Finance (No. 2) Act 2023

234 Governmental, international and non-profit entities

(1) An entity is a “governmental entity” if—

(a) it is wholly owned by a national, regional or local government,

(b) it has the principal purpose of—

(i) carrying on a public function of that government, or

(ii) managing or investing the assets of that government through investment activities (such as the making and holding of investments or asset management),

(c) it is accountable to that government on its overall performance and provides annual information reporting to that government,

(d) it does not carry on a trade or business, other than an investment business described in paragraph (b)(ii),

(e) its assets vest in that government on its dissolution, and

(f) it does not make distributions of its profits to, or for the benefit of, any person other than that government.

(2) “International organisation” means an intergovernmental or supranational organisation, or an entity that acts for, is part of, or is wholly owned by such an organisation, provided—

(a) the organisation is comprised primarily of governments,

(b) the organisation has a headquarters, or privileges or immunities in respect of its establishments, in the territory in which it is established, and

(c) its governing documents, or the law of that territory, preclude the distribution of its profits for the benefit of private persons.

(3) An entity is a “non-profit organisation” if—

(a) it is established and operated in the territory it is located in—

(i) exclusively for religious, charitable, scientific, artistic, cultural, athletic, education, or other similar purposes, or

(ii) as a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare, and

(b) it meets all of the conditions mentioned in subsection (4).

(4) Those conditions are that—

(a) substantially all of the income from the activities it carries out for the purposes it was established is exempt from income tax in the territory where it is located,

(b) it has no shareholders or members who have any interest in its income or assets,

(c) the income or assets of the entity may not be distributed to, or applied for the benefit of, a private person or non-charitable entity other than—

(i) pursuant to the conduct of the entity in carrying out activities for the purposes for which it was established,

(ii) as payment of reasonable compensation for services rendered or for the use of property or capital, or

(iii) as payment representing the fair market value of property which the entity has purchased,

(d) upon termination, liquidation or dissolution of the entity, all of its assets must be distributed or revert to a non-profit organisation or to a governmental entity of the territory in which the entity is located, and

(e) the entity does not carry on a trade or business that is not directly related to the purposes for which it was established.