Taxes Consolidation Act 1997 section 111AT

Determination of effective tax rate and top-up tax of investment entity

Section 111AT sets out how the effective tax rate and top-up tax of certain investment entities within a multinational or large-scale domestic group are calculated on a standalone basis, separately from the jurisdiction in which they are located.

• Where an investment entity is not tax transparent and has not elected for transparency or the taxable distribution method, its effective tax rate must be calculated separately from the other entities in the same jurisdiction.
• The effective tax rate is calculated by dividing the entity's adjusted covered taxes (limited to the group's allocable share of income) by that allocable share of qualifying income or loss, with multiple investment entities in the same jurisdiction being combined for this purpose.
• Top-up tax is calculated using the formula (A × (B − C)) − D, where A is the shortfall below the 15% minimum rate, B is qualifying income, C is the substance-based income exclusion, and D is any qualified domestic top-up tax already payable.
• The group's allocable share of income or loss only takes into account ownership interests that are not subject to an election to treat the entity as tax transparent or to apply the taxable distribution method.

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