Paragraph 16 Flow-through entities

Section 178 (reallocation of tax expense) is amended as follows.

In subsection (1), for “hybrid, transparent and reverse hybrid” substitute “hybrid and transparent”.

After subsection (1B) insert—

“(1C)

Subsection (1D) has effect where—

(a)

a member of a multinational group (“M”) is a flow-through entity, and

(b)

any of the following are not regarded as tax transparent in the territory in which a member of the group (“R”), which is a reference entity in relation to M (within the meaning of section 168(2A)), is located—

(i)

M;

(ii)

any member of the group through which R’s ownership interest in M is held.

(1D)

If—

(a)

R, or any member of the group (“X”) which has an ownership interest in R, has an amount of qualifying current tax expense,

(b)

that amount is in respect of profits not included in R’s, or as the case may be X’s, underlying profits, and

(c)

had those profits had been included in R’s, or as the case may be X’s, underlying profits a corresponding amount of profits would have been allocated to M under section 167 (ignoring for this purpose subsection (1)(a) of that section) or 168,

that qualifying current tax expense is to be allocated to M (and is to be regarded as qualifying current tax expense of M for the purposes of section 175(2)(a)).”

In subsection (2), after “(1A))” insert “or to M (under subsection (1D))”.