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May 15, 2026

Article 4 defines Adjusted Covered Taxes, essential for calculating the Effective Tax Rate. It details additions and reductions to current tax expenses, including adjustments for uncertain tax positions and qualified tax credits. The article introduces mechanisms for temporary differences through deferred tax adjustments and the Pillar Two Loss Election, which allows for the creation of deferred tax assets from losses. It also addresses the allocation of taxes between entities (e.g., CFC taxes and PE taxes) and provides rules for post-filing adjustments and the impact of domestic tax rate changes.

Article 4 - Computation of Adjusted Covered Taxes

Article 4.1. Adjusted Covered Taxes

4.1.1 The Adjusted Covered Taxes of a Constituent Entity for the Fiscal Year shall be equal to the current tax expense accrued in its Financial Accounting Net Income or Loss with respect to Covered Taxes for the Fiscal Year adjusted by:

(a) the net amount of its Additions to Covered Taxes for the Fiscal Year (as determined under Article 4.1.2) and Reductions to Covered Taxes for the Fiscal Year (as determined under Article 4.1.3);

(b) the Total Deferred Tax Adjustment Amount (as determined under Article 4.4); and

(c) any increase or decrease in Covered Taxes recorded in equity or Other Comprehensive Income relating to amounts included in the computation of Pillar Two Income or Loss that will be subject to tax under local tax rules.

4.1.2 The Additions to Covered Taxes of a Constituent Entity for the Fiscal Year is the sum of:

(a) any amount of Covered Taxes accrued as an expense in the profit before taxation in the financial accounts;

(b) any amount of Pillar Two Loss Deferred Tax Asset used under Article 4.5.3;

(c) any amount of Covered Taxes that is paid in the Fiscal Year and that relates to an uncertain tax position where that amount has been treated for a previous Fiscal Year as a Reduction to Covered Taxes under Article 4.1.3(d); and

(d) any amount of credit, refund or the transferable amount in respect of a Qualified Refundable Tax Credit or of a Marketable Transferable Tax Credit that is recorded as a reduction to the current tax expense.

4.1.3 The Reductions to Covered Taxes of a Constituent Entity for the Fiscal Year is the sum of:

(a) the amount of current tax expense with respect to income excluded from the computation of Pillar Two Income or Loss under Article 3;

(b) any amount of credit, refund or the transferable amount in respect of a tax credit that is not recorded as a reduction to the current tax expense and that is not derived from a Qualified Refundable Tax Credit or Marketable Transferable Tax Credit;