Taxation (International and Other Provisions) Act 2010 section 259KB

Meaning of "dual territory double deduction", "excessive PE deduction" and "PE jurisdiction"

Section 259KB defines three key terms used throughout Chapter 11 of the Act: "dual territory double deduction", "excessive PE deduction", and "PE jurisdiction".

• A dual territory double deduction arises where a company can deduct the same amount from income for tax purposes in two different territories simultaneously.
• A PE deduction is an amount deductible in calculating a company's taxable profits in a territory where it has a permanent establishment, arising from a real or deemed transfer of money or value from the PE jurisdiction to the company's home territory — but excluding amortisation debits on intangible fixed assets.
• A PE deduction is "excessive" to the extent it exceeds any corresponding increase in taxable profits or reduction in losses in the parent jurisdiction — and any such increase or reduction is ignored if the parent jurisdiction charges tax at a nil rate.
• The parent jurisdiction adjustment must fall within a "permitted" taxable period, which is normally one beginning within 12 months after the PE deduction period, though a later period may qualify if a claim is made and it is just and reasonable.