Paragraph 6

Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled—

This sub-paragraph applies to a company if—

Those persons are—

but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded.

A controlled foreign company falls within this sub-paragraph if either—

Paragraph 11A below has effect for the interpretation of this sub-paragraph.

For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s permanent establishment in the United Kingdom.

This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question F9is received by it in the territory in which it is resident and is derived directly from companies which it controls and which, throughout that period—

and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a “local holding company”.

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For the purposes of sub-paragraph F19(2A)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company’s chargeable profits for the accounting period would be apportioned to that person.

Any reference in F20sub-paragraph (3) above to a company which a holding company F21F22. . . controls includes a reference to a trading company F23to which sub-paragraph (5ZA) or (5ZB) below applies.

This sub-paragraph applies to a trading company in which the holding company F24. . . holds the maximum amount of ordinary share capital which is permitted under the law of the territory—

This sub-paragraph applies to a trading company if—

For the purposes of F28sub-paragraph (3) above, a company is an exempt trading company throughout any period if—

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For the purposes of this paragraph, the gross income of a holding company F32. . . during an accounting period includes—

Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.

In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

The following provisions of this Part of this Schedule have effect in relation to F33this paragraph.