1.  The qualifying income of a flow-through entity that is an ultimate parent entity shall be reduced, for the fiscal year, by the amount of qualifying income that is allocated to the holder of an ownership interest (the “ownership holder”) in the flow-through entity, provided that:

(a)   the income is subject to tax within 12 months after the end of this fiscal year at a nominal rate that equals or exceeds the minimum tax rate; or

(b)   it can be reasonably expected that the total amount of covered taxes and taxes paid by the ownership holder on the income equals or exceeds an amount equal to that income multiplied by the minimum tax rate.

2.  The qualifying income of a flow-through entity that is an ultimate parent entity shall be reduced, for the fiscal year, by the amount of qualifying income that is allocated to the holder of an ownership interest in the flow-through entity provided that the ownership holder is:

(a)   a natural person that is tax resident in the jurisdiction where the ultimate parent entity is located and holds ownership interests representing a right to 5 % or less of the profits and assets of the ultimate parent entity; or

(b)   a governmental entity, an international organisation, a non-profit organisation or a pension fund other than a pension services entity that is tax resident in the jurisdiction where the ultimate parent entity is located and holds ownership interests representing a right to 5 % or less of the profits and assets of the ultimate parent entity.

3.  The qualifying loss of a flow-through entity that is an ultimate parent entity shall be reduced, for the fiscal year, by the amount of qualifying loss that is allocated to the ownership holder of an interest in the flow-through entity.

The first subparagraph shall not apply where the ownership holder is not allowed to use such loss for the computation of its taxable income in the jurisdiction where it is tax resident.

4.  The covered taxes of a flow-through entity that is an ultimate parent entity shall be reduced proportionally to the amount of qualifying income reduced in accordance with paragraph 1.

5.  Paragraphs 1, 2, 3 and 4 shall apply to a permanent establishment through which a flow-through entity that is an ultimate parent entity wholly or partly carries out its business or through which the business of a tax transparent entity is wholly or partly carried out provided that the ultimate parent entity’s ownership interest in that tax transparent entity is held directly or through one or more tax transparent entities.

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