111AF Additional top-up tax

Summary

This provision provides instruction regarding the recalculation of the ETR and top-up tax for a previous fiscal year or fiscal years taking into account an adjustment to the adjusted covered taxes or the qualifying income (or both) for the year. When these provisions result in an amount of additional top-up it will be included in the fiscal year in which the relevant adjustment is made.

Details

(1)(a) Where, pursuant to section:

• 111K(1) (where a Member State does not apply a qualified domestic top-up tax to collect any additional top-up tax arising in accordance with Article 29 of the Directive),
• 111P(7)(g) (where there is an adjustment made to a prior year relating to the gain on the sale of a local tangible asset),
• 111X(9) (where there is a recaptured deferred tax liability),
• 111AB(1)(b) and (4) (where there is a decrease in covered tax in a prior year or current taxes are not paid within 3 years), and
• 111AS(5) (where there is a deemed distribution recapture),

an adjustment to covered taxes or qualifying income or loss results in the re-calculations of the effective tax rate and top-up tax of the MNE group or large-scale domestic group for a jurisdiction for a prior fiscal year, the effective tax rate and top-up tax shall be recalculated in accordance with section 111AC, 111AD and 111AE.

(1)(b) Any top-up tax arising from the recalculation referenced in paragraph (a) shall be treated as an additional top-up tax for the purpose of section 111AD(3) for the fiscal year in which the relevant adjustment is made.

(2) Where for a jurisdiction and a fiscal year there is an additional top-up tax, and no net qualifying income, the qualifying income of a constituent entity located in that jurisdiction for the purposes of section 111I(2) (to calculate a parent entity’s allocable share in the top-up tax), shall be an amount calculated as:

Where-

TUTA is the top-up tax allocated to the constituent entity pursuant to subsections (5) and (6) of section 111AD, and

MTR is the minimum tax rate.

(3)(a) Where, pursuant to section 111U (5) and (6) (in relation to expected adjusted covered taxes on losses), an additional top-up tax is due for a jurisdiction, the qualifying income of a constituent entity located in that jurisdiction for the purposes of section 111I(2), shall be an amount calculated as

Where-

TUTACE is the additional top-up tax allocated to the constituent entity, and

MTR is the minimum tax rate.

(3)(b) For the purpose of paragraph (a), the allocation of the additional top-up tax to a constituent entity shall be made pro-rata, to each constituent entity located in the jurisdiction, and calculated as:

Where-

QIQL is the qualifying income or loss of the constituent entity for the fiscal year,

MTR is the minimum tax rate, and

ACT is the adjusted covered taxes of the constituent entity for the fiscal year.

(3)(c) This additional top-up tax referenced in paragraph (a) shall only be allocated to constituent entities that record an amount of adjusted covered tax that is less than zero, and less than the qualifying income or loss of such constituent entities multiplied by the minimum tax rate.

(4) Where a constituent entity is allocated additional top-up tax in accordance with this section, section 111AD (5) or (6), such constituent entity shall be treated as a low-taxed constituent entity for the purposes of Chapter 2.

Relevant Date: Finance Act 2024