Timor-Leste

The taxable income of a non-resident carrying out business activities through a PE is calculated by reference to:

• the income attributable to the PE
• any sales of goods or merchandise of the same or similar kind as those sold through the PE, and
• any other business activities carried on in Timor-Leste of the same or similar kind as those effected through the PE.

Other principles for determining the taxable income of a PE in Timor-Leste include the following:

• Profit is calculated as if the PE was a Timor-Leste entity engaged in the same or similar activities under the same or similar conditions and dealt with wholly independently from the non-resident person of which it is a PE.
• Subject to this, deductions may be claimed for expenses incurred for the purposes of the business activities of the PE, including head office expenditures, whether incurred in Timor-Leste or elsewhere.
• No deductions may be claimed for amounts paid or payable by the PE to its head office or to another PE of the non-resident person, other than towards the reimbursement of actual expenses incurred by the non-resident person to third parties, by way of:
  • royalties, fees, or other similar payments
  • compensation for any services (including management services) provided to the PE, and
  • interest on money lent to the PE (except for banking businesses).