Qualifying income of a flow-through entity that is an ultimate parent entity shall be reduced, for a fiscal year, by the amount attributable to an ownership holder where (a) the ownership holder is subject to tax on such income for a taxable period that ends within 12 months after the end of that fiscal year at a nominal rate of tax that equals or exceeds the minimum tax rate, or (b) it can be reasonably expected that the sum of the covered taxes paid by the ultimate parent entity and other entities that are part of the tax transparent structure and taxes paid by the ownership holder on such income within 12 months after the end of the fiscal year equals or exceeds an amount equal to that income multiplied by the minimum tax rate. Qualifying income is also reduced by amounts allocated to an ownership holder who is an individual tax resident in the jurisdiction where the ultimate parent entity is located and holds ownership interests representing a right to 5 per cent or less, or to a governmental entity, an international organisation, a non-profit organisation or a pension fund that is tax resident in that jurisdiction and holds such 5 per cent or less rights.

The qualifying loss of a flow-through entity that is an ultimate parent entity shall be reduced, for a fiscal year, by the amount of qualifying loss attributable to the ownership holder, except where the ownership holder is not permitted to use the qualifying loss for the calculation of its taxable income. The covered taxes of a flow-through entity that is an ultimate parent entity shall be reduced in the same proportion as the reduction of qualifying income under subsections (1) and (2). Subsections (1) to (4) apply to a permanent establishment through which a flow-through entity that is an ultimate parent wholly or partly carries out its business, or to the business of a tax transparent entity where the ultimate parent entity's ownership interest in that tax transparent entity is held directly or through one or more tax transparent entities.