Article 13 - Excluded Equity Gains or Losses

FANIL is adjusted by excluding any equity gains or losses to determine GloBE Income or Loss, which includes the following:

1. Gains and losses from changes in fair value of an Ownership Interest (except for a Portfolio Shareholding).

2. profit or loss in respect of an Ownership Interest that is included in Financial Accounting Net Income or Loss under the equity method of accounting.

3. Gains and losses from disposition of an Ownership Interest, except a Portfolio Shareholding.

A DCE may apply the Equity Investment Inclusion Election, under which an owner of an Ownership Interest other than a Qualified Ownership Interest includes in the GloBE Income or Loss the accounting gain, profit, or loss with respect to any of the following cases:

1. Fair value gains and losses and impairments on that Ownership Interest where one of the following two cases are applicable:

   1. In the case that the owner is taxable on a mark-to-market basis or on the impairment.

   2. In the case that the owner is taxable on a realization basis and the income tax expense includes deferred tax expense on the mark to market movement or impairments on the Ownership Interest.

2. Profit and loss attributable to that Ownership Interest in the cases where the interest is in a Tax Transparent Entity and the owner accounts for the interest using the equity method.

3. The dispositions of that Ownership Interest which give rise to gains or losses that are included in the owner’s domestic taxable income, excluding any gain fully offset, and the proportionate share of any gain partially offset, by any deduction or other similar relief particular to the type of gain, such as a participation exemption directly attributable to the disposition of the Ownership Interest.

The Equity Investment Inclusion Election as referred to in the second paragraph of this Article is binding for five Tax Periods and shall not be revoked with respect to any Ownership Interest if a loss with respect to that Ownership Interest has been taken into account in the computation of the GloBE Income or Loss during the period in which the Equity Investment Inclusion Election was in effect. This election applies to all Ownership Interests held by all CEs in the same MNE Group located within the State, except for Portfolio Shareholdings held by such CEs.

When exercising the Equity Investment Inclusion Election referred to in the second paragraph of this Article, all current and deferred tax expenses or benefits arising from the gains, profits, or accounting losses recognized in the FANIL must be included in the Adjusted Covered Taxes.