CFM96730 - Interest restriction: joint ventures: treatment when no elections apply: group ratio and group interest

Investor Group

Where a worldwide group has an interest in non-group entities the results of the entity will not be consolidated, on a line-by-line basis, in the group바카라 사이트™s financial statements. As a result, any amounts of interest and other financing costs incurred by the non-group entity will not ordinarily be included within group-interest.

The results of the non-group entity will be included into the group바카라 사이트™s financial statement as follows:

  • The group바카라 사이트™s share of the results of JVs and associates.
  • The fair value movements of the group바카라 사이트™s investment in subsidiaries held at fair value.

These amounts will be recognised as items of profit or loss in the group바카라 사이트™s financial statements. They will therefore be included in the group-EBITDA of the group.

Therefore, in comparison to a group entity, any interest incurred by the non-group entity will not be recognised as contributing to the net group-interest expense of the worldwide group. However any interest incurred by the group entity will be included in the group바카라 사이트™s net group-interest expense.

As a result, in comparison with an investment in a group entity, this will supress the group ratio of the worldwide group. The non-group entity will not increase the net group interest expense of the worldwide group but if the non-group entity is profitable then this will increase group-EBITDA.

The interest allowance (non-consolidated investment) election provides flexibility around this treatment.

Investee Group

Opaque entities

Where the non-group entity is a corporate body it is an opaque entity and will be taxed at the entity level and not taxed in the worldwide group. In some circumstances the entity may have a relatively low group ratio to that of its investors. The entity does have the opportunity to obtain a similar group ratio to that of its investors by using the Group Ratio (Blended) Rule.

Transparent Entities

Where the non-group entity is a transparent entity the taxable profits of the entity that belong to the worldwide group will be taxed in the worldwide group.