183AAlternative to section 183 where carry forward of credits not permitted

1

A special foreign tax asset of a member of a multinational group is to be used to increase its covered tax balance in accordance with this section.

2

Subsection (3) applies where—

a

the territory in which a member of a multinational group is located requires that domestic losses are offset against relevant foreign income before foreign tax credits can be applied against tax on foreign income,

b

the territory limits the extent to which foreign tax credits can be applied against tax in a taxable period,

c

the territory allows foreign tax credits to be used to a greater extent where a domestic loss has been used to offset (in whole or in part) relevant foreign income in a prior period, and

d

the member has used a domestic loss to offset (in whole or in part) relevant foreign income.

3

Where this subsection applies, the member has a special foreign tax asset arising in the accounting period in which the loss was used.

4

The amount of that special foreign tax asset is the amount of the domestic loss used to offset relevant foreign income multiplied by the lesser of—

a

the nominal rate of tax in the member’s territory for the taxable period in which it was used, and

b

15%.

5

Where a member of a multinational group has a special foreign tax asset that arose in any previous accounting period, the member is to use that amount to increase its covered tax balance.

6

The amount of the special foreign tax asset that is to be used in an accounting period is the lesser of—

a

the amount of the asset, and

b

so much of the amount of foreign tax credits credited against tax in the taxable period corresponding to that accounting period as is capable of being credited only as a result of the prior use of the domestic loss.

Any remainder continues to be a special foreign tax asset (and is available for use in subsequent account periods where subsection (5) applies).