1.  The adjusted covered taxes of a constituent entity for a fiscal year shall be determined by adjusting the sum of the tax expense accrued in its financial accounting net income or loss with respect to covered taxes for the fiscal year, by:

(a)   the net amount of its additions and reductions to covered taxes for the fiscal year as set out in paragraphs 2 and 3;

(b)   the total deferred tax adjustment amount as set out in Article 21; and

(c)   any increase or decrease in covered taxes accrued in equity or other comprehensive income relating to amounts included in the computation of qualifying income or loss that will be subject to tax.

2.  The additions to the covered taxes of a constituent entity for the fiscal year shall include:

(a)   the amount of covered taxes accrued as an expense in the profit before taxation in the financial accounts;

(b)   the amount of qualifying loss deferred tax asset that has been used pursuant to Article 22, Paragraph 3;

(c)   the amount of covered taxes relating to an uncertain tax position previously excluded under point (d) of paragraph 3 that are paid for the fiscal year; and

(d)   the amount of credit or refund in respect of a qualified refundable tax credit that was accrued as a reduction to the tax expense.

3.  The reductions to the covered taxes of a constituent entity for the fiscal year shall include:

(a)   the amount of tax expense with respect to income excluded from the computation of qualifying income or loss under Chapter III;

(b)   the amount of credit or refund in respect of a refundable tax credit that is not a qualified refundable tax credit that was not accrued as a reduction to the tax expense;

(c)   the amount of covered taxes refunded or credited to a constituent entity that was not treated as an adjustment to tax expense, unless it relates to a qualified refundable tax credit;

(d)   the amount of tax expense, which relates to an uncertain tax position; and

(e)   the amount of tax expense that is not expected to be paid within three years after the end of the fiscal year.

4.  For the purpose of computing adjusted covered taxes, where an amount of covered tax is described in more than one point in paragraphs 1 to 3, it shall only be taken into account once.

5.  Where, for a fiscal year, there is a net qualifying loss in a jurisdiction and the amount of adjusted covered taxes for that jurisdiction is negative and less than an amount equal to the net qualifying loss multiplied by the minimum tax rate (the “expected adjusted covered taxes”), the amount equal to the difference between the amount of adjusted covered taxes and the amount of expected adjusted covered taxes shall be treated as an additional top-up tax for that fiscal year. The amount of additional top-up tax shall be allocated to each constituent entity in the jurisdiction in accordance with Article 28, Paragraph 3.

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