INTM489675 - Diverted Profits Tax: application of Diverted Profits Tax: legislation – Finance Act 2015 – core provisions: section 86 – the mismatch condition

The mismatch condition is intended to apply to cases that involve entities or transactions lacking economic substance and is similar to the rule in section 80 applicable to UK companies. The condition is met if:

• in connection with the supplies of the goods, services, etc., arrangements are in place as a result of which provision (“the material provision”) is made or imposed as between the foreign company and another person (“A”) by means of a transaction or series of transactions,
• the participation condition is met in relation to the foreign company and A (INTM489725),
• the material provision results in an effective tax mismatch outcome as between the foreign company and A (INTM489740),
• the insufficient economic substance condition is met (INTM489765),
• the effective tax mismatch outcome is not an excepted loan relationship outcome see INTM489595,
• the foreign company and A are not both SMEs. The same definitions are used as in section 80 – see INTM489595.