Taxation (International and Other Provisions) Act 2010 section 371NC

Reductions to "the local tax amount"

Section 371NC sets out how the amount of local tax paid by a controlled foreign company (CFC) in its territory is to be reduced when comparing it with the UK tax that would otherwise be due, as part of the creditable tax exemption calculation.

• The local tax amount must be reduced where the CFC has net income taxed locally but not taxable under UK rules, or has expenditure deductible under UK rules but not locally
• These adjustments ensure that the local tax figure and the notional UK tax figure are calculated on a more comparable basis
• A further reduction applies where any repayment of tax, or payment in respect of a tax credit, is made to any person in respect of the local tax paid by the CFC
• Both types of reduction can apply cumulatively — the repayment reduction is made after any adjustment for differences in income or expenditure recognition