1.    For the purpose of this Article, an insurance investment entity means an entity that would meet the definitions of an investment fund set out in Article 3, point (25) or a real estate investment vehicle set out in Article 3, point (26) if it had not been established in relation to liabilities under an insurance or annuity contract and owned wholly by an entity that is subject to regulation in the jurisdiction where it is located as an insurance company.

2.    At the election of the filing constituent entity, an investment entity or an insurance investment entity may be treated as a tax transparent entity if the constituent entity-owner is subject to tax in the jurisdiction in which it is located under a fair market value or a similar regime based on the annual changes in the fair value of its ownership interests in such entity and the tax rate applicable to the constituent entity-owner on such income equals or exceeds the minimum tax rate.

3.    A constituent entity that indirectly owns an ownership interest in an investment entity or an insurance investment entity directly through another investment entity or an insurance investment entity shall be considered to be subject to tax under a fair market value or similar regime with respect to its indirect ownership interest in the first-mentioned entity or insurance investment entity if it is subject to a fair market value or similar regime with respect to its direct ownership interest in the second-mentioned entity or insurance investment entity.

4.    The election shall be made in accordance with Article 43(1).

If the election is revoked, any gain or loss from the disposal of an asset or a liability held by the investment entity or an insurance investment entity shall be determined on the basis of the fair market value of the asset or liability on the first day of the year the revocation is made.

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