Taxation (International and Other Provisions) Act 2010 section 259JE

Meaning of excessive PE inclusion income

Section 259JE defines what counts as "excessive PE inclusion income" for the purposes of the counteraction rules in section 259JD, which deal with hybrid mismatches involving permanent establishments of multinational companies.

• Excessive PE inclusion income arises where income is recognised in the UK in respect of transfers (actual or deemed) from the parent jurisdiction to the UK permanent establishment, but there is no corresponding reduction in taxable profits or increase in losses in the parent jurisdiction.
• Where the parent jurisdiction does recognise some deduction or loss increase, but less than the full amount of the PE inclusion income, only the excess over the aggregate tax effect in the parent jurisdiction counts as excessive PE inclusion income.
• Any reduction in profits or increase in losses taxed at a nil rate in the parent jurisdiction is disregarded — it does not count as a genuine tax consequence.
• The parent jurisdiction's tax effect is assessed over relevant taxable periods, generally those beginning within 12 months after the end of the UK accounting period in question, though a later period can be used if that is just and reasonable.

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