111AU Election to treat investment entity as tax transparent entity

Summary

This section provides a five-year election to treat an investment entity as a tax transparent entity. The election is available to constituent entity-owners of investment entities that are subject to a mark-to-market or similar tax regime on investments in investment entities.

Details

General

(1) On the making of an election by a filing constituent entity, a constituent entity that is an investment entity may be treated as a tax transparent entity for the purpose of this Part if:

• (1)(a) the constituent entity-owner is subject to tax in the jurisdiction in which it is located under a fair market value or a similar regime based on the annual changes in the fair value of its ownership interest in such entity, and
• (1)(b) the tax rate applicable to the constituent entity-owner on the annual changes in the fair value of its ownership interest referenced in paragraph (a) equals or exceeds the minimum tax rate.

(2) Provides that a constituent entity that indirectly owns an ownership interest in an investment entity through a direct ownership interest in another investment entity shall be considered to be subject to tax under a fair market value or similar regime with respect to its indirect ownership interest in the first mentioned entity if it is subject to a fair market value or similar regime with respect to its direct ownership interest in the second mentioned investment entity.

(3) The election referred to in this section shall be made in accordance with section 111AAAD.

(4) Where the election is withdrawn, any gain or loss from the disposal of an asset or a liability held by the investment entity shall be determined on the basis of the fair market value of the asset or liability on the first day of the fiscal year the withdrawal is made.

Relevant Date: Finance Act 2024