Document ID: chunk:federal_register_of_legislation:C2025C00014:section:23ah:p3
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 23AH (pt 3/5)
Character Range: 135030–137597

interest were foreign income derived by the company through a PE of the company in that country.
 (11) This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in a capital gain or capital loss made in relation to an asset of a partnership, or made by a trustee, in carrying on a business at or through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were a capital gain or capital loss made by the company through a PE of the company in that country.

Active income test
 (12) A PE of an entity passes the active income test for a year of income if the entity would have passed the active income test in section 432 if:
 (a) the assumptions in subsection (14) were made; and
 (b) subsection 432(3) and 446(2) and paragraphs 432(1)(b) and (e) and 447(1)(b), (d) and (f) had not been enacted.

Adjusted tainted income
 (13) For the purposes of this section, the adjusted tainted income of a PE of an entity is income or other amounts that would be adjusted tainted income of the entity for the purposes of Part X if:
 (a) the assumptions in subsection (14) were made; and
 (b) subsection 446(2) and paragraphs 447(1)(b), (d) and (f) had not been enacted.

Assumptions for subsections (12) and (13)
 (14) The assumptions referred to in paragraphs (12)(a) and (13)(a) are:
 (a) except in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or other amounts derived by the entity were the income derived in carrying on business at or through the PE; and
 (b) the entity's statutory accounting periods were the same as the entity's years of income; and
 (c) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):
 (i) the part of the entity's operations that consists of the business carried on at or through the PE were a company (the PE company); and
 (ii) the remaining part of the entity's operations were a separate company (the HQ company); and
 (iii) the PE company and the HQ company had carried out the transactions that they would have carried out if the PE company were engaged in the same or similar activities as the PE under the same or similar conditions as the PE and were dealing wholly independently with the HQ company; and
 (iv) any income derived by the HQ company were disregarded; and
 (d) if the entity is an AFI entity (within the meaning of subsection 326(2))—the entity were an AFI subsidiary; and
 (e) in applying paragraphs 447(1)(a), (c) and (e), the HQ company were