Inter connected companies
9. (1) Where any interest, annuity or other annual payment, or any royalty or rent, is paid by one company to another company, and one of those companies is a subsidiary of the other, or both are subsidiaries of a third company, the capital, profits and losses of both companies shall be computed for the purposes of this Act as if-
(a) the interest, annuity, annual payment, royalty or rent were not payable;
(b) any debt in respect of which any such interest is payable did not exist; and
(c) any asset in respect of which any such royalty or rent is payable were the property of the company paying the royalty or the rent.
(a) any debt is owing to any company by another company; and
(b) one of those companies is a subsidiary of the other, or both are subsidiaries of a third company; and
(c) no interest is payable in respect of the debt, but the circumstances in which the debt came into existence or is allowed to continue to exist are such that the debt represents in substance capital employed in the business of the debtor company,
the capital of both companies shall be computed as if the debt did not exist.
(a) a company (hereinafter referred to as “the principal company”) is resident in the taxable territories and is not a subsidiary of any other company resident in the taxable territories; and
(b) during the whole or any part of any chargeable accounting period of the principal company, another company, whether or not resident or carrying on business within the taxable territories (hereinafter referred to as “the subsidiary company”) is a subsidiary of the principal company,
the following provisions of this section shall, subject to the provisions of section 5, have effect in relation to that chargeable accounting period.
(3) If the subsidiary company is a subsidiary of the principal company throughout the chargeable accounting period, such capital employed in, and profits or losses arising from, the business of the subsidiary company as is employed or arise in-
(i) the chargeable accounting period; or
(ii) any year constituting or comprised in the standard period of the principal company,
shall be treated for the purposes of this Act as if it or they were capital employed in, or as the case may be, profits or losses arising from, the business of the principal company.
(4) If the subsidiary company is a subsidiary of the principal company during part only of the chargeable accounting period, the excess or deficiency of profits of the subsidiary company for that part of that period shall be treated as increasing or as the case may be, decreasing the excess or deficiency of profits of the principal company for the whole period and shall not be deemed to be an excess or deficiency of profits of the subsidiary company.
In this sub section, the expressions “excess” and “deficiency” mean, in relation to profits, an excess or deficiency in relation to the standard profits of the subsidiary company or, as the case may be, the principal company.
(5) In any case to which sub section (3) or sub section (4) applies, such alteration, if any, of the periods which would otherwise be the chargeable accounting periods of the subsidiary company shall be made as the National Board of Revenue may direct.
(6) For the purposes of this section, a company shall be deemed to be a subsidiary of another company if and so long as not less than nine tenths of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies.
(7) The amount of ordinary share capital of one company owned by a second company through another company or other companies, or partly directly and partly through another company or other companies shall be determined in accordance with the provisions of the Third Schedule.
(8) In this section and the Third Schedule references to owner ship shall be construed as references to beneficial ownership, and the expression “ordinary share capital”, in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders whereof have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.
(9) The principal company shall be entitled to allocate to its subsidiary company or companies the respective proportionate shares of the excess profits tax payable by the whole group.
(10) The excess profits tax payable by virtue of this section by the principal company in respect of the profits of any subsidiary company shall, for the purposes of section 12, be deemed to have been paid by the subsidiary company and not by the principal company.