Article 57 - Election of Tax Transparency for Investment Entities

A DCE may elect to treat an Investment Entity or an Insurance Investment Entity as a Tax Transparent Entity, provided the following two conditions are met:

1. The CE-owner is subject to income tax in its jurisdiction under a mark-to-market or similar system based on the annual changes in the fair market value of its Ownership Interest in the Entity;

2. The tax rate applicable to the CE-owner with respect such income described in clause (1) is equal to or exceeds the minimum tax rate.

A CE that indirectly owns an Ownership Interest in an Investment Entity or Insurance Investment Entity through a direct ownership Interest in another Investment Entity or Insurance Investment Entity is considered to be subject to tax under a mark-to-market or similar regime with respect to the indirect ownership interest in the first-mentioned Entity if it is subject to a mark-to-market or similar regime with respect to the direct ownership interest in the second mentioned Entity.

When making the election under Paragraph One of this Article, the CE-owner may apply Article 43 of these ERs with respect to its share of the income of the Investment Entity or Insurance Investment Entity.

The duration of the election referred to in this Article shall be five Tax Periods. If the election is revoked, the gain or loss resulting from the disposal of an asset or liability held by the Investment Entity or Insurance Investment Entity shall be determined based on the fair value of the assets or liabilities on the first day of the revocation year.

If the election is made to treat Investment Entities or Insurance investment Entities as Tax Transparent Entities for the purposes of applying the DMTT Law, the provisions of Article 56 of these ERs shall not apply to calculate the ETR for the Investment Entities or Insurance Investment Entities.

If a CE-owner that is a policyholder-owned, regulated mutual insurance Entity, and holds an Ownership Interest in an Investment Entity, it is considered subject to income tax under a mark-to-market system or similar system based on annual changes in the fair market value of the Ownership Interest in the Investment Entity at a rate equal to or exceeding the Minimum Tax.