Article 18 - Definitions

UAE

:

means the United Arab Emirates.

Ministry

:

means the Ministry of Finance.

Minister

:

means the Minister of Finance.

Acceptable Financial Accounting Standard

:

means IFRS and the generally accepted accounting principles of Australia, Brazil, Canada, Member States of the European Union, Member States of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, the People's Republic of China, the Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the United Kingdom, and the United States of America.

Accrued Pension Expense

:

means the difference between the amount of pension liability expense included in the Financial Accounting Net Income or Loss and the amount contributed to a Pension Fund for the Fiscal Year. Accrued Pension Expense shall not include expenses that are accrued for direct pension payments to former employees.

Accrued Pension Income

:

means the sum of the pension income and the amount of pension contributions, if any, during the Fiscal Year.

Additional Current Top-up Tax

:

is the amount of tax determined in Article 5.4 and any amount treated as Additional Current Top-up Tax determined under Article 5.4, such as the amount determined under Article 4.1.5.

Additional Tier One Capital

:

means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements applicable to the banking sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis.

Additions to Covered Taxes

:

is defined in Article 4.1.2.

Adjusted Asset Gain

:

in respect of Aggregate Asset Gain that is subject to an election under Article 3.2.6 means an amount equal to the Aggregate Asset Gain in the Election Year, reduced by any amount of such gain that has been applied against the Net Asset Loss in a prior Loss Year under Article 3.2.6(b) or (c).

Adjusted Covered Taxes

:

is defined in Article 4.1.1.

Aggregate Asset Gain

:

in respect of an election under Article 3.2.6, means the net gain in the Election Year from the disposition of Local Tangible Assets by all Constituent Entities located in the Jurisdiction excluding the gain or loss on a transfer of assets between Group Members.

Agreed Administrative Guidance

:

means guidance on the interpretation or administration of the Pillar Two Model Rules issued by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

Annual Election

:

means an election made by a Filing Constituent Entity and that applies only for the Fiscal Year for which the election is made.

Allocated Asset Gain

:

in respect of an election under Article 3.2.6, means the Adjusted Asset Gain that is allocated to a Fiscal Year in the Lookback Period under Article 3.2.6(d).

Arm's Length Principle

:

means the principle under which transactions between Constituent Entities must be recorded by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances.

Asymmetric Foreign Currency Gains or Losses

:

means foreign currency gains or losses of an entity whose accounting and tax functional currencies are different and that are:

(a) included in the computation of a Constituent Entity's taxable income or loss and attributable to fluctuations in the exchange rate between its accounting functional currency and its tax functional currency;

(b) included in the computation of a Constituent Entity's Financial Accounting Net Income or Loss and attributable to fluctuations in the exchange rate between its tax functional currency and its accounting functional currency;

(c) included in the computation of a Constituent Entity's Financial Accounting Net Income or Loss and attributable to fluctuations in the exchange rate between a third foreign currency and its accounting functional currency; and

(d) attributable to fluctuations in the exchange rate between a third foreign currency and its tax functional currency, whether or not such foreign currency gain or loss is included in taxable income.

The tax functional currency is the functional currency used to determine the Constituent Entity's taxable income or loss for a Covered Tax in the Jurisdiction in which it is located. The accounting functional currency is the functional currency used to determine the Constituent Entity's Financial Accounting Net Income or Loss. A third foreign currency is a currency that is not the Constituent Entity's tax functional currency or accounting functional currency.

Authorised Accounting Body

:

is the body with legal authority in a Jurisdiction to prescribe, establish, or accept accounting standards for financial reporting purposes.

Authorised Financial Accounting Standard

:

in respect of any Entity, means a set of generally acceptable accounting principles permitted by an Authorised Accounting Body in the Jurisdiction where that Entity is located.

Average Pillar Two Income or Loss

:

is defined in Article 5.5.2.

Average Pillar Two Revenue

:

is defined in Article 5.5.2.

Commentary

:

means any commentary to the Pillar Two Model Rules as developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting as amended from time to time.

Consolidated Financial Statements

:

means:

(a) the financial statements prepared by an Entity in accordance with an Acceptable Financial Accounting Standard, in which the assets, liabilities, income, expenses and cash flows of that Entity and the Entities in which it has a Controlling Interest are presented as those of a single economic unit;

(b) where an Entity meets the definition of a Group under Article 1.2.3, the financial statements of the Entity that are prepared in accordance with an Acceptable Financial Accounting Standard;

(c) where the Ultimate Parent Entity has financial statements described in paragraph (a) or (b) that are not prepared in accordance with an Acceptable Financial Accounting Standard, the financial statements are those that have been prepared in accordance with another Authorised Financial Accounting Standard subject to adjustments to prevent any Material Competitive Distortions; and

(d) where the Entity does not prepare financial statements described in the paragraphs above, the Consolidated Financial Statements of the Entity are those that would have been prepared by the Entity if such financial statements were compulsory in accordance with law or regulations and were prepared in accordance with an Authorised Financial Accounting Standard that is either an Acceptable Financial Accounting Standard or another Authorised Financial Accounting Standard that is adjusted to prevent any Material Competitive Distortions.

Constituent Entity (CE)

:

is defined in Article 1.3.1.

Constituent Entity-owner

:

means a Constituent Entity that directly or indirectly owns an Ownership Interest in another Constituent Entity of the same MNE Group.

Controlled Foreign Company Tax Regime

:

means a set of tax rules (other than an IIR) under which a direct or indirect shareholder of a foreign entity (the controlled foreign company or CFC) is subject to current taxation on its share of part or all of the income earned by the CFC, irrespective of whether that income is distributed currently to the shareholder.

