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Article 6.5. Multi-Parented MNE Groups
Article 6.5 covers the situation in which two or more Groups prepare Consolidated Financial Statements in which the financial performance of these Groups is presented as a single economic unit in accordance with a Dual-listed Arrangement or a Stapled Structure. The rules in this Article ensure that the GloBE Rules apply to these structures in the same way they would apply to a Group with single UPE with an appropriate allocation of Top-up Tax amongst the Constituent Entities of the combined MNE Group. A Multi-Parented MNE Group is comprised of two or more Groups whose UPEs enter into an arrangement that is a Stapled Structure or Dual-listed Arrangement. The terms Multi-Parented MNE Group, Dual-listed Arrangement and Stapled Structure are defined in Article 10.1.
The GloBE Rules apply only to MNE Groups and therefore the definition of a Multi-Parented MNE Group requires that at least one Entity or PE of the combined Group has to be located in a different jurisdiction with respect to the rest of the Entities of the combined Group. The phrase “combined Group” was included in the definition to accommodate the situation in which two domestic Groups hold Ownership Interests of an Entity located in another jurisdiction but they only hold the Controlling Interests of the Entity when they act as a combined Group. For instance, two separate domestic Groups may each hold 50% of the Ownership Interests of an Entity located in another jurisdiction (or domestic Entity with a PE in another jurisdiction). In this case, the Entity would be treated as a JV by each Group individually. However, where the UPEs of both Groups are part of a Stapled Structure or Dual-listed Arrangement the JV becomes a Constituent Entity of the combined Group and because that Entity is located in another jurisdiction, the combined Group becomes a Multi-Parented MNE Group.
A Stapled Structure is an arrangement under which 50% or more of the Ownership Interests in the UPEs are “stapled” together as if they were the Ownership Interests of a single Entity. Stapled Ownership Interests are combined together (through their form of ownership, restrictions on transfer, or other terms or conditions) in a way that they cannot be transferred or traded independently. Stapled Ownership Interests that are listed on a securities exchange, are quoted on that exchange at a single price for the combined Ownership Interests. The definition of Stapled Structure also requires that one of the UPEs prepares Consolidated Financial Statements in which assets, liabilities, income, expenses and cash flows of the Entities in all of the Groups are presented together as those of a single economic unit.
The other arrangement covered by the definition of a Multi-Parented MNE Group is a Dual-listed Arrangement. A Dual-listed Arrangement is an arrangement whereby two or more UPEs combine their businesses through contract rather than bringing them under the ownership and control of a single entity. Under a Dual-listed Arrangement, each UPE makes distributions to its owners based on a fixed ratio pursuant to a contract, such as an equalization agreement, and the activities of the combined groups are managed collectively as if they were carried out by a single economic entity. As with the definition of Stapled Structure, the definition of Dual-listed Arrangement also requires the UPEs to prepare Consolidated Financial Statements in which the assets, liabilities, income, expenses and cash flows of all the Entities of the Groups are presented together as those of a single economic unit. However, in contrast to Stapled Structures, the Ownership Interests in the UPEs under a Dual-listed Arrangement are quoted, traded or transferred independently in different capital markets.
Under these definitions, both a Stapled Structure and a Dual-listed Arrangement must prepare the Consolidated Financial Statements that are externally audited pursuant to a regulatory regime. This requirement is satisfied where a UPE prepares Consolidated Financial Statements in accordance with an Acceptable Financial Accounting Standard where it requires that the Consolidated Financial Statements must present fairly the financial position and performance of the Entities and are audited by a professional external auditor in accordance with the auditing standards issued by the auditing standards board in the jurisdiction of location of the UPE.
Country Profile – Japan
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