entity makes an Annual Election to apply the De Minimis Exclusion under Article 12 of the Law for a Fiscal Year, the Filing Constituent Entity will not be required to calculate the Effective Tax Rate as stated in Article 8 of the Law or calculate the Tax as stated in Article 9 of the Law for Constituent Entities located in the Kingdom for that Fiscal Year.

The provisions of Article 12 of the Law shall apply to Joint Ventures and Joint Venture Subsidiaries as if they were Constituent Entities of a separate Multinational Enterprise Group, and the Average Constituent Entity Revenue and the Average Constituent Entity Income or Loss of the Constituent Entities located in the Kingdom that are Joint Ventures or Joint Venture Subsidiaries shall only be taken into account when applying the provisions of Article 12 of the Law to that separate Multinational Enterprise Group.