Taxes Consolidation Act 1997 section 111AS

Eligible distribution tax systems

Section 111AS provides rules for accommodating eligible distribution tax systems within the Pillar Two framework, allowing deemed distribution tax to be included in adjusted covered taxes subject to recapture safeguards.

• A filing constituent entity may elect to include a deemed distribution tax amount in adjusted covered taxes, calculated as the lesser of the amount needed to bring the jurisdiction's effective tax rate up to the minimum rate, or the tax that would have been due had all income been distributed during the year.
• A deemed distribution tax recapture account is established for each election year; actual distribution taxes paid in later years reduce outstanding balances in chronological order, with further reductions available where the jurisdiction has a net qualifying loss multiplied by the minimum tax rate.
• If any balance remains in a recapture account at the end of the fourth fiscal year after it was established, the adjusted covered taxes for the original year are reduced accordingly and the effective tax rate and top-up tax for that year are recalculated.
• Where a constituent entity leaves the group or transfers substantially all of its assets outside the group in the same jurisdiction, any outstanding recapture account balances trigger an immediate reduction to adjusted covered taxes and recalculation, with additional top-up tax apportioned by reference to the entity's qualifying income relative to the jurisdiction's net qualifying income.

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