Taxes Consolidation Act 1997 section 111S

Allocation of qualifying income or loss of flow-through entity

Section 111S sets out how the qualifying income or loss of a flow-through entity is allocated among its owners, permanent establishments, and other group entities for the purposes of the global minimum tax rules.

• The income or loss of a flow-through entity is first reduced by the share attributable to owners outside the MNE group or large-scale domestic group, unless the entity is an ultimate parent entity or is held through tax transparent entities by an ultimate parent that is itself a flow-through entity.
• Any income or loss already allocated to another constituent entity within the group is also stripped out, and where the flow-through entity operates through a permanent establishment, the remaining amount is allocated to that establishment in accordance with section 111R.
• For flow-through entities that are tax transparent and are not ultimate parent entities, the remaining income or loss is then divided among the constituent entity-owners in proportion to their ownership interests carrying rights to profits.
• Where the flow-through entity is a tax transparent ultimate parent entity or a reverse hybrid entity, any remaining income or loss stays with that entity, and all of these allocation steps are applied separately for each ownership interest carrying profit rights.

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