Income Tax Regulations — 5907
gs included in the exempt earnings of the secondary affiliate, be deducted from the exempt surplus or added to the exempt deficit, as the case may be, of the primary affiliate, (A.1) to the extent that such income or profits tax would otherwise have reduced the hybrid surplus or increased the hybrid deficit of the secondary affiliate, (I) be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the primary affiliate, and (II) be added to the hybrid underlying tax of the primary affiliate, and (B) to the extent that such income or profits tax would otherwise have reduced the net earnings included in the taxable earnings of the secondary affiliate, (I) be deducted from the taxable surplus or added to the taxable deficit, as the case may be, of the primary affiliate, and (II) be added to the underlying foreign tax of the primary affiliate, (v) to the extent that (A) the income or profits tax that would otherwise have been payable by the primary affiliate for the year on behalf of the consolidated group is reduced by virtue of a loss of a secondary affiliate for the year or a previous taxation year, or (B) the primary affiliate receives, in respect of a loss of a secondary affiliate for the year or a subsequent taxation year, a refund of income or profits tax otherwise payable for the year by the primary affiliate on behalf of the consolidated group, the amount of such reduction or refund, as the case may be, shall at the end of the year of the loss, (C) where such loss reduces the exempt surplus or increases the exempt deficit, as the case may be, of the secondary affiliate, be added to the exempt surplus or deducted from the exempt deficit, as the case may be, of the primary affiliate, (C.1) where such loss reduces the hybrid surplus or increases the hybrid deficit, as the case may be, of the secondary affiliate, (I) be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the primary affiliate, and (II) be deducted from the hybrid underlying tax of the primary affiliate, and (D) where such loss reduces the taxable surplus or increases the taxable deficit, as the case may be, of the secondary affiliate, (I) be added to the taxable surplus or deducted from the taxable deficit, as the case may be, of the primary affiliate, and (II) be deducted from the underlying foreign tax of the primary affiliate; and (b) where by virtue of the primary affiliate being responsible for paying, or claiming a refund of, income or profits tax for the year on behalf of the consolidated group, (i) an amount is paid to the primary affiliate by a secondary affiliate in respect of the income or profits tax that would have been payable by the secondary affiliate for the year had it not been a member of the group, (A) in respect of the secondary affiliate, the amount so paid shall be deemed to be a payment of such income or profits tax for the year, and (B) in respect of the primary affiliate, (I) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the exempt surplus or deducted from the exempt deficit, as the case may be, of the secondary affiliate shall at the end of the year be added to the exempt surplus or deducted from the exempt deficit, as the case may be, of the primary affiliate, (I.1) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the secondary affiliate is, at the end of the year, to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the primary affiliate and deducted from the hybrid underlying tax of the primary affiliate, and (II) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the taxable surplus or deducted from the taxable deficit, as the case may be, of the secondary affiliate shall at the end of th