Corporation Tax Act 2009 section 18IB

The low profits exemption

Section 18IB applies a modified version of the controlled foreign companies low profits exemption rules when determining whether a permanent establishment meets the anti-diversion conditions.

• The low profits exemption from the CFC rules (Chapter 12, Part 9A of TIOPA 2010) can apply to the anti-diversion rule for permanent establishments.
• The exemption is relevant to the condition in section 18G(1)(c), which is one of the tests for the anti-diversion rule.
• Certain provisions are excluded: specifically subsections (2) and (4) of section 371LB and subsections (5) and (6) of section 371LC are disapplied.
• The effect is that a simplified version of the low profits exemption is used in the permanent establishment context, without the additional conditions and anti-avoidance rules that apply in the full CFC regime.