111AD Calculation of top-up tax

Details

(1) Where the effective tax rate of a jurisdiction in which constituent entities are located is below the minimum tax rate for a fiscal year, the MNE group or large-scale domestic group shall calculate a top-up tax in accordance with this section separately for each of its constituent entities that has qualifying income included in the calculation of net qualifying income of that jurisdiction for the fiscal year.

(2) The top-up tax percentage for a jurisdiction for a fiscal year, shall be the positive percentage point difference, if any, calculated as:

where-

MTR is the minimum tax rate, and

ETR is the effective tax rate of the jurisdiction for the fiscal year calculated in accordance with section 111AC.

(3) The jurisdictional top-up tax for a fiscal year shall be the positive amount, if any, calculated as follows:

where-

TUTP is the top-up tax percentage of the jurisdiction for a fiscal year determined in accordance with subsection (2),

EP is the excess profit determined for the jurisdiction for the fiscal year in accordance with subsection (4),

ATUJ is the additional top-up tax for the jurisdiction for a fiscal year determined in accordance with section 111AF, and

D is the amount of qualified domestic top-up tax payable for the jurisdiction for the fiscal year.

(4) The excess profit for the jurisdiction for the fiscal year is the positive amount, if any, of the net qualifying income of all the constituent entities in the jurisdiction determined in accordance with section 111AC(3), minus the substance-based income exclusion amount for the jurisdiction for the fiscal year. This is calculated as follows:

where-

NQI is the positive amount, if any, of the net qualifying income of all the constituent entities in the jurisdiction determined in accordance with section 111AC(3), and

SBIE is the substance-based income exclusion amount for the jurisdiction for the fiscal year determined in accordance with section 111AE.

(5) Subject to subsection (6), the top-up tax of a constituent entity for a fiscal year is calculated as follows:

where-

JTUT is the jurisdictional top-up tax for a fiscal year as determined by subsection (3),

QI is the qualifying income of the constituent entity for a jurisdiction for a fiscal year, and

AQI is the sum, if any, of the qualifying income of all the constituent entities for a fiscal year located in the jurisdiction.

(6)(a)&(b) Where the jurisdictional top-up tax for a fiscal year results from a recalculation to which section 111AF applies, and there is no net qualifying income in respect of the jurisdiction for the fiscal year, the top-up tax shall be allocated to each constituent entity using the calculation provided for in subsection (5), based on the qualifying income of the constituent entities in the fiscal year, for which the recalculations pursuant to section 111AF are performed.

(7) The top-up tax of each stateless constituent entity shall be calculated, for each fiscal year, separately from the top-up tax of all other constituent entities.

Relevant Date: Finance Act 2024