835AG Permanent establishment deduction without inclusion mismatch outcome.

(1) A permanent establishment deduction without inclusion mismatch outcome shall arise in respect of a payment where it would be reasonable to consider that—

(a) there is, or but for this section would be, a deduction in the payer territory, in a case in which a corresponding amount has not been included in the payee territory, and

(b) the satisfaction of the condition described in paragraph (a) is attributable to—

(i) the payment being made to a disregarded permanent establishment,

(ii) differences in the allocation of payments between the head office of an entity and a permanent establishment of that entity, or between two or more permanent establishments of an entity,

or

(iii) where the payment is between the head office of an entity and a permanent establishment of that entity or between two or more permanent establishments of an entity, the payment being disregarded under the laws of the payee territory.

(2) A permanent establishment deduction without inclusion mismatch outcome shall not arise by virtue of the circumstance described in subsection (1)(b)(iii) to the extent the payment is, or would be, deductible against dual inclusion income.

(3) A permanent establishment deduction without inclusion mismatch outcome shall be neutralised as follows:

(a) where the State is the payer territory, notwithstanding any other provision of the Tax Acts and the Capital Gains Tax Acts, the payer shall be denied a deduction for the payment for the purposes of domestic tax, to the extent a corresponding amount has not been included for the purposes of foreign tax;

(b) where—

(i) the State is the payee territory,

(ii) the mismatch outcome arises by virtue of paragraph (b)(i) of subsection (1),

(iii) the disregarded permanent establishment is a permanent establishment within the meaning of Article 5 of the Model Tax Convention on Income and Capital, published by the Organisation for Economic Co-operation and Development, as it read on 21 November 2017, and

(iv) a deduction has not been denied in the payer territory through the operation of a provision similar to paragraph (a),

notwithstanding section 25, the profits and gains referred to in section 835AF(1)(b) shall be charged to corporation tax on the entity concerned as if the business carried on in the State by the disregarded permanent establishment was carried on by a company resident in the State.