Finance Act 2024

Permanent establishment income and expense attribution

12 (1) Section 159 (permanent establishment income and expense attribution) is amended as follows.

(2) In subsection (1), for the words from “only” to the end substitute “—

“(a) reflect all amounts of income and expense that are attributable to it in accordance with the tax treaty under which it is treated as a permanent establishment, and

(b) do not reflect amounts attributable to its main entity in accordance with that treaty.”

(3) In subsection (2), for the words from “only” to the end substitute “—

(a) reflect all amounts of income and expense that are attributable to it in accordance with the law of the territory in which the member is located, and

(b) do not reflect amounts attributable to its main entity in accordance with the law of that territory.”

(4) In subsection (3), for the words from “only” to the end substitute “—

(a) reflect all amounts of income and expense that would be attributed to it in accordance with Article 7 of the OECD tax model, and

(b) do not reflect amounts that would be attributed to its main entity in accordance with the OECD tax model.”

(5) After that subsection insert—

“(4) Amounts are to be reflected (or, as the case may be, not reflected) in the underlying profits of a permanent establishment in accordance with subsections (1) to (3) whether or not—

(a) in the case of an amount of income, it is subject to tax or not, or

(b) in the case of an amount of expense, it is deductible or not.”