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

Application of Chapter 11

Section 259MD explains how the transparent fund rules in Chapter 13A interact with the imported mismatch rules in Chapter 11, ensuring that adjustments for transparent funds are taken into account when calculating the extent of an imported mismatch.

• When an imported mismatch under Chapter 11 arises from a payment or quasi-payment that would be subject to transparent fund adjustments under section 259MB, those adjustments must be used when measuring the mismatch — provided the overseas territory has not already counteracted the mismatch itself.
• The relevant Chapters that may give rise to the imported mismatch (and which correspond to the transparent fund payment rules) are Chapter 3 (deduction/non-inclusion for financial instruments), Chapter 4 (hybrid transfers), Chapter 5 (hybrid entities as payers), and Chapter 7 (hybrid entities as payees).
• Similarly, where an imported mismatch under Chapter 11 arises from a hybrid double deduction amount that would be subject to transparent fund adjustments under section 259MC, those adjustments feed into the calculation of the mismatch — again, only where the overseas territory has not already dealt with the mismatch.
• The effect is that transparent fund adjustments always flow through into the imported mismatch calculation, preventing mismatches from being preserved simply because a transparent fund structure is involved.