The Controlled Foreign Companies (Excluded Countries) Regulations 1998

Branch or agency income and gains

6.—(1) The amount of any branch or agency income and gains as mentioned in regulation 5(3)(e) is–

(a) where the conditions specified in paragraph (2) are satisfied with respect to the branch or agency for the accounting period concerned, the amount (being not more than 10 per cent. of the net amount of the profits of that branch or agency for that period) by reference to which the condition specified in sub-paragraph (d) of that paragraph is satisfied by that branch or agency;

(b) where the conditions specified in paragraph (2) are not satisfied with respect to the branch or agency for the accounting period concerned, the net amount or, where paragraph (3) applies, the gross amount of the branch or agency income and gains for that accounting period.

(2) The conditions specified in this paragraph are that–

(a) the branch or agency is situated in a territory specified in Part I or in Part II of Schedule 1 or, as the case may be, in Part I or in Part II of Schedule 2, and where the territory is one specified in Part II of Schedule 1 or in Part II of Schedule 2, at no time during the accounting period–

(i) is entitled to any tax exemption, tax reduction or other benefit, or

(ii) falls within any condition,

specified in column 2 of that Part opposite the specification of that territory;

(b) the profits of the branch or agency are within the charge to tax of that territory;

(c) the profits attributed to the branch or agency for tax purposes in that territory are those which it might be expected to make if it were a distinct and separate enterprise from the company of which it is a branch or agency, engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the company of which it is a branch or agency;

(d) not more than 10 per cent. of the net amount of the profits of the branch or agency for the accounting period would, on the assumption that the branch or agency was not a branch or agency of the controlled foreign company but a separate controlled foreign company, be attributable to the aggregate of the gross amounts of any income and gains falling within any of sub-paragraphs (a) to (d) of regulation 5(3) and arising outside the territory in which the branch or agency is situated;

(e) amounts falling to be deducted in computing the taxable profits of the branch or agency, being amounts which are paid to, or are in respect of costs incurred by, the head office of the company of which it is a branch or agency, either–

(i) are liable to tax, or are disallowed as an expense, in the territory of residence of that company, or

(ii) where that company is liable to tax in its territory of residence in respect of the whole of its profits wherever arising, are not allowed as a deduction in computing the taxable profits of that company except where the amount in question is paid by that company to another person.

(3) This paragraph applies to a case where the net amount of the income and gains referred to in paragraph (1) in the accounting period concerned does not exceed an amount which would be equal to the aggregate of the gross amounts of any income and gains falling within any of sub-paragraphs (a) to (d) of regulation 5(3) in that period if branch or agency income and gains fell within those sub-paragraphs.