INTM224970 - Controlled Foreign Companies: Entity Exemptions: Chapter 11 - The Excluded Territories Exemption: Meaning of accounting profits: Restricted income - Category B
TIOPA10/S371KG covers the basic rule for Category B income. This category focuses on a CFC바카라 사이트檚 바카라 사이트渞elevant non-local income바카라 사이트�. This is the gross amount of non-trading income received from persons or certain permanent establishments (PE) resident outside of the CFC바카라 사이트檚 territory which benefits from a 바카라 사이트渘otional deduction바카라 사이트� for interest expense in the CFC바카라 사이트檚 territory. This notional deduction for interest expense that has not, in fact, been paid reduces the effective tax rate on the non-trading income received from persons or PEs resident outside the CFC바카라 사이트檚 territory.
An example of such a provision is the notional interest deduction available in Belgium or Luxembourg. It is often the case that a CFC carrying on a financing or treasury function will be established in one of these territories in order to minimise any foreign tax that would otherwise arise. Accordingly the category B restriction on 바카라 사이트榥otional interest바카라 사이트� makes it likely that such a CFC will not be able to satisfy the conditions of the excluded territories exemption (ETE).
바카라 사이트楻elevant non-local income바카라 사이트� means the gross amount of any non-trading income (see INTM248100) which is included in the CFC바카라 사이트檚 relevant income (see INTM224960) and which is received (directly or indirectly) from a person outside the CFC바카라 사이트檚 territory or a PE which a person resident in the CFC바카라 사이트檚 territory (other than the CFC itself) has in a territory outside the CFC바카라 사이트檚 territory.
The gross amount of income means the amount before deduction of expenses or transfers to or from reserves.
Any balance of non-local income taxed in the territory, after the notional or deemed deduction is taken into account, would not fall within the restriction at Category B. So, for example, if a financing CFC resident in Belgium received intra-group interest from the US of 150 (i.e. relevant non-local income of 150) against which a notional deduction of 100 was set, the measure of the restricted income under Category B would be 100.