Part 4Domestic top-up tax
Chapter 3Application of multinational top-up tax provisions
273Determining top-up amounts of entity that is not a member of a group
1
Chapters 3 to 6, 8 and 9 of Part 3 apply for the purposes (“domestic entity purposes”) of determining whether a qualifying entity that is not a member of a group has top-up amounts or additional top-up amounts, and the extent of those amounts, as they apply for the purpose of determining the same for the purposes of multinational top-up tax.
2
Chapter 3 of that Part has effect for domestic entity purposes as if for section 132 there were substituted—
132Effective tax rate
The effective tax rate of a qualifying entity that is not a member of a group is determined as follows—
Step 1
Determine, in accordance with Chapter 4 of Part 3, the adjusted profits for that period of that member.
Step 2
If, on determining those adjusted profits, the member has not made a profit, the effective tax rate is to be treated as 15%. Otherwise, proceed to Step 3.
Step 3
Determine the covered tax balance of the member for the period (which may be negative) in accordance with Chapter 5 of Part 3.
Step 4
If that balance is nil the effective tax rate is 0%. Otherwise, proceed to Step 5.
Step 5
Divide the covered tax balance by the adjusted profits.
Step 6
Except where Step 2 or 4 applies, the effective tax rate of the entity is X%, where X (which will be negative if the covered tax balance is negative) is the result of Step 5 multiplied by 100.
3
That Part has effect for domestic entity purposes as if—
a
references to “member of a multinational group” (however framed and including references to multiple members) were to “qualifying entity”;
b
any reference (however framed) to the consolidated financial statements of the ultimate parent were to the qualifying financial statements of the entity;
c
in section 194 (total top-up amount), subsections (2) to (7) were omitted;
d
in section 203 (additional top-up amounts: covered taxes less than expected), subsections (3) to (7) were omitted;
e
in section 206 (additional top-up amounts: recalculations), subsections (4) to (8) were omitted.
4
Part 3 has effect for those purposes as if the following provisions (which are only relevant to groups or have no relevance for domestic purposes) were omitted—
a
in section 134 (underlying profits as determined for statements of ultimate parent), subsections (2) to (9);
b
section 135 (permanent establishments);
c
section 139 (consolidation adjustments);
d
section 140 (purchase accounting adjustments);
e
in section 141 (general exclusion of dividends), subsection (2)(c);
f
section 149 (arm’s length requirement);
g
section 150 (transactions between group members);
h
section 154 (exclusion of qualifying intra-group financing arrangement expenses);
j
in section 163 (election to spread capital gains), subsection (3);
k
section 164 (election to exclude intra-group transactions);
l
section 167 (underlying profits of member of group seen as transparent);
m
in section 168 (underlying profits of flow-through entities), subsection (8);
n
section 169 (non-tax resident entities to be treated as flow-through entities);
o
section 170 (adjustments for ultimate parent that is flow-through entity);
p
section 172 (ultimate parent subject to deductible dividend regime);
q
section 177 (allocation of covered taxes: permanent establishments);
r
section 178 (reallocation of tax expense);
s
sections 179 and 180 (controlled foreign company tax regimes);
t
section 181 (distributions from other group members);
u
section 183 (qualifying foreign tax credits);
y
in section 216 (election where assets and liabilities adjusted to fair value), subsection (6);