Article 58 - Ultimate Parent Entity that Is a Flow-through Entity

The Constituent Entity Income of a Flow-through Entity that is an Ultimate Parent Entity shall be reduced, for a Fiscal Year, by the amount of Constituent Entity Income that is attributable to each Ownership Interest in the Flow-through Entity in any of the following situations:

1. The holder of the Ownership Interests is subject to income taxes on such income for a taxable period that ends within 12 months of the end of the Multinational Enterprise Group's Fiscal Year and any of the following applies:

   1. The holder of the Ownership Interest is subject to income taxes on the full amount of such income at a nominal rate that equals to or exceeds the Minimum Rate.

   2. There is a reasonable expectation that the sum of the amount of Adjusted Covered Taxes of the Ultimate Parent Entity and income taxes of the holder of the Ownership Interest applicable on such income equals to or exceeds the amount that results from multiplying the full amount of such income by the Minimum Rate.

2. The Ownership Interests are held by a natural person and represent a right to 5% or less of the profits and assets of the Ultimate Parent Entity, provided the natural person is a tax resident in jurisdiction where the Ultimate Parent Entity is located.

3. The Ownership Interests are held by a Government Body, International Organisation, Non-profit Organisation or a Pension Fund holds Ownership Interests that represent a right to 5% or less of the profits and assets of the Ultimate Parent Entity, provided the holder of the Ownership Interests is a resident in the jurisdiction where the Ultimate Parent Entity is located.

A Flow-through Entity that is an Ultimate Parent Entity which reduces its Constituent Entity Income pursuant to Paragraph A of this Article shall proportionally reduce its Covered Taxes to reflect the reduction.

The Constituent Entity Loss of a Flow-through Entity that is an Ultimate Parent Entity shall be reduced, for a Fiscal Year, by the amount of Constituent Entity Loss that is attributable to each Ownership Interest in that Flow-through Entity.

Paragraph C of this Article shall not be applicable to the extent the Ownership Interest holder is not permitted to utilise the loss in computing its separate income for the purposes of income taxes.

Where the Constituent Entity Loss of an Ultimate Parent Entity that is a Flow-through Entity is not reduced to zero pursuant to Paragraph C of this Article and the relevant Filing Constituent Entity makes a Loss Election as described in Article 35 of these Regulations that applies for that Ultimate Parent Entity, the balance of Constituent Entity Loss can be carried forward as a Constituent Entity Loss Deferred Tax Asset to subsequent Fiscal Years.

For the purposes of Paragraph A of this Article, an Ownership Interest holder is subject to income taxes on its share of the Ultimate Parent Entity's Constituent Entity Income if any of the following applies:

1. That share of income is included in the Ownership Interest holder's income which is subject to income taxes under the laws of the jurisdiction in which the Ownership Interest holder is tax resident.

2. That share of income is subject to income taxes of a Permanent Establishment of the Ownership Interest holder.

This Article shall apply to Permanent Establishments in any of the following cases:

1. A Permanent Establishment through which the business of a Flow-through Entity that is the Ultimate Parent Entity of a Multinational Enterprise Group is wholly or partly carried out.

2. A Permanent Establishment through which the business of a Tax Transparent Entity is wholly or partly carried out where the Ultimate Parent Entity's Ownership Interest in that Tax Transparent Entity is held directly or through a Tax Transparent Structure.

For the purposes of applying the provisions of the preceding Paragraphs of this Article, an Ownership Interest in an Entity or a Permanent Establishment that is a Constituent Entity shall be treated as held through a Tax Transparent Structure if that Ownership Interest is held indirectly through a chain of Tax Transparent Entities.