Controlled Foreign Companies: Entity Exemptions: Chapter 11 - The Excluded Territories Exemption: The Basic Rule
TIOPA10/S371KB(1) sets out the four conditions that need to be met for the excluded territories exemption (ETE) to apply for a CFC’s accounting period. These are:
- the CFC is resident in one of the specified excluded territories for the accounting period (the residence condition (see INTM224850);
- the total of the amounts (if any) of the CFC’s income which falls within Categories A, B, C and D (as set out in TIOPA10/S371KE to S371KI) is no more than the ‘threshold’ amount for the accounting period (as described in TIOPA10/S371KD) (the income condition (see INTM224900);
- the intellectual property (IP) condition (provided by TIOPA10/S371KJ) is met (see INTM225000); and
- the CFC is not at any time during the accounting period involved in an arrangement, the main purpose or one of the main purposes of which is to obtain a tax advantage (as defined by CTA10/S1139) for any person (TIOPA10/S371KB(1)(d)) (the anti-avoidance condition (see INTM225050)).
The conditions must all be satisfied by the CFC throughout the relevant accounting period for the ETE to apply.