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

Deductions from dual inclusion income

Section 259KD limits the amount by which a deduction can be denied under the imported mismatch rules, by reference to dual inclusion income — that is, income taxed in more than one jurisdiction.

• Where an imported mismatch arises from certain hybrid or double deduction arrangements, the denial of a deduction under the imported mismatch rules is capped at the "relevant net amount".
• The relevant net amount varies depending on the type of mismatch: for hybrid payer, financial instrument, hybrid entity or permanent establishment mismatches, it is the amount that would have been disallowed under the relevant chapter (ignoring carry-forward rules); for dual territory double deductions or excessive PE deductions, it is the excess of those deductions over dual inclusion income.
• Dual inclusion income is income that is treated as ordinary taxable income of the same company in two different jurisdictions for the same or overlapping periods.
• A taxable period in the second jurisdiction is "permitted" for these purposes if it begins within 12 months of the end of the deduction period in the first jurisdiction, or if a later period is claimed and it is just and reasonable for the income to arise in that later period.

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