Part 3

Multinational top-up tax
Chapter 4

Calculation of adjusted profits of members of a multinational group

Adjustments only applicable to permanent establishments

Permanent establishment income and expense attribution
159
1
Where a member of a multinational group is a permanent establishment falling within paragraph (a) of section 232(2) (entity treated as permanent establishment in accordance with tax treaty), its underlying profits are to be adjusted so that they —
a
reflect all amounts of income and expense that are attributable to it in accordance with the tax treaty under which it is treated as a permanent establishment, and
b
do not reflect amounts attributable to its main entity in accordance with that treaty.
2
Where a member of a multinational group is a permanent establishment falling within paragraph (b) of section 232(2) (permanent establishment taxed on similar basis to residents in absence of tax treaty), its underlying profits are to be adjusted so that they —
a
reflect all amounts of income and expense that are attributable to it in accordance with the law of the territory in which the member is located, and
b
do not reflect amounts attributable to its main entity in accordance with the law of that territory.
3
Where a member of a multinational group is a permanent establishment falling within paragraph (c) of section 232(2) (permanent establishment located in territory without corporate income tax), its underlying profits are to be adjusted so that they —
a
reflect all amounts of income and expense that would be attributed to it in accordance with Article 7 of the OECD tax model, and
b
do not reflect amounts that would be attributed to its main entity in accordance with the OECD tax model.
4
Amounts are to be reflected (or, as the case may be, not reflected) in the underlying profits of a permanent establishment in accordance with subsections (1) to (3) whether or not—
a
in the case of an amount of income, it is subject to tax or not, or
b
in the case of an amount of expense, it is deductible or not.
S. 159(1)(a)(b) substituted for words (22.2.2024 with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 12(2)
S. 159(2)(a)(b) substituted for words (22.2.2024 with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 12(3)
S. 159(3)(a)(b) substituted for words (22.2.2024 with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 12(4)
S. 159(4) inserted (22.2.2024 with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 12(5)