1.  The financial accounting net income or loss of a constituent entity that is a flow-through entity shall be reduced by the amount allocable to its owners that are not part of the MNE group and that hold their ownership interest in such flow-through entity directly or through one or more tax transparent entities, unless:

(a)   the flow-through entity is an ultimate parent entity; or

(b)   the flow-through entity is held, directly or through one or more tax transparent entities, by an ultimate parent entity.

2.  The financial accounting net income or loss of a constituent entity that is a flow-through entity shall be reduced by the financial accounting net income or loss that is allocated to another constituent entity.

3.  Where a flow-through entity wholly or partially carries out business through a permanent establishment, its financial accounting net income or loss which remains after applying paragraph 1 shall be allocated to that permanent establishment in accordance with Article 17.

4.  Where a tax transparent entity is not the ultimate parent entity, the financial accounting net income or loss of the flow-through entity which remains after applying paragraph 3 shall be allocated to its constituent entity-owners in accordance with their ownership interests in the flow-through entity.

5.  Where a reverse hybrid entity or a tax transparent entity is the ultimate parent entity, the financial accounting net income or loss of the flow-through entity which remains after applying paragraph 3 shall be allocated to the reverse hybrid entity or the tax transparent entity.

A reverse hybrid entity means a flow-through entity that is not considered as fiscally transparent in the jurisdiction in which its owner is located.

6.  Paragraphs 3, 4 and 5 shall be applied separately with respect to each ownership interest in the flow-through entity.

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