Taxes Consolidation Act 1997 section 835AM

Payment by hybrid entity deduction without inclusion mismatch outcome

Section 835AM defines what constitutes a "payment by hybrid entity deduction without inclusion mismatch outcome" and sets out the rules for neutralising such a mismatch.

• A mismatch arises where a payment by a hybrid entity is deductible in the payer territory but the corresponding amount is not included in the payee territory, because the payment is disregarded under the payee territory's laws.
• No mismatch arises to the extent the payment is deductible against dual inclusion income — that is, income taxable in both territories.
• The primary rule denies the payer a deduction where the State is the payer territory, to the extent a corresponding amount is not included for foreign tax purposes.
• The defensive rule requires the payee to bring the amount into charge where the State is the payee territory and the payer territory has not denied the deduction under an equivalent provision.