UK taxation of foreign permanent establishments

The basic rule of the scope of UK corporation tax is that a UK resident company is chargeable to corporation tax on all its profits (comprising income and chargeable gains), including those that arise in permanent establishments outside the UK.

The scope and effect of this basic rule is altered by certain provisions specifically dealing with international matters, such as:

•
relief for foreign tax
•
the foreign branch exemption, and
•
the controlled foreign company (CFC) regime (for which see: CFC rules—overview)

Relief for foreign tax

A UK resident company may suffer foreign tax by way of:

•
withholding tax on payments received, and/or
•
tax due by direct assessment in a foreign territory that imposes tax on the activity of the UK resident company, whether or not the non-UK activities constitute a permanent establishment (PE)

Where a UK resident company has suffered foreign tax on profits that are

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