Commentary

D2.709 Calculation of DPT

Corporate tax
Corporate tax | Commentary

D2.709 Calculation of DPT

Corporate tax | Commentary

D2.709 Calculation of DPT

There are three ways in which taxable diverted profits (if any) may be determined. The first key step before establishing which method applies is to establish the 'actual provision condition'. This is done by comparing the 'material provision' (ie the actual transaction(s)) with an 'alternative provision' (ie a provision that it is just and reasonable to assume would have been made or imposed between the relevant company and any connected company had tax on income not been a relevant consideration for any person at any time). The actual provision condition is met if the material provision results in expenses that would (ignoring any transfer pricing disallowance) be allowable in the relevant company's tax computation and the alternative provision would also have resulted in allowable expenses of the relevant company of the same type and for the same purpose as the actual expenses, but would not have resulted in 'relevant taxable income' of a connected company1. For accounting periods beginning on or after 29 October 2018, a reference to a transfer pricing adjustment for these purposes also includes an adjustment under any

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