Corporation Tax

Effective tax rate planning

Produced by Tolley in association with Anne Fairpo
  • 03 Nov 2021 16:11

The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:

  • Effective tax rate planning
  • Calculation of the effective tax rate
  • Country-by-country reporting (CBCR)
  • Intercompany charges
  • Management charges
  • Loans
  • Intellectual property
  • Trading models
  • Further reading

Effective tax rate planning

Calculation of the effective tax rate

An international group’s effective rate of tax is usually calculated as the amount of tax it pays divided by its consolidated profits. The effective tax rate depends largely on:

  1. the rate of tax paid by each company in the group

  2. the companies in which profits are recognised

See Example 1.

The objective of effective tax rate planning is usually to ensure the profits are recognised in companies which pay tax at a low rate rather than a high rate.

However, other taxes may arise as a result of:

  1. withholding taxes on trading and other income ― see the Foreign trading income guidance note

  2. controlled foreign company (CFC) and other anti-avoidance rules ― see the Introduction to CFCs and Shareholder issues ― international corporate structures guidance notes

  3. withholding taxes on dividends paid to the group’s parent company ― see the Holding companies guidance note

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information


Popular Articles

Partial exemption de minimis limit

This guidance note provides an overview of the partial exemption de minimis rules. This note should be read in conjunction with the Partial exemption overview guidance note. If a business incurs an insignificant amount of input tax which is associated with exempt supplies (exempt input tax), it may

19 Oct 2021 22:57 | Produced by Tolley Read more Read more

Patent box tax regime ― overview

Introduction to the regimeThe aim of the patent box regime is to provide an incentive for companies to develop and retain patents and other qualifying intellectual property within the UK as part of the Government’s growth agenda. Finance Act 2012 originally introduced the legislation governing the

22 Dec 2021 16:12 | Produced by Tolley Read more Read more

Pre-owned assets tax

Where a donor has made a gift of property and continues to use or benefit (or may benefit) from that property in some way, he may have made a gift with reservation of benefit for the purposes of inheritance tax (IHT).However, this will not be the case where:•a donor makes a gift of cash and the

19 Oct 2021 23:08 | Produced by Tolley Read more Read more