4‑20 Meaning of Reductions to Covered Ta4‑20 Meaning of Reductions to Covered Taxes

4‑20 Meaning of Reductions to Covered Taxes

(1) The Reductions to Covered Taxes of a Constituent Entity for a Fiscal Year is the sum of the following: (a) if income is excluded from the computation of the Constituent Entity’s GloBE Income or Loss under Chapter 3—the sum of: (i) the Constituent Entity’s Accrued Current Covered Tax Expense for the Fiscal Year that relates to the income; and (ii) the amount (if any) of Additions to Covered Taxes for the Fiscal Year of the Constituent Entity that relates to the income;

Note: An amount of Covered Taxes in respect of a Net Asset Gain or Net Asset Loss is excluded from the computation of Adjusted Covered Taxes by subsection 3‑160(2).

(b) the amount (if any) of credit or refund, in respect of a tax credit (other than a Qualified Refundable Tax Credit or a Marketable Transferable Tax Credit), that:
(i) is credited or refunded to the Constituent Entity in respect of Covered Taxes in the Fiscal Year; and
(ii) is not recorded as a reduction to the Constituent Entity’s Accrued Current Covered Tax Expense for the Fiscal Year;
(c) if the Constituent Entity transferred a Non‑Marketable Transferable Tax Credit during the Fiscal Year:
(i) where the Constituent Entity is the person to whom the tax credit was originally granted—the amount (if any) received by the Constituent Entity in exchange for the transfer; or
(ii) where subparagraph (i) does not apply, and the transfer amount mentioned in subsection 3‑145(3) is a positive number—that amount;

Note: If the transfer amount is a negative number, it is included in the Constituent Entity’s GloBE Income or Loss: see subsection 3‑145(2).

(d) the amount (if any) of Covered Taxes refunded or credited to the Constituent Entity (other than a Qualified Refundable Tax Credit or a Marketable Transferable Tax Credit) that is not treated as an adjustment to the Constituent Entity’s Accrued Current Covered Tax Expense for the Fiscal Year;
(e) the amount (if any) of the Constituent Entity’s Accrued Current Covered Tax Expense for the Fiscal Year that relates to an uncertain tax position;
(f) the amount (if any) of the Constituent Entity’s Accrued Current Covered Tax Expense for the Fiscal Year that is not expected to be paid within 3 years after the last day of the Fiscal Year.

Use of purchased Non‑Marketable Transferable Tax Credits (2) Subsection (3) applies if an amount mentioned in paragraph (1)(b) is in respect of a tax credit that is a Non‑Marketable Transferable Tax Credit purchased by the Constituent Entity. (3) Reduce the amount by the multiplying it by the following fraction: (a) the excess of the face value of the tax credit over its purchase price; divided by: (b) face value of the tax credit.