Finance (No. 2) Act 2023

239Location of entitiesU.K.

(1)The normal rule for determining, for the purposes of this Part, the territory in which an entity is located is that—

(a)if it is tax resident in a territory based on its place of management or place of creation, or based on similar criteria, it is located in that territory, or

(b)if it is not tax resident in any territory based on such criteria, it is located in the territory in which it was created.

(2)But subsection (1) does not apply to a flow-through entity or a permanent establishment (as to which, see section 240).

(3)Where, in an accounting period, an entity is tax resident based on its place of management, place of creation or similar criteria in more than one territory and—

(a)all of those territories are party to a tax treaty, and

(b)for the purposes of the treaty the entity is deemed resident in one of those territories,

the entity is treated as located in that territory for that period.

(4)Otherwise, where an entity is tax resident in an accounting period based on its place of management, place of creation or similar criteria in more than one territory—

(a)if the entity has accrued more covered taxes in an accounting period in one of those territories than in the others, ignoring any taxes accrued in accordance with a controlled foreign company tax regime, it is to be treated as located in that territory for that period,

(b)if paragraph (a) does not apply and the entity has a greater qualifying substance based income exclusion amount in one of those territories than in the others, it is to be treated as located in that territory for that period, or

(c)if neither paragraph (a) nor (b) applies—

(i)if the entity is the ultimate parent of a multinational group, it is to be treated as being located in the place where it was created for that period, or

(ii)otherwise, the entity is a stateless entity for that period.

(5)For the purposes of subsection (4)(b) “the qualifying substance based income exclusion amount” for an entity for a period in a territory is—

(a)if the substance based income exclusion is calculated for that period for that territory, the sum of the payroll carve-out amount and the tangible asset carve-out amount as would be determined under section 195(1) for the entity for that period if the entity were located in that territory, and

(b)if the substance based income exclusion is not calculated for that period for that territory, nil.

(6)Where—

(a)an entity is not (ignoring this subsection) subject to Pillar Two IIR tax within the meaning of section 128,

(b)it is tax resident based on its place of management, place of creation or similar criteria in the United Kingdom,

(c)as a result of the application of subsection (3) or (4) it is treated as not being located in the United Kingdom, and

(d)if it were located in the United Kingdom, it would be a responsible member of a multinational group,

the entity is instead to be treated as located in the United Kingdom for the purposes of sections 122 and 126 of this Part (but not otherwise).

(7)For the purposes of this Part—

(a)a “stateless entity” is to be treated as not being located in any territory;

(b)where an entity’s location changes during an accounting period, it is to be treated as being located in the territory it was located, or was treated as being located, at the start of that period.