INTM230200 - Controlled Foreign Companies: Creditable tax of a CFC: Example
X is a CFC registered in Jersey and as such pays no local corporation tax. It operates through permanent establishments in the UK and France. For the year to 31 March, when the UK rate of corporation tax is 24%, it makes profits of 拢10,000 in each of its PEs and pays UK and French corporation tax of 拢2,400 and 拢3,400 respectively. X also has investment income of 拢100,000 - most of this bears no tax anywhere but interest of 拢5,000 from a UK company has income tax of 拢1,000 deducted at source.
The creditable tax of X is computed as follows:
| 听 | 拢 |
|---|---|
| French corporation tax (restricted to the UK tax attributable | 听 |
| to the French permanent establishment income) | 2,400 |
| UK corporation tax on PE income | 2,400 |
| UK income tax deducted from interest | 1,000 |
| 听 | 5,800 |