Controlling Interest

:

means an Ownership Interest in an Entity such that the interest holder:

(a) is required to consolidate the assets, liabilities, income, expenses and cash flows of the Entity on a line-by-line basis in accordance with an Acceptable Financial Accounting Standard; or

(b) would have been required to consolidate the assets, liabilities, income, expenses and cash flows of the Entity on a line-by-line basis if the interest holder had prepared Consolidated Financial Statements. A Main Entity is deemed to have the Controlling Interests of its Permanent Establishments.

Cooperative

:

means an Entity that collectively markets or acquires goods or services on behalf of its members and that is subject to a tax regime in the Jurisdiction in which it is located that is designed to ensure tax neutrality in respect of members' property or services sold through the cooperative and property or services acquired by members through the cooperative.

Covered Taxes

:

is defined in Article 4.2.

Deductible Dividend

:

means, with respect to a Constituent Entity that is subject to a Deductible Dividend Regime,

(a) a distribution of profits to the holder of an Ownership Interest that is deductible from taxable income of the Constituent Entity under the laws of the Jurisdiction in which it is located; or

(b) a patronage dividend to a member of a Cooperative.

Deductible Dividend Regime

:

means a tax regime designed to yield a single level of taxation on the owners of an Entity through a deduction from the income of the Entity for distributions of profits to the owners. For this purpose, patronage dividends of a Cooperative are treated as distributions to owners. A Deductible Dividend Regime also includes a regime applicable to Cooperatives that exempts the Cooperative from taxation.

Designated Filing Entity

:

means the Constituent Entity, other than the Ultimate Parent Entity, that has been appointed by the MNE Group to file the Pillar Two Information Return on behalf of the MNE Group.

Designated Local Entity

:

means the Constituent Entity of an MNE Group that is located in the UAE and that has been appointed by the other Constituent Entities located in the UAE of the MNE Group to file the Pillar Two Information Return, or to submit the notifications under Article 15.3.

Disallowed Accrual

:

is defined in Article 4.4.6.

Disqualified Refundable Imputation Tax

:

means any amount of Tax, other than a Qualified Imputation Tax, accrued or paid by a Constituent Entity that is:

(a) refundable to the beneficial owner of a dividend distributed by such Constituent Entity in respect of that dividend or creditable by the beneficial owner against a tax liability other than a tax liability in respect of such dividend; or

(b) refundable to the distributing corporation upon distribution of a dividend. A withholding tax on dividends imposed on a dividend recipient and withheld by the distributing Entity is not a Disqualified Refundable Imputation Tax, even if part or all of the withholding tax is ultimately refunded to the dividend recipient by the tax authority.

Domestic Designated Filing Entity

:

means:

(a) a Constituent Entity that files the Top-up Tax Return and pays the Top-up Tax on behalf of all members of a Domestic Main Group, a Domestic Minority-owned Subgroup or a Reverse Hybrid Entity; or

(b) a Joint Venture or JV Subsidiary that files the Top-up Tax Return and pays the Top-up Tax on behalf of all members of a Domestic JV Group.

Domestic Group

:

means:

(a) one or more Constituent Entities of an MNE Group located in the UAE (Domestic Main Group);

(b) one or more Constituent Entities, located in the UAE, of the same Minority-owned Subgroup (Domestic Minority- owned Subgroup): or

(c) a Joint Venture, a Joint Venture and one or more JV Subsidiaries, or one or more JV Subsidiaries, located in the UAE, of the same JV Group (Domestic JV Group).

Dual-listed Arrangement

:

means an arrangement entered into by two or more Ultimate Parent Entities of separate Groups, under which:

(a) the Ultimate Parent Entities agree to combine their business by contract alone;

(b) pursuant to contractual arrangements the Ultimate Parent Entities will make distributions (with respect to dividends and in liquidation) to their shareholders based on a fixed ratio;

(c) their activities are managed as a single economic entity under contractual arrangements while retaining their separate legal identities;

(d) the Ownership Interests in the Ultimate Parent Entities comprising the agreement are quoted, traded or transferred independently in different capital markets; and

(e) the Ultimate Parent Entities prepare Consolidated Financial Statements in which the assets, liabilities, income, expenses and cash flows of all the Entities of the Groups are presented together as those of a single economic unit and that are required by a regulatory regime to be externally audited.

Effective Tax Rate

:

is defined in Article 5.1.1.

Election Year

:

in respect of an Annual Election means the year for which the election is made.

Eligible Employees

:

means employees, including part-time employees, of a Constituent Entity that is a member of the MNE Group and independent contractors participating in the ordinary operating activities of the MNE Group under the direction and control of the MNE Group.

Eligible Payroll Costs

:

means employee compensation expenditures (including salaries, wages, and other expenditures that provide a direct and separate personal benefit to the employee, such as health insurance and pension contributions), payroll and employment taxes, and employer social security contributions.

Eligible Tangible Assets

:

is defined in Article 5.3.4.

Entity

:

means:

(a) any juridical person; or

(b) an arrangement that prepares separate financial accounts, such as a partnership or trust; but does not include natural person, central, state, or local government or their administration or agencies that carry out government functions.

Equity Investment Inclusion Election

:

means a Five-Year Election made on a Jurisdictional basis to apply the provisions of Article 7.5 with respect to all Ownership Interests (other than a Portfolio Shareholding) owned by Constituent Entities located in a Jurisdiction, except that the election cannot be revoked with respect to an Ownership Interest if a loss with respect to that Ownership interest has been taken into account in the computation of the Pillar Two Income or Loss during the period in which this election was in effect.

Effective Tax Rate Adjustment Article

:

means Article 3.2.6, Article 4.4.4, Article 4.6.1, Article 4.6.4.

EUR

:

means the currency of the European Monetary Union.

Excess Profit

:

is defined in Article 5.2.2.

Excluded Dividends

:

means dividends or other distributions received or accrued in respect of an Ownership Interest, except for:

(a) a Short-term Portfolio Shareholding, and

(b) an Ownership Interest in an Investment Entity that is subject to an election under Article 7.4.

