835AVD. Reverse hybrid mismatch outcome

(1) Subject to subsection (2), a reverse hybrid mismatch outcome shall arise where some or all of the profits or gains of a reverse hybrid entity that are attributable to a relevant participator are subject to neither domestic nor foreign tax.

(2) A reverse hybrid mismatch outcome shall not arise in respect of the profits or gains of a reverse hybrid entity where the profits or gains are attributable to a relevant participator that—

(a) under the laws of the territory in which it is established, is exempt from tax which generally applies to profits or gains in that territory,

(b) is established in a territory, or part of a territory, that does not impose a foreign tax, or

(c) is established in a territory that does not impose a tax that generally applies to profits or gains derived from payments receivable in that territory by enterprises from sources outside that territory.

(3) Subject to subsections (7) and (8), a reverse hybrid mismatch outcome shall be neutralised, notwithstanding any other provision of the Tax Acts and the Capital Gains Tax Acts, by the profits and gains referred to in subsection (1) being charged to corporation tax on the reverse hybrid entity concerned as if the business carried on in the State by the reverse hybrid entity was carried on by a company resident in the State.

(4) In subsection (5), ‘unit’ has, as the context requires, the meaning assigned to it in section 739B(1), that meaning as modified in accordance with section 739J(1)(b), or, where this section is applied to a relevant partnership, a ‘partnership interest’, within the meaning of section 739J.

(5) A reverse hybrid entity that is liable to tax under subsection (3) shall—

(a) be entitled to appropriate or cancel such portion of units of the relevant participator concerned as are required to meet the amount of the tax arising on profits attributable to that participator, and

(b) be acquitted and discharged of such appropriation or cancellation, as the case may be, as if the amount of tax had been paid to the participator.

(6) Where a reverse hybrid entity exercises its right under subsection (5)(a)—

(a) the participator concerned shall allow the appropriation or cancellation, as the case may be, and

(b) the appropriation or cancellation, as the case may be, shall take place at the end of the tax period in respect of which the tax arose.

(7) Where, in respect of a reverse hybrid entity, a participator is resident in a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made, then any corporation tax being charged on that entity by virtue of subsection (3) shall take account of the provisions of those arrangements.

(8) The provisions of the Tax Acts relating to the calculation, assessment and collection of tax shall apply to any tax due pursuant to this section—

(a) as if the reverse hybrid entity was a company resident in the State for the tax period, and

(b) without prejudice to the generality of paragraph (a), where the reverse hybrid entity—

(i) is a common contractual fund, all obligations falling on the common contractual fund pursuant to this Part shall be fulfilled on behalf of the common contractual fund by the management company who is authorised to act on behalf, or for the purposes, of the common contractual fund and habitually does so, but the management company shall not be liable in a personal capacity to any tax imposed by this Part on the common contractual fund, and

(ii) is a partnership, all obligations falling on the partnership pursuant to this part shall be fulfilled by the precedent partner (within the meaning of section 1007) on behalf of the partnership.