3‑100 Adjustment—Arm’s Length Principle 3‑100 Adjustment—Arm’s Length Principle and transactions between Constituent Entities located in the same jurisdiction

3‑100 Adjustment—Arm’s Length Principle and transactions between Constituent Entities located in the same jurisdiction

(1) In computing the GloBE Income or Loss of a Constituent Entity of an MNE Group for a Fiscal Year, adjust the Constituent Entity’s Financial Accounting Net Income or Loss for the Fiscal Year in accordance with the following subsections. (2) Subsection (3) applies if: (a) the amount of a transaction that is between Constituent Entities of the MNE Group that are located in the same jurisdiction: (i) is not recorded in the financial accounts of both Constituent Entities in the same amount; or (ii) is not recorded in the financial accounts of both Constituent Entities consistently with the Arm’s Length Principle; or (iii) is not recorded at all in the financial accounts of both Constituent Entities; and (b) if subparagraph (a)(ii) applies—any of the following conditions are satisfied: (i) the transaction is a sale or other transfer of an asset, that gives rise to a loss that is included in the computation of the GloBE Income or Loss of one of the Constituent Entities; (ii) one of the Constituent Entities is an Investment Entity or Insurance Investment Entity, but the other is not; (iii) one of the Constituent Entities is a Minority‑Owned Constituent Entity, but the other is not. (3) For the purposes of subsection (1), adjust the amount in which the transaction is recorded in the financial accounts of each Constituent Entity so as to be consistent with the Arm’s Length Principle.

Note: Part 3‑4 sets out rules for allocating income or loss between a Main Entity and its Permanent Establishments.