Excluded Entity

:

is defined in Article 1.5.1 and Article 1.5.2.

Excluded Equity Gain or Loss

:

means the gain, profit or loss included in the Financial Accounting Net Income or Loss of the Constituent Entity arising from:

(a) gains and losses from changes in fair value of an Ownership Interest, except for a Portfolio Shareholding;

(b) profit or loss in respect of an Ownership Interest included under the equity method of accounting; and

(c) gains and losses from disposition of an Ownership Interest, except for a disposition of a Portfolio Shareholding.

Excluded Insurance Reserves Expense

:

means, any expense of a Constituent Entity that is an insurance company, in respect of the movement of insurance reserves of the Entity to the extent that the amount of the expense is equal to the amount of any of the following:

(a) Excluded Dividends, net of any investment management fees, from a security held on behalf of a policyholder; or

(b) Excluded Equity Gains or Losses from a security held on behalf of a policyholder.

Filing Constituent Entity

:

is an Entity filing the Top-up Tax Return in accordance with Article 8.1.

Financial Accounting Net Income or Loss

:

is defined in Articles 3.1.2 and 3.1.3.

Fiscal Year

:

means an accounting period with respect to which the Constituent Entities prepare their standalone financial statements or the Ultimate Parent Entity of the MNE Group prepares its Consolidated Financial Statements, as the context requires. In the case of Consolidated Financial Statements as defined in paragraph

(d) of its definition, Fiscal Year means the calendar year.

Five-Year Election

:

means an election made by a Filing Constituent Entity with respect to a Fiscal Year (the election year) that cannot be revoked with respect to the election year or the four succeeding Fiscal Years. If a Five-Year Election is revoked with respect to a Fiscal Year (the revocation year), a new election cannot be made with respect to the four Fiscal Years succeeding the revocation year.

General Government

:

means the central administration, agencies whose operations are under its effective control, state and local governments and their administrations.

Governmental Entity

:

means an Entity that meets all of the following criteria set out in paragraphs (a) to (d) below:

(a) it is part of or wholly-owned by a government (including any political subdivision or local authority thereof);

(b) it has the principal purpose of:

(i) fulfilling a government function; or

(ii) managing or investing that government's or Jurisdiction's assets through the making and holding of investments, asset management, and related investment activities for the government's or Jurisdiction's assets; and does not carry on a trade or business;

(c) it is accountable to the government on its overall performance, and provides annual information reporting to the government; and (d) its assets vest in such government upon dissolution and to the extent it distributes net earnings, such net earnings are distributed solely to such government with no portion of its net earnings inuring to the benefit of any private person.

Group

:

is defined in Article 1.2.2 and 1.2.3.

Group Entity

:

in respect of any Entity or Group, means an Entity that is a member of the same Group.

High-Tax Counterparty

:

means a Constituent Entity that is located in a Jurisdiction that is not a Low-Tax Jurisdiction or that is located in a Jurisdiction that would not be a Low-Tax Jurisdiction if its Effective Tax Rate were determined without regard to any income or expense accrued by that Entity in respect of an Intragroup Financing Arrangement.

IFRS

:

means the International Financial Reporting Standards.

IIR

:

means the rules equivalent to Article 2.1 to Article 2.3 of the Pillar Two Model Rules.

Included Revaluation Method Gain or Loss

:

means the net gain or loss, increased or decreased by any associated Covered Taxes, for the Fiscal Year in respect of all property, plant and equipment that arises under an accounting method or practice that:

(a) periodically adjusts the carrying value of such property to its fair value;

(b) records the changes in value in Other Comprehensive Income; and

(c) does not subsequently report the gains or losses recorded in Other Comprehensive Income through profit and loss.

Insurance Investment Entity

:

means an Entity that:

(a) would meet the definition of an Investment Fund or a Real Estate Investment Vehicle except that it is established in relation to liabilities under an insurance or annuity contract; and

(b) is wholly-owned by an Entity or by a number of Entities which are all members of the same MNE Group, that are subject to regulation in its location as an insurance company. The Entities referred to in paragraph (b) of this definition also include Flow-through Entities provided that they are subject to regulations in the same manner as an insurance company.

Intermediate Parent Entity

:

means a Constituent Entity (other than an Ultimate Parent Entity, Partially-Owned Parent Entity, Permanent Establishment, or Investment Entity) that owns (directly or indirectly) an Ownership Interest in another Constituent Entity in the same MNE Group.

International Organisation

:

means any intergovernmental organisation (including a supranational organisation) or wholly-owned agency or instrumentality thereof that meets all of the criteria set out in paragraphs (a) to (c) below:

(a) it is comprised primarily of governments;

(b) it has in effect a headquarters or substantially similar agreement (for example, arrangements that entitle the organisation's offices or establishments in the Jurisdiction (e.g. a subdivision, or a local, or regional office) to privileges and immunities) with the Jurisdiction in which it is established; and

(c) law or its governing documents prevent its income inuring to the benefit of private persons.

International Shipping Income

:

is defined in Article 3.3.2.

Intragroup Financing Arrangement

:

means any arrangement entered into between two or more members of the MNE Group whereby a High Tax Counterparty directly or indirectly provides credit or otherwise makes an investment in a Low Tax Entity.

Investment Entity

:

means:

(a) an Investment Fund, a Real Estate Investment Vehicle or Insurance Investment Entity;

(b) an Entity that is at least 95% owned directly by an Entity described in paragraph (a) or through a chain of such Entities and that operates exclusively or almost exclusively to hold assets or invest funds for the benefit of such Investment Entities; and

(c) an Entity where at least 85% of the value of the Entity is owned by an Entity referred to in paragraph (a) provided that substantially all of the Entity's income is Excluded Dividends or Excluded Equity Gain or Loss that is excluded from the computation of Pillar Two Income or Loss in accordance with Articles 3.2.1(b) or (c).

