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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Attributed losses from foreign equity

DN 2: When attributed CFC loss arises

You could also call this:

“Rules for when you can claim a loss from a foreign company you control”

You have an attributed CFC loss from a foreign company in an income year if certain conditions are met. These conditions include:

The foreign company is a controlled foreign company (CFC) during one of its accounting periods. This period must end during your income year. You must have an income interest in the foreign company for this accounting period. At some point during the accounting period, you need to be a New Zealand resident who isn’t a transitional resident. Your income interest must be 10% or more for the accounting period. The CFC must have a net attributable CFC loss for the accounting period. The CFC can’t be a non-attributing active CFC or a non-attributing Australian CFC for the accounting period. Also, you can’t be a portfolio investment entity.

If you and a non-attributing active CFC or non-attributing Australian CFC meet most of these conditions, and the CFC earns income from personal services that counts as an attributable CFC amount, you might still have an attributed CFC loss. This loss would be equal to your income interest in the CFC multiplied by the amount that the CFC’s costs for earning the personal services income exceed the income itself.

You can find more details about some of these terms in other sections of the law. For example, sections EX 1 to EX 7 explain what a controlled foreign company is, and sections EX 8 to EX 13 tell you how to calculate your income interest.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513896.

Topics:
Money and consumer rights > Taxes
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DN 1: Attributed controlled foreign company loss, or

“Deductions for losses from foreign companies you control”

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DN 3: Calculation of attributed CFC loss, or

“How to figure out an attributed CFC loss”

Part D Deductions
Attributed losses from foreign equity

DN 2When attributed CFC loss arises

  1. A person has an attributed CFC loss from a foreign company in an income year if—

  2. the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7 (which relate to the definition of a controlled foreign company); and
    1. the accounting period ends during the income year; and
      1. the person is not a portfolio investment entity; and
        1. the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13 (which relate to calculating a person’s income interest); and
          1. at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
            1. the person’s income interest is 10% or more for the accounting period, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
              1. the CFC has a net attributable CFC loss for the accounting period under section EX 20C (Net attributable CFC income or loss); and
                  1. the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B (Non-attributing active CFCs); and
                    1. the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 (Non-attributing Australian CFCs).

                      1. If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) (Attributable CFC amount), the person has attributed CFC loss from the CFC equal to the product of—

                      2. the person's income interest in the CFC:
                        1. the amount by which the CFC's expenditure incurred in deriving the income from personal services exceeds the income from personal services.

                          Compare
                          Notes
                          • Section DN 2(1) heading: inserted (with effect on 30 June 2009), on , by section 90(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(1)(bb): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 12(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                          • Section DN 2(1)(f): substituted (with effect on 30 June 2009), on , by section 90(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(1)(g): repealed (with effect on 30 June 2009), on , by section 90(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(1)(h): added (with effect on 30 June 2009), on , by section 90(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(1)(i): added (with effect on 30 June 2009), on , by section 90(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(2) heading: added (with effect on 30 June 2009), on , by section 90(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2(2): added (with effect on 30 June 2009), on , by section 90(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms attributable CFC amount: inserted (with effect on 30 June 2009), on , by section 90(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms branch equivalent loss: repealed (with effect on 30 June 2009), on , by section 90(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms net attributable CFC loss: inserted (with effect on 30 June 2009), on , by section 90(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms non-attributing active CFC: inserted (with effect on 30 June 2009), on , by section 90(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms non-attributing Australian CFC: inserted (with effect on 30 June 2009), on , by section 90(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section DN 2 list of defined terms portfolio investment entity: inserted (with effect on 1 July 2011), on , by section 12(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).