Revenue Note for Guidance

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Revenue Note for Guidance

111V Meaning of marketable transferable tax credit

Summary

This section provides that marketable transferable tax credits should be considered qualifying refundable tax credits for the purposes of this Part.

Details

Definitions

(1) Introduces definitions required for the purposes of identifying a marketable transferable tax credit as referred to in sections 111P and 111U for the purposes of calculating qualifying income or loss and adjusted covered taxes respectively.

“marketable price floor” means 80 per cent of the net present value of the tax credit, where the net present value is determined based on the yield to maturity on a debt instrument issued by the government that issued the tax credit with equal or similar maturity (up to 5-year maturity) issued in the same fiscal year as the tax credit is transferred or if not transferred, the origination year;

“marketable transferable tax credit” means a tax credit, or portion of a tax credit, that:

  1. can be used by the holder of the credit to reduce its liability for a covered tax in the jurisdiction that issued the tax credit,
  2. meets the legal transferability standard, and
  3. meets the marketability standard;

“non-marketable transferable tax credit” means a tax credit that:

  1. if held by the originator, is transferable but is not a marketable transferable tax credit, or
  2. if held by the purchaser, is not a marketable transferable tax credit;

“originator” means the constituent entity that engages in the activities that generates the tax credit concerned;

“origination year” means the fiscal year in which the eligibility criteria for a tax credit is met by a constituent entity.

(2) For the purposes of the definition in subsection (1) of marketable transferable tax credit, a tax credit meets the legal transferability standard:

  • (2)(a) in respect of the originator of the tax credit, where the originator may, under the laws governing the tax credit, transfer the tax credit to an entity that is not connected with the originator in the origination year, or within a period of 15 months beginning on the final date of the origination year, and
  • (2)(b) in respect of the purchaser of the tax credit, where the purchaser may, under the laws governing the tax credit, transfer the tax credit to an entity that is not connected with the purchaser in the fiscal year in which that purchaser purchased the tax credit.

(3) For the purposes of the definition in subsection (1) of marketable transferable tax credit, a tax credit meets the marketability standard:

  • (3)(a) in respect of the originator of the tax credit, where the tax credit is transferred to an entity that is not connected with the originator within a period of 15 months beginning on the final date of the origination year for a price equal to, or exceeding, the marketable price floor, or where the tax credit is not transferred, or is transferred between entities connected with the originator, similar tax credits trade between entities that are not connected within a period of 15 months beginning on the final date of the origination year for a price equal to, or exceeding, the marketable price floor, and
  • (3)(b) in respect of the purchaser of the tax credit, where that purchaser acquired the credit from an entity that is not connected with that purchaser at a price equal to or exceeding the marketable price floor

Relevant Date: Finance Act 2024