Investment Fund

:

means an Entity that meets all of the criteria set out in paragraphs (a) to (g) below:

(a) it is designed to pool assets (which may be financial and non-financial) from a number of investors (some of which are not connected);

(b) it invests in accordance with a defined investment policy;

(c) it allows investors to reduce transaction, research, and analytical costs, or to spread risk collectively;

(d) it is primarily designed to generate investment income or gains, or protection against a particular or general event or outcome;

(e) investors have a right to return from the assets of the fund or income earned on those assets, based on the contributions made by those investors;

(f) the Entity or its management is subject to a regulatory regime in the Jurisdiction in which it is established or managed (including appropriate anti-money laundering and investor protection regulation); and

(g) it is managed by investment fund management professionals on behalf of the investors.

Joint Venture (JV)

:

means an Entity whose financial results are reported under the equity method in the Consolidated Financial Statements of the Ultimate Parent Entity provided that the Ultimate Parent Entity holds directly or indirectly at least 50% of its Ownership Interests. A Joint Venture does not include:

(a) an Ultimate Parent Entity of an MNE Group that is subject to the Pillar Two Rules;

(b) an Excluded Entity as defined by Article 1.5.1;

(c) an Entity whose Ownership Interest held by the MNE Group are held directly through an Excluded Entity referred to in Article 1.5.1 and the Entity: i. operates exclusively or almost exclusively to hold assets or invest funds for the benefit of its investors; ii. carries out activities that are ancillary to those carried out by the Excluded Entity; or iii. substantially all of its income is excluded from the computation of Pillar Two Income or Loss in accordance with Articles 3.2.1(b) or (c).

(d) an Entity that is held by an MNE Group composed exclusively of Excluded Entities; or

(e) a JV Subsidiary.

JV Group

:

means a Joint Venture and its JV Subsidiaries.

JV Subsidiary

:

means an Entity whose assets, liabilities, income, expenses and cash flows are consolidated by a Joint Venture under an Acceptable Financial Accounting Standard (or would have been consolidated had it been required to consolidate such items in accordance with an Acceptable Financial Accounting Standard). A Permanent Establishment whose Main Entity is the Joint Venture or a JV Subsidiary shall be treated as a separate JV Subsidiary.

UTPR Jurisdiction

:

means any state or jurisdiction with fiscal autonomy, which may include the UAE as the context may require.

Liable Constituent Entity (or Entities)

:

means one or several Constituent Entities located in the UAE that could be liable for Top-up Tax if a Safe Harbour in Article 8.2 did not apply.

Local Tangible Asset

:

means immovable property located in the same Jurisdiction as the Constituent Entity.

Look-back Period

:

in respect of an election under Article 3.2.6, means the Election Year and the four prior Fiscal Years.

Loss Year

:

in respect of Jurisdiction for which the Filing Constituent Entity has made an election under Article 3.2.6, means a Fiscal Year in the Lookback Period for which there is a Net Asset Loss for a Constituent Entity located in that Jurisdiction and the total amount of Net Asset Loss of all such Constituent Entities exceeds the total amount of their Net Asset Gain.

Low-Tax Entity

:

means a Constituent Entity located in a Low Tax Jurisdiction or a Jurisdiction that would be a Low-Tax Jurisdiction if the Effective Tax Rate for the Jurisdiction were determined without regard to any income or expense accrued by that Entity in respect of an Intragroup Financing Arrangement.

Low-Tax Jurisdiction

:

in respect of an MNE Group in any Fiscal Year, means a Jurisdiction where the MNE Group has Net Pillar Two Income and is subject to an Effective Tax Rate (as determined under Article 5) in that period that is lower than the Minimum Rate.

Main Entity

:

in respect of a Permanent Establishment, is the Entity that includes the Financial Accounting Net Income or Loss of the Permanent Establishment in its financial statements.

Marketable Price Floor

:

means 80% of the net present value of the tax credit, where such value is determined based on the yield to maturity on a debt instrument issued by the government that issued the tax credit with equal or similar maturity (and up to 5-year maturity) issued in the same Fiscal Year as the tax credit is transferred (or if not transferred, the Origination Year). For purposes of this definition:

(a) the amount of the tax credit is the face value of the credit or the remaining creditable amount in relation to the tax credit; and

(b) the cash flow projection to be factored in the calculation of the net present value shall be based on the maximum amount that can be used each year under the legal design of the credit.

Marketable Transferable Tax Credit

:

means a tax credit that can be used by the holder of the credit to reduce its liability for a Covered Tax in the Jurisdiction that issued the tax credit provided that the following conditions are met:

(a) in the case of the originator of the tax credit:

i. the tax credit regime needs to be designed in a way that the originator can transfer the credit to an unrelated party in the Fiscal Year in which it satisfies the eligibility criteria for the credit (Origination Year) or within 15 months of the end of the Origination Year; and

ii. the tax credit is transferred to an unrelated party within 15 months of the end of the Origination Year (or, if not transferred or transferred between related parties, similar tax credits trade between unrelated parties within 15 months of the end of the Origination Year) at a price that equals or exceeds the Marketable Price Floor;

(b) in the case of the purchaser of the tax credit:

i. the tax credit regime needs to be designed in a way that the purchaser can transfer the credit to an unrelated party in the Fiscal Year in which it purchased the tax credit;

ii. the legal framework under which the tax credit is provided allows the purchaser to transfer the tax credit to an unrelated party and subjects the purchaser to the same or less stringent legal restrictions on the transfer of the credit than the ones applicable to the originator; and

iii. the purchaser acquires the credit from an unrelated party at a price that equals or exceeds the Marketable Price Floor. For purposes of this definition an originator and purchaser are considered related parties if one owns, directly or indirectly, at least 50% of the Ownership Interest in the other (or, in the case of a company, at least 50% of the aggregate vote and value of the company's shares) or another person owns, directly or indirectly, at least 50% of the Ownership Interest (or, in the case of a company, at least 50% of the aggregate vote and value of the company's shares) in each of the Originator and purchaser. In any case, an Originator and purchaser are considered related parties if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same person or persons.

