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There are three ways in which taxable diverted profits (if any) may be determined where the avoided PE conditions are met (see D2.717).

The three ways are as follows¹:

1. Ìý

   •ÌýÌýÌýÌý cases where the tax avoidance condition is met but the mismatch condition is not (see 'Calculation where only tax avoidance condition is met' below)

2. Ìý

   •ÌýÌýÌýÌý cases where the mismatch condition is met but profits are calculated by reference to the actual provision (see 'Mismatch condition met—calculation by reference to the actual provision' below)

3. Ìý

   •ÌýÌýÌýÌý cases where the mismatch condition is met and profits are calculated by reference to the relevant alternative provision (see 'Mismatch condition met—calculation by reference to the alternative provision' below)

The first key step before establishing which method applies is to establish the 'actual provision condition'. This is similar to the definition for the lack of economic substance circumstance (see D2.717) and is met if²:

1. Ìý

   •ÌýÌýÌýÌý the actual transaction (ie the material provision) results in expenses that would