It is quite common for the amount of foreign tax to be
adjusted; for instance, upwards following enquiries or downwards
following a carry-back claim under the foreign tax code.
If there is an addition to the foreign tax, the formulae at
LLM7120 and
LLM7130 are re- worked. There may be a
new ERFT, calculated under the first formula at
LLM7120. When calculating ASFT under the
second formula, “FT” is the foreign tax including the
addition. If, for example, foreign tax for a territory was
originally 300,000, and there is an additional 50,000 making
350,000, the calculation is reworked using the sum of 350,000
– rather than undertaking a further calculation using 50,000
added to the original calculation.
A similar principle applies if the foreign tax is reduced by
repayment. The formulae are re- worked and “FT” is the
foreign tax after subtraction of the repaid amount. The Regulations
provide for a deduction to be made from AAFST in circumstances
where an adjusted sum of foreign tax is reduced. If, for example,
foreign tax for a territory was originally 300,000 and there is a
repayment of 50,000 leaving 250,000, the calculation is reworked
using the sum of 250,000 – rather than undertaking a further
calculation using 50,000 and deducting it from the original
calculation.
These tax adjustments apply to the foreign period of
accounting for which the creditable tax is payable, and to its
corresponding accounting period. The approach outlined for
individual Names for additional payments at
LLM7060, and for refunds at
LLM7070, does not apply. Although the
approach described there, of relating the adjustments to the
periods in which the additional payment is made, or the refund is
received, has the advantage of avoiding the need for retrospective
adjustments, it is not suitable for the corporate member
Regulations. This is because the restriction described at
LLM7120 depends on the tax rates for the
period to which the income relates.
