111I. Allocation of top-up tax under IIR

(1) IIR top-up tax due by a parent entity in respect of a low-taxed constituent entity for a fiscal year pursuant to section 111E(1), 111F(1), 111G(1) or 111H(1), as the case may be, shall be equal to an amount calculated as—

A × B

where—

A is the top-up tax of the low-taxed constituent entity, as calculated in accordance with section 111AD, and

B is the parent entity’s allocable share in that top-up tax for the fiscal year.

(2) (a) A parent entity’s allocable share in the top-up tax with respect to a low-taxed constituent entity is the proportion of the parent entity’s ownership interest in the qualifying income of the low-taxed constituent entity, calculated as—

(A – B) / C

where—

A is the qualifying income of the low-taxed constituent entity for the fiscal year,

B is the amount of qualifying income attributable to ownership interests held by owners other than the parent entity as determined by paragraph (b), and

C is the qualifying income of the low-taxed constituent entity for the fiscal year.

(b) The amount of qualifying income attributable to ownership interests in a low-taxed constituent entity held by owners other than the parent entity shall be the amount that would have been treated as attributable to such owners under the principles of the acceptable financial accounting standard used in the ultimate parent entity’s consolidated financial statements if the low-taxed constituent entity’s net income was equal to its qualifying income, and—

(i) the parent entity had prepared consolidated financial statements in accordance with that accounting standard (in this subsection referred to as the ‘hypothetical consolidated financial statements’),

(ii) the parent entity owned a controlling interest in the low-taxed constituent entity such that all of the income and expenses of the low-taxed constituent entity were consolidated on a line-by-line basis with those of the parent entity in the hypothetical consolidated financial statements,

(iii) all of the low-taxed constituent entity’s qualifying income was attributable to transactions with persons that are not members of an MNE group or large-scale domestic group, and

(iv) all ownership interests not directly or indirectly held by the parent entity were held by persons other than members of an MNE group or large-scale domestic group.

(3) In addition to the amount allocated to a parent entity in accordance with subsection (1), IIR top-up tax due by a parent entity pursuant to section 111E(2), 111F(2), 111G(2) or 111H(2), as the case may be, shall include, for the fiscal year, in accordance with section 111AD, the full amount of top-up tax calculated for that parent entity.