Material Competitive Distortion

:

in respect of the application of a specific principle or procedure under a set of generally accepted accounting principles means an application that results in an aggregate variation greater than EUR 75 million in a Fiscal Year as compared to the amount that would have been determined by applying the corresponding IFRS principle or procedure. Where the application of a specific principle or procedure results in a Material Competitive Distortion, the accounting treatment of any item or transaction subject to that principle or procedure must be adjusted to conform to the treatment required for the item or transaction under IFRS in accordance with any Agreed Administrative Guidance.

Minimum Rate

:

means fifteen percent (15%).

Minority-Owned Constituent Entity

:

means a Constituent Entity where the Ultimate Parent Entity has a direct or indirect Ownership Interest in that Entity of 30% or less.

Minority-Owned Parent Entity

:

means a Minority-Owned Constituent Entity that holds, directly or indirectly, the Controlling Interests of another Minority-Owned Constituent Entity, except where the Controlling Interests of the first-mentioned Entity are held, directly or indirectly, by another Minority-Owned Constituent Entity.

Minority-Owned Subgroup

:

means a Minority-Owned Parent Entity and its Minority-Owned Subsidiaries.

Minority-Owned Subsidiary

:

means a Minority-Owned Constituent Entity whose Controlling Interests are held, directly or indirectly, by a Minority-Owned Parent Entity.

MNE Group

:

is defined in Articles 1.2.1.

MNE Group's Allocable Share of the Investment Entity's Pillar Two Income

:

is defined in Article 7.3.4.

Multi-Parented MNE Group

:

means two or more Groups where:

(a) the Ultimate Parent Entities of those Groups enter into an arrangement that is a Stapled Structure or a Dual-listed Arrangement; and

(b) at least one Entity or Permanent Establishment of the combined Group is located in a different Jurisdiction with respect to the location of the other Entities of the combined Group.

Net Asset Gain

:

in respect of an election under Article 3.2.6, means the net gain from the disposition of Local Tangible Assets by a Constituent Entity located in the Jurisdiction for which the election was made excluding the gain or loss on a transfer of assets to another Group Member.

Net Asset Loss

:

in respect of a Constituent Entity and a Fiscal Year, means the net loss from the disposition of Local Tangible Assets by that Constituent Entity in that year excluding the gain or loss on a transfer of assets to another Group Member. The amount of Net Asset Loss shall be reduced by the amount of Net Asset Gain or Adjusted Asset Gain which is set-off against such loss pursuant to the application of Article 3.2.6(b) or (c) as a result of a previous election made under Article 3.2.6.

Net Book Value of Tangible Assets

:

means the average of the beginning and end values of Tangible Assets after taking into account accumulated depreciation, depletion, and impairment, as recorded in the financial statements.

Net Pillar Two Income

:

of a Jurisdiction is defined in Article 5.1.2.

Net Pillar Two Loss

:

is the nil or negative amount, if any, computed in accordance with the following formula:

Net Taxes Expense

:

means the net amount of:

(a) any Covered Taxes accrued as an expense and any current and deferred Covered Taxes included in the income tax expense, including Covered Taxes on income that is excluded from the Pillar Two Income or Loss computation;

(b) any deferred tax asset attributable to a loss for the Fiscal Year;

(c) any Qualified Domestic Minimum Top-up Tax accrued as an expense;

(d) any taxes arising pursuant to the Qualified IIR and Qualified UTPR, accrued as an expense;

(e) any Disqualified Refundable Imputation Tax accrued as an expense; and

(f) taxes accrued by an insurance company in respect of returns to policyholders to the extent Article 3.2.9 applies in relation to those taxes.

Non-Marketable Transferable Tax Credit

:

is a tax credit that, if held by the Originator, is transferable but is not a Marketable Transferable Tax Credit, and if held by a purchaser, is not a Marketable Transferable Tax Credit.

Non-profit Organisation

:

means an Entity that meets all of the following criteria:

(a) it is established and operated in its Jurisdiction of residence:

(i) exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, or other similar purposes; or

(ii) as a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare;

(b) substantially all of the income from the activities mentioned in paragraph (a) is exempt from income tax in its Jurisdiction of residence;

(c) it has no shareholders or members who have a proprietary or beneficial interest in its income or assets;

(d) the income or assets of the Entity may not be distributed to, or applied for the benefit of, a private person or non-charitable Entity other than:

(i) pursuant to the conduct of the Entity's charitable activities;

(ii) as payment of reasonable compensation for services rendered or for the use of property or capital; or

(iii) as payment representing the fair market value of property which the Entity has purchased, and

(e) upon termination, liquidation or dissolution of the Entity, all of its assets must be distributed or revert to a Non-profit Organisation or to the government (including any Governmental Entity) of the Entity's Jurisdiction of residence or any political subdivision thereof; but does not include any Entity carrying on a trade or business that is not directly related to the purposes for which it was established.

Non-Qualified Refundable Tax Credit

:

means a tax credit that is not a Qualified Refundable Tax Credit but that is refundable in whole or in part.

Non-qualifying Gain or Loss

:

means the lesser of the gain or loss of the disposing Constituent Entity arising in connection with a Pillar Two Reorganisation that is subject to tax in the disposing Constituent Entity's location and the financial accounting gain or loss arising in connection with the Pillar Two Reorganisation.

OECD Model Tax Convention

:

means the OECD (2017), Model Tax Convention on Income and on Capital: Condensed Version 2017.

Other Comprehensive Income

:

means items of income and expense that are not recognised in profit or loss as required or permitted by the Authorised Financial Accounting Standard used in the Consolidated Financial Statements. Other Comprehensive Income is usually reported as an adjustment to equity in the statement of financial position (balance sheet).

