Taxes Consolidation Act 1997 section 111AC

Determination of effective tax rate

Section 111AC sets out how to calculate the effective tax rate (ETR) for a multinational enterprise (MNE) group or large-scale domestic group, on a jurisdiction-by-jurisdiction basis, for each fiscal year.

• The ETR for a jurisdiction is calculated by dividing the total adjusted covered taxes (ACJ) of all constituent entities in that jurisdiction by their net qualifying income (NQI), using the formula ACJ ÷ NQI.
• Net qualifying income (or loss) is determined by subtracting total qualifying losses (AQL) from total qualifying income (AQI) of all constituent entities located in the jurisdiction; the ETR calculation only applies where there is a positive net qualifying income.
• Investment entities are excluded from both the ETR calculation and the net qualifying income calculation.
• Stateless constituent entities — those not located in any jurisdiction — have their ETR calculated separately from all other constituent entities.

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