PART 3

Diverted profits tax

Calculation of taxable diverted profits: section 86 cases

Section 86: mismatch condition is met: calculation of profits by reference to the relevant alternative provision
91
1
This section applies where —
a
section 86 applies for an accounting period,
b
the mismatch condition is met, and
c
the actual provision condition is not met.
2
The taxable diverted profits that arise to the foreign company in the accounting period, in relation to the material provision in question, are determined in accordance with subsections (3) to (5).
3
Subsection (4) applies if the actual provision condition would have been met but for the fact that the relevant alternative provision would have resulted in relevant taxable income of a company for that company's corresponding accounting period.
4
The taxable diverted profits that arise to the foreign company in the accounting period are an amount equal to the sum of—
a
the notional PE profits for the accounting period, and
b
the total amount of any relevant taxable income of a connected company, for that company's corresponding accounting period, which would have resulted from the relevant alternative provision.
5
If subsection (4) does not apply, the taxable diverted profits that arise to the foreign company in the accounting period are the sum of—
a
what would have been the notional PE profits of the foreign company for that period had the relevant alternative provision been made or imposed instead of the material provision, and
b
the total amount of any relevant taxable income of a connected company, for that company's corresponding accounting period, which would have resulted from the relevant alternative provision.