Taxes Consolidation Act 1997 section 111R

Allocation of qualifying income or loss between main entity and permanent establishment

Section 111R sets out the rules for allocating qualifying income or loss between a main entity and its permanent establishment (PE) for the purposes of the Pillar Two minimum tax framework.

• A PE's financial accounting net income or loss is based on its own separate financial accounts, or estimated on a standalone basis using the ultimate parent entity's accounting standards if no separate accounts exist.
• The PE's income or loss must be adjusted to reflect only amounts attributable to it under the relevant tax treaty, domestic law, or the OECD Model Tax Convention, depending on the type of PE.
• A PE's financial accounting net income or loss is generally excluded from the main entity's qualifying income or loss calculation.
• Where a PE's qualifying loss is treated as an expense in the main entity's domestic taxable income (and is not offset against income taxed in both jurisdictions), that loss becomes an expense of the main entity — and subsequent PE income is treated as main entity income until the loss is recouped.

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