Taxes Consolidation Act 1997 section 835AG

Permanent establishment deduction without inclusion mismatch outcome

Section 835AG defines what constitutes a permanent establishment deduction without inclusion mismatch outcome and sets out the rules for neutralising such a mismatch, for the purposes of the Anti-Tax Avoidance Directives (ATADs).

• A mismatch arises where there is a tax deduction in the payer territory but the corresponding amount is not included in the payee territory, due to the involvement of a disregarded permanent establishment, differing payment allocations, or disregarded payments.
• No mismatch arises where a disregarded payment is deductible against dual inclusion income — that is, income taxable in both the payer and payee territories.
• The primary rule denies the payer a deduction where the State is the payer territory, to the extent the corresponding amount has not been included for foreign tax purposes.
• The defensive rule applies where the State is the payee territory and a payment is made to a disregarded permanent establishment as defined in the OECD Model Convention: the profits are charged to corporation tax as if the business were carried on by an Irish-resident company.