Ownership Interest

:

means any equity interest that carries rights to the profits, capital or reserves of an Entity (including a Flow-through Entity), including the profits, capital or reserves of a Main Entity's Permanent Establishment(s). For purposes of this definition:

(a) an equity interest is an interest that is accounted for as equity under the financial accounting standard used in the preparation of the Consolidated Financial Statements of the Ultimate Parent Entity; and

(b) where different types of equity interests are issued by an Entity, equal regard should be given to each equity interest that carries rights to profits, capital or reserves, unless otherwise provided by a provision of this Decision.

Parent Entity

:

means an Ultimate Parent Entity that is not an Excluded Entity, an Intermediate Parent Entity, or a Partially-Owned Parent Entity.

Partially-Owned Parent Entity

:

means a Constituent Entity (other than an Ultimate Parent Entity, Permanent Establishment, or Investment Entity) that:

(a) owns (directly or indirectly) an Ownership Interest in another Constituent Entity of the same MNE Group; and

(b) has more than 20% of the Ownership Interests in its profits held directly or indirectly by persons that are not Constituent Entities of the MNE Group.

Passive Income

:

means income included in Pillar Two Income that is:

(a) a dividend or dividend equivalents;

(b) interest or interest equivalent;

(c) rent;

(d) royalty;

(e) annuity; or

(f) net gains from property of a type that produces income described in paragraphs (a) to (e), but only to the extent a Constituent Entity-owner is subject to tax on such income under a Controlled Foreign Company Tax Regime or as a result of an Ownership Interest in a Hybrid Entity.

Pension Fund

:

means:

(a) an Entity that is established and operated in a Jurisdiction exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals: i. regulated as such by that Jurisdiction or one of its political subdivisions or local authorities; or ii. those benefits are secured or otherwise protected by national regulations and funded by a pool of assets held through a fiduciary arrangement or trustor to secure the fulfilment of the corresponding pension obligations against a case of insolvency of the MNE Group; and

(b) a Pension Services Entity.

Pension Services Entity

:

means an Entity that is established and operated exclusively or almost exclusively:

(a) to invest funds for the benefit of Entities referred to in paragraph (a) of the definition of Pension Fund; or

(b) to carry out activities that are ancillary to those regulated activities carried out by the Entities referred to in paragraph (a) of the definition of Pension Fund provided that they are members of the same Group.

Permanent Establishment

:

means:

(a) a place of business (including a deemed place of business) situated in a Jurisdiction and treated as a permanent establishment in accordance with an applicable Tax Treaty in force provided that such Jurisdiction taxes the income attributable to it in accordance with a provision similar to Article 7 of the OECD Model Tax Convention on Income and on Capital;

(b) if there is no applicable Tax Treaty in force, a place of business (including a deemed place of business) in respect of which a Jurisdiction taxes under its domestic law the income attributable to such place of business on a net basis similar to the manner in which it taxes its own tax residents;

(c) if a Jurisdiction has no corporate income tax system, a place of business (including a deemed place of business) situated in that Jurisdiction that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention on Income and on Capital provided that such Jurisdiction would have had the right to tax the income attributable to it in accordance with Article 7 of that model; or

(d) a place of business (or a deemed place of business) that is not already described in paragraphs (a) to (c) through which operations are conducted outside the Jurisdiction where the Entity is located provided that such Jurisdiction exempts the income attributable to such operations.

Pillar Two Implementation Framework

:

means the procedures to be developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting in order to develop administrative rules, guidance, and procedures that will facilitate the co-ordinated implementation of the Pillar Two Model Rules.

Pillar Two Income of all Constituent Entities

:

is defined in Article 5.1.2(a).

Pillar Two Income or Loss of a Constituent Entity

:

is defined in Article 3.1.1.

Pillar Two Information Return

:

means the GloBE Information Return developed in accordance with the Pillar Two Implementation Framework that contains the information described in Article 15.

Pillar Two Loss Deferred Tax Asset

:

is defined in Article 4.5.

Pillar Two Loss Election

:

is defined in Article 4.5.1.

Pillar Two Losses of all Constituent Entities

:

is defined in Article 5.1.2(b).

Pillar Two Model Rules

:

means the model rules set out in the document entitled Tax Challenges Arising from the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two) published by the OECD on 20 December 2021.

Pillar Two Reorganisation

:

means a transformation or transfer of assets and liabilities such as in a merger, demerger, liquidation, or similar transaction where:

(a) the consideration for the transfer is, in whole or in significant part, equity interests issued by the acquiring Constituent Entity or by a person connected with the acquiring Constituent Entity, or, in the case of a liquidation, equity interests of the target (or, when no consideration is provided, where the issuance of an equity interest would have no economic significance);

(b) the disposing Constituent Entity's gain or loss on those assets is not subject to tax, in whole or in part; and

(c) the tax laws of the Jurisdiction in which the acquiring Constituent Entity is located require the acquiring Constituent Entity to compute taxable income after the disposition or acquisition using the disposing Constituent Entity's tax basis in the assets, adjusted for any Non- qualifying Gain or Loss on the disposition or acquisition. For purposes of this definition, transformation means a change in the form of an Entity and includes a contribution of assets to the capital of an existing Entity where the Entity does not issue new or additional Ownership Interests in exchange for the contributed property because the transaction does not result in a change in the relative ownership of the Entity.

Pillar Two Revenue

:

is defined in Article 5.5.3(a) for the purposes of Article 5.5.2.

Pillar Two Rules

:

means a Qualified IIR, Qualified UTPR or Qualified Domestic Minimum Top-up Tax including the provisions of this Decision.

