Article 34 - Adjusted Covered Taxes

The adjusted Covered Taxes for a CE to be determined for the Tax Period shall be equal to the current tax expense accrued in its FANIL with respect to covered taxes for that period, and adjusted as follows:

1. Net amount of additions in Covered Taxes during the Tax Period according to provisions of Article 35 of these ERs, and the reductions of covered taxes during the Tax Period according to provisions of Article 36 of these ERs;

2. Total amount of Deferred Tax adjustments according to Article 38 of these ERs; and

3. Any increase or decrease in Covered Taxes recorded in equity or Other Comprehensive Income related to amounts included in the GloBE Income or Loss subject to income tax under local tax legislation.

No amount of covered taxes shall be counted more than once.

If the adjusted covered taxes in the country are less than zero and less than the Expected Adjusted Covered Taxes in a Tax Period with no GloBE net income in the State, CEs in the State are treated as having Additional Current Top-Up Tax in the State according to the Article 47 of these ERs, arising in the current Tax Period, equal to the difference between these two amounts.

The expected adjusted covered taxes amount is calculated using the following formula:

The DCE may elect a Tax Period to replace the Additional Current Top-Up Tax referenced in Article 47 of these ERs with an Excess Negative Tax Expense carried forward to a later period, subject to the following:

1. The Excess Negative Tax Expense in the Tax Period must equal the amount calculated according to paragraph three of this Article for that Tax Period.

2. The Excess Negative Tax Expense carried forward to a later period must be used in all subsequent calculations related to the ETR in the State.

3. The total Adjusted Covered Taxes (but not less than zero) must be reduced by the remaining balance of the Excess Negative Tax Expense carried forward to each subsequent Tax Period in which positive GloBE income and Adjusted Covered Taxes in the State arise, and the surplus balance is reduced by the same amount.

4. The Excess Negative Tax Expense attributable to a loss that is carried back and it is deducted in the current Tax Period against income of prior Tax Periods for domestic tax purposes shall be taken into account in the current Tax Period under the third paragraph of this Article and cannot be included in the Excess Negative Tax Expense Carry-Forward.

5. The Negative Adjusted Covered Tax amount cannot be less than the expected Covered Taxes amount under paragraph three of this Article.

6. The 'Excess Negative Tax Expense carried forward should remain with the transferring Group if the MNE Group disposes of one or more CEs in the State.

7. If an MNE Group disposes of all CEs located in the State and later reacquires CEs or establishes new ones in the State in a subsequent Tax Period, the balance of the surplus Negative Tax Expense carried forward must be taken into account when determining the Adjusted Covered Taxes in the State starting from that Tax Period.

8. The MNE Group must maintain records of the remaining balance of the surplus Negative Tax Expense carried forward.