Article 56 - Calculation of the Effective Tax Rate for Investment Entities

This Article applies to CE that meet the definition of an Investment Entity, except for Investment Entities that are Tax-Transparent Entities or that apply an election pursuant to Articles 57 and 58 of these ERs.

The ETR for an Investment Entity that is a CE and is located in a State must be calculated separately from the ETR for other CEs located in that State in accordance with Article 41 of these ERs.

The ETR for each Investment Entity is calculated by dividing the amount of adjusted covered taxes for that Entity by the allocable share of the MNE group’s GloBE Income of the Investment Entity, according to the provisions of Chapter Three of these ERs. If there is more than one Investment Entity in the Jurisdiction, the adjusted covered taxes and the allocable share of the MNE group’s GloBE income or loss of each Investment Entity must be aggregated for the purpose of calculating the ETR for all those Investment Entities.

The adjusted covered taxes for the Investment Entity comprises of the sum of the following:

1. The adjusted covered taxes determined for the Investment Entity under Article 34 of these ERs and attributed to the allocable share of the MNE Group’s GloBE income of the Investment Entity.

2. The allocated covered taxes for that Investment Entity pursuant to Article 37 of these ERs.

   The adjusted covered taxes for the Investment Entity do not include any covered taxes payable by that Entity if those taxes relate to income that is not part of the allocable share of the MNE group’s GloBE income for that Entity.

The tax payable by a CE that qualifies as an Investment Entity shall be calculated by multiplying the tax rate applicable to that Investment Entity by the positive amount of the allocable share of the MNE group’s GloBE income for that Investment Entity, reduced by the amount of excluded income based on SBIE.

The tax rate for the Investment Entity is equal to the difference, if any, between the minimum tax rate and the ETR of that Investment Entity.

When there is more than one Investment Entity in the jurisdiction belonging to the MNE group, the allocable share of GloBE income or loss for each Investment Entity, along with the SBIE determined for each Investment Entity, must be aggregated for the purpose of calculating a single effective tax rate for all such investment Entities.

The SBIE for the Investment Entity shall be calculated according to the provisions of Article 43 of these ERs, without applying the exemption in Paragraph Two of that Article, and only Eligible Tangible Assets and Eligible Payroll Costs of the Investment Entity shall be considered.

The provisions of this Article shall also apply to insurance investment Entities located in the State.