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Determining the taxable diverted profits

Taxable diverted profits (if any) where there is a lack of economic substance may be determined in one of three ways¹:

1. Ìý

   •ÌýÌýÌýÌý cases where the 'actual provision condition' is met (see below) but there are no diverted profits of the company for that period or although there are diverted profits, a full transfer pricing adjustment has been made (see 'No taxable diverted profits arise' below)

2. Ìý

   •ÌýÌýÌýÌý cases where the actual provision condition is met but the company making the payment has not made the full transfer pricing adjustment (see 'Calculation by reference to the actual provision' below)

3. Ìý

   •ÌýÌýÌýÌý cases where the actual provision condition is not met (see the 'Calculation by reference to the alternative provision' below)

The first key step before determining which method applies is to establish the 'actual provision condition'. This is done by