111D Location of constituent entity

Summary

This section provides the rules for determining the location of a constituent entity.

Details

(1) Subject to subsections (2) to (9), an entity other than a flow-through entity shall be located in the jurisdiction in which it is considered to be resident for tax purposes, based on its place of management, its place of creation or similar criteria.

(2) Where it is not possible to determine the location of an entity other than a flow-through entity based on where it is considered to be a tax resident in accordance with subsection (1), the entity shall be deemed to be located in the jurisdiction where it was created.

(3)(a) Where a constituent entity is a flow-through entity, and that constituent entity is:

1. an ultimate parent entity of an MNE group or a large-scale domestic group, or
2. required to apply an IIR,

then that constituent entity shall be located in the jurisdiction where it was created.

(3)(b) Where a constituent entity is a flow-through entity and paragraph (a) does not apply, the constituent entity shall be considered to be stateless.

(4) Where a constituent entity is a permanent establishment that:

• (4)(a) is treated as a permanent establishment in accordance with a tax treaty (provided that such jurisdiction taxes the income attributable to it), it shall be deemed to be located in the jurisdiction where it is treated as a permanent establishment and liable to tax under that tax treaty,
• (4)(b) in the absence of a tax treaty, is treated as carrying on its a place of business or deemed place of business located in a jurisdiction which taxes the income attributable to such place of business on a net basis in a manner similar to which it taxes its own tax residents, it shall be deemed to be located in the jurisdiction where it is subject to income taxation based on its business presence,
• (4)(c) in the absence of a corporate income tax system, is treated as carrying on its place of business or deemed place of business in a location that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention on Income and Capital, provided that such jurisdiction would have had the right to tax the income that would have been attributable to the place of business, it shall be deemed to be located in the jurisdiction where it is situated, or
• (4)(d) carries on its place of business or deemed place of business, in a location that is not described above, through which operations are conducted outside the jurisdiction where the entity is located if such jurisdiction exempts the income attributable to such operations, it shall be considered to be stateless.

(5) Where a constituent entity is regarded as located in more than one jurisdiction it shall be deemed to be located as follows;

• (5)(a) Where those jurisdictions have a tax treaty, the constituent entity shall be regarded as located in the jurisdiction where it is regarded to be tax resident under that treaty.
• (5)(b) Where the tax treaty referred to above requires the competent authorities to reach a mutual agreement on the residence for tax purposes of the constituent entity, and no agreement is reached, subsection (6) shall apply.
• (5)(c) Where no relief from double taxation is available under a tax treaty as a result of the constituent entity being a tax resident of more than one territory, subsection (6) shall apply.

(6)(a) Where a constituent entity is regarded as located in more than one jurisdiction, and those jurisdictions do not have a tax treaty or where subsection 5(b) or 5(c) apply, the constituent entity shall be regarded as located in the jurisdiction which charged the higher amount of covered taxes for the fiscal year.

(6)(b) For the purpose of calculating the covered taxes in paragraph (a), no account shall be taken of any tax paid in accordance with a controlled foreign company tax regime.

(6)(c) Subject to paragraph (d), where the amount of covered taxes referred to in paragraph (a) is the same in both jurisdictions, or is zero, then the constituent entity shall be regarded as located in the jurisdiction in which the greater amount of the substance- based income exclusion under section 111AE is calculated on an entity basis.

(6)(d) Where the amount of the substance-based income exclusion referred to in paragraph (c) is the same in both jurisdictions, or is zero, then:

1. the constituent entity shall be regarded to be stateless, or
2. where the constituent entity is an ultimate parent entity, the constituent entity will be regarded as located in the jurisdiction in which it is created.

(7) Where, on the application of paragraphs (5) and (6), a parent entity is considered to be located in a jurisdiction where it is not subject to a qualified IIR, it shall be deemed to be subject to the qualified IIR of the other jurisdiction, unless an applicable tax treaty prohibits the application of such rule.

(8) For the purpose of this Part, the location of a constituent entity, determined at the beginning of a fiscal year, shall remain the same throughout the fiscal year.

(9) For the purposes of Chapter 5, a stateless constituent entity shall be deemed to be located in a jurisdiction but not a jurisdiction where any other entity is located.

Relevant Date: Finance Act 2024