Policy Disallowed Expenses

:

means:

(a) expenses accrued by the Constituent Entity for illegal payments, including bribes and kickbacks; and

(b) expenses accrued by the Constituent Entity for fines and penalties that equal or exceed EUR 50,000 (or an equivalent in the functional currency in which the Constituent Entity's Financial Accounting Net Income or Loss was calculated).

Portfolio Shareholding

:

means Ownership Interests in an Entity that are held by the MNE Group and that carry rights to less than 10% of the profits, capital, reserves, or voting rights of that Entity at the date of the distribution or disposition, or in the case of fair value movements, at the end of the Fiscal Year.

Prior Period Errors and Changes in Accounting Principles

:

means all changes in the opening equity at the beginning of the Fiscal Year of a Constituent Entity attributable to:

(a) a correction of an error in the determination of Financial Accounting Net Income in a previous Fiscal Year that affected the income or expenses includible in the computation of Pillar Two Income or Loss for such Fiscal Year, except to the extent such error correction resulted in a material decrease to a liability for Covered Taxes subject to Article 4.6; or

(b) a change in accounting principle or policy that affects income or expenses includible in the computation of Pillar Two Income or Loss.

Qualified Ancillary International Shipping Income

:

is defined in Article 3.3.3.

Qualified Debt Release

:

means a debt release:

(a) pursuant to a procedure undertaken under a statutorily provided insolvency or bankruptcy proceedings pursuant to domestic law that are: i. supervised by a court or other judicial body in the relevant Jurisdiction; or ii. under which an independent insolvency administrator is appointed;

(b) pursuant to an arrangement with one or more creditors that are not closely related to the debtor and it is reasonable to assume based on an opinion of a qualified independent party that the debtor would be insolvent within 12 months of the date of the release in the absence of the release of debts owed to non-closely related creditors under the arrangement; or

(c) where paragraphs (a) or (b) do not apply and the debtor's liabilities exceed the fair market value of its assets determined immediately before the debt release, the amount owed by the debtor to a non-closely related creditor to the extent of the lesser of:

i. the excess of the debtor's liabilities over the fair market value of its assets determined immediately before the debt release; and

ii. the reduction in the debtor's attributes under the tax laws of the Jurisdiction where the debtor is located resulting from the debt release.

For the purposes of this definition, a creditor is closely related to the debtor if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons or enterprises. In any case, a creditor or debtor shall be considered to be closely related to the other if either one possesses directly or indirectly more than 50% of the Ownership Interest in the other (or, in the case of a company, more than 50% of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company) or if another person or enterprise possesses directly or indirectly more than 50% of the Ownership Interest (or, in the case of a company, more than 50% of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company) in the creditor and debtor.

Qualified Domestic Minimum Top- up Tax

:

means a tax under the law of a Jurisdiction that has the status of a qualified domestic minimum top-up tax for the Fiscal Year as determined by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting and published on the OECD's website in accordance with the definition of a Qualified Domestic Minimum Top-up Tax in Article 10.1 of the Pillar Two Model Rules.

Qualified IIR

:

means a set of rules equivalent to Article 2.1 to Article 2.3 of the Pillar Two Model Rules that have qualified status for the Fiscal Year as determined by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting and published on the OECD's website in accordance with the definition of a Qualified IIR in Article 10.1 of the Pillar Two Model Rules.

Qualified Imputation Tax

:

means a Covered Tax accrued or paid by a Constituent Entity that is refundable or creditable to the beneficial owner of a dividend distributed by such Constituent Entity (or, in the case of a Covered Tax accrued or paid by a Permanent Establishment, a dividend distributed by the Main Entity) to the extent that the refund is payable, or the credit is provided:

(a) by a Jurisdiction other than the Jurisdiction which imposed the Covered Taxes under a foreign tax credit regime;

(b) to a beneficial owner of the dividend that is subject to tax at a nominal rate that equals or exceeds the Minimum Rate on the dividend on a current basis under the domestic law of the Jurisdiction which imposed the Covered Taxes on the Constituent Entity;

(c) to an individual beneficial owner of the dividend who is tax resident in the Jurisdiction which imposed the Covered Taxes on the Constituent Entity and who is subject to tax on the dividends as ordinary income; or

(d) to a Governmental Entity, an International Organisation, a resident Non-profit Organisation, a resident Pension Fund, a resident Investment Entity that is not a Group Entity, or a resident life insurance company to the extent that the dividends are received in connection with a pension fund business and subject to tax in a similar manner as a dividend received by Pension Fund. For purposes of paragraph (d), a Non-Profit Organisation or Pension Fund is resident in a Jurisdiction if it is created and managed in that Jurisdiction, and an Investment Entity is resident in a Jurisdiction if it is created and regulated in the Jurisdiction. A life insurance company is resident in the Jurisdiction in which it is located.

Qualified Ownership Interest

:

means:

(a) an investment in a Tax Transparent Entity:

(i) that is treated as an equity interest for local tax purposes; and

(ii) that would be treated as an equity interest under an Authorised Financial Accounting Standard in the Jurisdiction in which the Tax Transparent Entity operates, where the assets, liabilities, income, expenses, and cash flows of the Tax Transparent Entity are not consolidated on a line-by-line basis in the Consolidated Financial Statements of the Ultimate Parent Entity; and

(b) the total return with respect to that investment (including distributions and benefits of tax losses and Qualified Refundable Tax Credits derived through the Tax Transparent Entity, but excluding tax credits other than Qualified Refundable Tax Credits) is expected to be less than the total amount invested by the investor such that a portion of the investment will be returned in the form of tax credits other than Qualified Refundable Tax Credits (regardless of whether such tax credits are expected to be transferred or used to reduce the investor's Covered Tax liability).

For purposes of paragraph (b), the determination of the expected total return is made at the time the investment is entered into and is based on facts and circumstances, including the terms of the investment. An investment will not be considered a Qualified Ownership Interest:

(a) unless the investor has a bona fide economic interest in the Flow-Through Entity and is not protected from loss of its investment; or

(b) where a Jurisdiction only permits the benefits of tax credits to be transferred through such interests when the developer or investor is subject to the Pillar Two Model Rules.

