Article 51 - CEs Joining or Leaving the MNE Group

The following provisions apply when an Entity (the “Target Entity) becomes or ceases to be a CE of an MNE Group as a result of a transfer of direct or indirect Ownership Interests during a Tax Period (referred to as the “Acquisition Year):

1. If the target Entity joins or leaves an MNE group, or becomes the UPE of a new Group, then the target Entity shall be treated as a member of the MNE Group for the purposes of this Article if any portion of its assets, liabilities, income, expenses, or cash flows is consolidated on a line-by-line basis in the CFS of the UPE during the Acquisition Year.

2. During the Acquisition Year, the MNE Group must only consider the FANIL and the Adjusted Covered Taxes of the Target Entity that are included in the CFS used to calculate the GloBE Income.

3. The Target Entity must determine its GloBE Income or Loss and Adjusted Covered Taxes for the Acquisition Year, and each subsequent year based on the carrying value of its historical assets and liabilities.

4. For the purpose of calculating the Eligible Payroll Costs of the target Entity under Article 44 of these ERs, only those costs included in the FS used in calculating the GloBE Income shall be considered.

5. For the purposes of Article 45 of these ERs, the carrying value of the Target Entity’s Eligible Tangible Assets shall be proportionally adjusted to align with the duration of the relevant Tax Period during which the Target Entity was a member of the MNE group.

6. Except for the DTA related to GloBE losses, the DTAs and DTLs of the CE that were transferred between MNE groups must be taken into account by the acquiring MNE Group in the same manner and amount as if the acquiring MNE Group had controlled the CE when those liabilities and assets arose, in accordance with the provisions of these ERs.

7. DTLs of the Target Entity previously included in the total adjusted DTA must be reversed by the MNE Group disposing of the Target Entity, for the purposes of paragraph 4 of Article 38 of these ERs. These liabilities shall be treated as arising in the Acquisition Year for the purposes of paragraph 4 of Article 38 by the MNE Group acquiring the Target Entity. For the purposes of this paragraph, any subsequent reduction in covered taxes under paragraph 4 of Article 38 shall be effective in the Tax Period in which the amount is recovered.

The acquisition or disposal of a controlling interest in a CE is excluded from the above, and such an acquisition or disposal shall be treated as an acquisition or disposal of assets and liabilities if both of the following conditions are met in the country or jurisdiction where the targeted CE is located (or where the assets are in the case of a Tax-Transparent Entity):

1. The state or jurisdiction treats the acquisition or disposal of the controlling interest in the same manner, or in a similar manner, as an acquisition or disposal of assets and liabilities.

2. The state or jurisdiction imposes a covered tax on the seller that is calculated based on the difference between the tax base and the consideration received for the controlling interest, or the fair market value of the assets and liabilities.