Revenue Note for Guidance

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Revenue Note for Guidance

835AQ Tax residency double deduction mismatch outcome

Summary

This section sets out what is meant by tax residency double deduction mismatch outcome and provides the rule to neutralise such an outcome.

Details

(1) Tax residency double deduction mismatch outcome

A tax residency double deduction mismatch outcome shall arise

where—

  1. a company has obtained a tax deduction in respect of the same payment in the State and in another territory but the income against which the tax deduction is taken is not included in the two territories, and
  2. the mismatch is because the company is tax resident in the State and in the other territory.

(2) The rule for neutralising a tax residency double deduction mismatch outcome

Where the other territory–

  1. is a Member State, with which the government has a Double Tax Agreement by virtue of section 826(1) (DTA), and under that DTA the company is tax resident in that Member State,
  2. is not a Member State, and under the DTA with that other territory—
    1. the company is not tax resident in the State, or
    2. the company is tax resident in the State but the double deduction mismatch outcome has not been neutralised in the other territory, or
  3. is not a territory referred to in paragraph (a) or (b),

then notwithstanding any other provision of the Acts, the mismatch outcome shall be neutralised by the company being denied a tax deduction for so much of the payment as corresponds to the double deduction mismatch outcome which has not been neutralised in another territory.

(3) Where the tax residence of a company must be determined by mutual agreement

Where the tax residence of a company must be determined by mutual agreement between the competent authorities of both territories which are party to a DTA, then any adjustment to the return, filed pursuant to section 959I (obligation to make a return), required to give effect to subsection (2) shall be made without unreasonable delay upon that agreement, notwithstanding any time limits in Part 41A (Assessing Rules Including Rules for Self-Assessment).

Relevant Date: Finance Act 2021