CRA indicates that it will administer the GMTA in accordance with OECD administrative guidance where Finance has intimated that the GMTA will be amended to catch up

CRA indicated that as new OECD administrative guidance is released, the DST and Global Tax Section of CRA will consult with the Department of Finance to determine, on a case-by-case basis, how such guidance should be handled – whether there is a pending amendment to the Global Minimum Tax Act (GMTA) or whether CRA will apply the new guidance to inform its interpretation of the existing GMTA provisions.

CRA was provided with a particular example in this regard respecting s. 17(6) of the GMTA: A particular constituent entity (a CE) is a reverse hybrid entity in relation to its direct owner, while at the same time being fiscally transparent in relation to an indirect owner that holds the particular CE through one or more intermediaries who are also fiscally transparent in relation to the indirect owner. In the current version of the GMTA, this is addressed by allowing the income of the CE to be allocated to the indirect owner. However, the June 2024 OECD Administrative Guidance instead addressed this scenario by allowing any tax paid by the indirect owner with respect to the income of the CE to be allocated to the CE. Although proposed amendments to s. 17(6) released in August 2024 no longer allow the income of the CE to be allocated to the indirect owner, the amendments fail to provide for allocating the tax paid by the indirect owner, regarding the income of the CE, to the CE. However, it is understood that further GMTA amendments will align with the June 2024 administrative guidance.

CRA indicated that it has consulted with Finance and, in light of likely further amendments, it will administer the provisions of the GMTA to achieve what the OECD administrative guidance clarifies should be the outcome – that is, the constituent entity covered taxes paid by the upper-tier entity being pushed down to the CE.

Neal Armstrong. Summaries of 3 December 2024 CTF Roundtable, Q.11 under GMTA s. 3(1) and s. 17(6).