Finance (No. 2) Act 2023

232 Permanent establishments F1 ... U.K.

(1) A “permanent establishment” of an entity (“the main entity”) means a place of business of the main entity F2 ...—

(a) [F3 that is situated] in a territory other than the territory [F4 in which the main entity is located], F5 ...

[F6 (aa) any profits in relation to which are reflected in the financial statements of the main entity, and]

(b) [F7 that] meets any of the conditions in paragraphs (a) to (d) of subsection (2).

(2) Those conditions are—

(a) that the place of business is situated in a territory where it is treated as a permanent establishment in accordance with an applicable tax treaty in force provided that such territory taxes the income attributable to it in accordance with a provision similar to Article 7 of the OECD tax model;

(b) that the place of business [F8 is situated in] a territory where there is no applicable tax treaty in force and the territory, under its domestic law, taxes the income attributable to such place of business on a net basis similar to the manner in which it taxes its own tax residents;

(c) that the place of business [F9 is situated in] a territory that has no corporate income tax system, but would be treated as a permanent establishment in accordance with the OECD tax model provided that such territory would have had the right to tax the income attributable to it in accordance with Article 7 of that model;

(d) that—

(i) the place of business does not meet any of the conditions in paragraphs (a) to (c), and

[F10 (ii) the income attributable to the place of business’s operations is exempted from tax by the territory of the main entity or, where the main entity is a flow-through entity, by the territory in which the reference entity (within the meaning of section 168) is located.]

[F11 (2A) For the purposes of subsection (1)(a)—

(a) section 240(2) (flow-through entities treated as stateless) is to be disregarded, and

(b) a flow-through entity that would otherwise be a stateless entity under section 240(2) is instead treated as located in the territory in which it is created.]

(3) For the purposes of this Part, a permanent establishment is to be treated as an entity distinct from the entity it is a permanent establishment of (whether that would otherwise be the case or not).

[F12 (3A) But an entity with a permanent establishment is not to be taken as having ownership interests in that permanent establishment.]

(4) In this section “place of business” means a place of business as construed in accordance with the OECD tax model, and includes a deemed place of business for the purpose of that model, a tax treaty or the domestic law of a territory.

(5) In this Part, a reference to “the main entity” in relation to a permanent establishment is to be construed in accordance with this section.

[F13 (6) See also section 232ZA (modifications that apply where legal main entity is distinct from main entity).]

Textual Amendments

F1 Words in s. 232 heading omitted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 8 paras. 8(2), 53(5)-(13)

F2 Word in s. 232(1) omitted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 8 paras. 8(3)(a), 53(5)-(13)

F3 Words in s. 232(1)(a) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(3)(b), 53(5)-(13)

F4 Words in s. 232(1)(a) substituted (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. 56(2)

F5 Word in s. 232(1)(a) omitted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 8 paras. 8(3)(c), 53(5)-(13)

F6 S. 232(1)(aa) inserted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(3)(c), 53(5)-(13)

F7 Word in s. 232(1)(b) inserted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(3)(d), 53(5)-(13)

F8 Words in s. 232(2)(b) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(4)(a), 53(5)-(13)

F9 Words in s. 232(2)(c) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(4)(a), 53(5)-(13)

F10 S. 232(2)(d)(ii) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(4)(b), 53(5)-(13)

F11 S. 232(2A) inserted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(5), 53(5)-(13)

F12 S. 232(3A) inserted (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. 4(6)

F13 S. 232(6) inserted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 8(6), 53(5)-(13)