Multinational Top-up Tax and Domestic Top-up Tax

MTT17050 - Scope: Determining ownership of entities: Calculating the percentage ownership interest held by a specific entity or individual

For some provisions of MTT, it is necessary to determine the percentage ownership interest, including direct and indirect interests, that a specific entity or individual holds in an entity. A rule is required to ensure that both the direct and indirect interests of the person are considered, and to prevent the double counting of interests.

This is set out in Section 243 of Finance (No.2) Act 2023.

The rule

To determine the percentage ownership interests held in an entity (“A”) by a specific entity or individual (“B”):

Step 1: Ignore any indirect interest not held by B.

Step 2: If B has an indirect interest in A, reduce the direct interest through which it is held by the amount of the indirect interest.

The total ownership interests recognised will always add up to 100%.

Example

B Ltd has a 10% direct interest in A Ltd, and a 40% direct interest in Z Ltd.

Z Ltd has a 90% direct interest in A Ltd.

It is necessary to determine the percentage ownership interest that B Ltd holds in A Ltd.

Step 1

B Ltd has a 10% direct interest in A Ltd and a 36% indirect interest via Z Ltd.

Z Ltd has a 90% direct interest in A Ltd.

There are no other direct interests and all other indirect interests are ignored.

Step 2

B Ltd has an indirect interest of 36% derived from Z Ltd’s 90% interest. We reduce the direct interest by the amount of the indirect interest (leaving Z Ltd with an interest of 54%).

The percentage ownership interest that B Ltd holds in A Ltd is therefore 46%.