»Ê¹ÚÌåÓýapp

FA15/S86 sets out the circumstances in which there is an ‘avoided permanent establishment� for the purposes of the Diverted Profits Tax (DPT) legislation. Where an avoided PE exists, then FA15/S88-91 contain the provisions for calculating the profits attributable to the avoided PE � the ‘notional PE profits�.

FA15/S88(5)(b) provides that notional PE profits include an amount equal to royalties paid by the foreign company during the period that avoid the application of ITA07/S906. FA15/S88(5A) determines that a payment has avoided the application of ITA07/S906 for these purposes if ITA07/S906 does not apply to the payment, but it would have applied if the payment had been made through an actual PE.

Banking surcharge profits

FA15/S79(6) provides that any amount included in notional PE profits by FA15/S88(5)(b) is not to be included in the calculation of profits that would have been within the banking surcharge. »Ê¹ÚÌåÓýapp effect is that such payments are charged at the DPT rate of 25% and not the 33% rate applicable to notional PE profits that would have been subject to the surcharge.