Qualified Refundable Tax Credit

:

means a refundable tax credit designed in a way such that it must be paid as cash or available as cash equivalents within four years from when a Constituent Entity satisfies the conditions for receiving the credit under the laws of the Jurisdiction granting the credit. A tax credit that is refundable in part is a Qualified Refundable Tax Credit to the extent it must be paid as cash or available as cash equivalents within four years from when a Constituent Entity satisfies the conditions for receiving the credit under the laws of the Jurisdiction granting the credit. A Qualified Refundable Tax Credit does not include any amount of tax creditable or refundable pursuant to a Qualified Imputation Tax or a Disqualified Refundable Imputation Tax.

Qualified UTPR

:

means a set of rules equivalent to Article 2.4 to Article 2.6 of the Pillar Two Model Rules that have qualified status for the Fiscal Year as determined by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting and published on the OECD's website in accordance with the definition of a Qualified UTPR in Article 10.1 of the Pillar Two Model Rules.

Qualified Flow-through Tax Benefit

:

means a tax benefit that has flowed through a Qualified Ownership Interest attributable to a:

(a) tax credit, other than a Qualified Refundable Tax Credit; or

(b) a tax deductible loss.

Qualifying Competent Authority Agreement

:

means a bilateral or multilateral agreement or arrangement between Competent Authorities that provides for the automatic exchange of annual Pillar Two Information Returns.

Real Estate Investment Vehicle

:

means an Entity the taxation of which achieves a single level of taxation either in its hands or the hands of its interest holders (with at most one year of deferral), provided that the Entity holds predominantly immovable property and is itself widely held. A tax neutral vehicle that holds Ownership Interest in a Real Estate Investment Vehicle is treated as being subject to a single level of taxation.

Recaptured Deferred Tax Liability

:

is defined in Article 4.4.4.

Recapture Exception Accrual

:

is defined in Article 4.4.5.

Reductions to Covered Taxes

:

is defined in Article 4.1.3.

Reporting Fiscal Year

:

means the Fiscal Year that is the subject of the Pillar Two Information Return or Top-up Tax Return.

Restricted Tier One Capital

:

means an instrument issued by a Constituent Entity pursuant to prudential regulatory requirements applicable to the insurance sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis.

Short-term Portfolio Shareholding

:

means a Portfolio Shareholding that has been economically held by the Constituent Entity that receives or accrues the dividends or other distributions for less than one year at the date of the distribution.

Stapled Structure

:

means an arrangement entered into by two or more Ultimate Parent Entities of separate Groups, under which:

(a) 50% or more of the Ownership Interests in the Ultimate Parent Entities of the separate Groups are by reason of form of ownership, restrictions on transfer, or other terms or conditions combined with each other, and cannot be transferred or traded independently. If the combined Ownership Interests are listed, they are quoted at a single price; and

(b) one of those Ultimate Parent Entities prepares Consolidated Financial Statements in which the assets, liabilities, income, expenses and cash flows of all the Entities of the Groups are presented together as those of a single economic unit and that are required by a regulatory regime to be externally audited.

Stateless Constituent Entity

:

means a Constituent Entity described in Article 18.3.2(b) and Article 18.3.3(d).

Substance-based Income Exclusion

:

is defined in Article 5.3.

Substitute Loss Carry-forward Deferred Tax Asset

:

means a deferred tax asset that derives from a:

(a) foreign tax credit provided that all of the following conditions apply:

(i) the Jurisdiction requires that foreign source income offset domestic source losses before foreign tax credits may be applied against tax imposed on foreign source income;

(ii) the Constituent Entity has a domestic tax loss that is fully or partially offset by foreign source income; and

(iii) the domestic tax regime allows foreign tax credits to be used to offset a tax liability in a subsequent year in relation to income that is included in the computation of the Constituent Entity's Pillar Two Income or Loss; or

(b) loss recapture mechanism applicable in a Controlled Foreign Company Tax Regime that:

(i) provides for an equivalent or less generous result as the one in paragraph (a) of this definition; and

(ii) similarly allows excess foreign tax credits arising in a subsequent year to offset the domestic tax liability on domestic source income that has been re-sourced as foreign income.

Tax

:

means a compulsory unrequited payment to General Government.

Taxable Distribution Method

:

is defined in Article 7.4.2.

Tax Treaty

:

means an agreement for the avoidance of double taxation with respect to taxes on income and on capital.

Tested Year

:

is defined in Article 7.4.5.

Testing Period

:

is defined in Article 7.4.5.

Top-up Tax

:

means the top-up tax computed for the UAE, the Jurisdiction or Constituent Entity pursuant to Article 5.2, as the context requires.

Top-up Tax Return

:

is the tax return referred in Article 8.1.

Top-up Tax Percentage

:

is defined in Article 5.2.1.

Total Deferred Tax Adjustment Amount

:

is defined in Article 4.4.1.

Transition Year

:

for a Jurisdiction, means the first Fiscal Year that the MNE Group comes within the scope of a Qualified IIR or Qualified UTPR in respect of that Jurisdiction or the Top-up Tax under this Decision.

Ultimate Parent Entity (UPE)

:

is defined in Article 1.4.

Undistributed Net Pillar Two Income

:

is defined in Article 7.4.3.

UPE Jurisdiction

:

means the Jurisdiction where the Ultimate Parent Entity is located.

UTPR

:

means the provisions of a Jurisdiction that are equivalent to Article 2.4 to Article 2.6 of the Pillar Two Model Rules.

UTPR Jurisdiction

:

means a Jurisdiction that has a Qualified UTPR in force.

UTPR Top-up Tax Amount

:

means the amount of Top-up Tax allocated to a UTPR Jurisdiction under the UTPR.