MTT18030 - Scope: Determining location of entities: Location of flow-through entities and permanent establishments
Rules on determining the location of flow-through entities and permanent establishments are set out in section 240 of Finance (No.2) Act 2023.
See MTT41010 for general guidance on permanent establishments, and MTT41410 for general guidance on flow-through entities.
Location of flow-through entities
A flow-through entity that:
- is the ultimate parent of a group, or
- would be a responsible member if it were located in the territory in which it was created,
it is located in that territory.
A flow-through entity that is not a responsible member is a stateless entity.
See MTT18010 for guidance on stateless entities, MTT18040 for guidance on the place of creation, and MTT61030 for guidance on responsible members.
Location of permanent establishments
The location of a permanent establishment (PE) depends on which of the four conditions it meets under section 232(2)(a)-(d).
An entity that is a PE because of a tax treaty is located in the territory where it is treated as a PE under that tax treaty.
A PE that is taxed on a similar basis to other tax residents is located in the territory in which it is subject to net basis taxation based on its business presence.
A PE that is located in a territory without a corporate income tax, but would be taxable by that territory if it did have a corporate income tax, is located in the territory in which it is situated.
Other PEs are stateless entities.
Amendment in Finance Act 2025
Section 240 was amended by FA25. This guidance page reflects the current version of the legislation. Consult FA25 for legislation applicable to prior periods if the retrospection election does not apply (see MTT09490).