Finance (No. 2) Act 2023

183 Qualifying foreign tax credits (substitute loss carry forward assets)

(1) A qualifying foreign tax credit of a member of a multinational group is to be included in the member’s total deferred tax adjustment amount.

(2) A foreign tax credit is qualifying if—

(a) the territory in which the member is located—

(i) requires that domestic losses are offset against relevant foreign income before foreign tax credits can be applied against tax on foreign income, and

(ii) permits foreign tax credits to be used to offset tax on domestic profits to the extent to which domestic losses have been offset against relevant foreign income in a previous taxable period,

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

(c) the foreign tax credit is in respect of tax imposed by another territory on that foreign income.

(3) The amount that may be included in the total deferred tax adjustment amount of the member is the lesser of—

(a) the foreign tax paid, and

(b) the amount of domestic loss used to offset the relevant foreign income, multiplied by the tax rate in respect of which the foreign tax was calculated.

(4) Section 182(7) (adjustment where rate of tax exceeds 15%) applies to a qualifying tax credit included in the member’s total deferred tax adjustment amount as it applies to the member’s deferred tax expense.

(5) In this section “relevant foreign income”, in relation to a member of a multinational group, means income of a controlled foreign company of the member on which the member is taxed as a result of a controlled foreign company tax regime.