Part E
Timing and quantifying rules
Controlled foreign company and foreign investment fund rules:
When is a company a controlled foreign company?
EX 1Meaning of controlled foreign company
A foreign company is a controlled foreign company (CFC) if any of the following tests is met:
- there is a group of 5 or fewer New Zealand residents whose total control interests in the company are more than 50% in any one of the control interest categories:
- a single New Zealand resident holds a control interest of 40% or more unless at the same time—
- the person's control interest is less than or equal to a control interest in the same category held by another person; and
- the other person is not a New Zealand resident; and
- the other person is not associated with the New Zealand resident:
- the person's control interest is less than or equal to a control interest in the same category held by another person; and
- there is a group of 5 or fewer New Zealand residents who can control the exercise of the shareholder decision-making rights for the company and, as a result, control the company’s affairs.
Even if a test in subsection (1) is met, a foreign company is not a CFC if—
- the foreign company is a foreign PIE equivalent; and
- 1 of the New Zealand residents is—
- a portfolio investment entity:
- an entity that qualifies for PIE status:
- a life insurance company.
- a portfolio investment entity:
If any of the tests in subsection (1) is met at any time in a foreign company’s accounting period and the exception in subsection (2) does not apply at the time, the company is treated as a CFC for the whole of the accounting period.
Compare
- 2004 No 35 s EX 1
Notes
- Section EX 1(1)(b)(i): substituted (with effect on 1 April 2008), on , by section 42(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
- Section EX 1(2): amended, on , by section 381 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
- Section EX 1(2)(a): amended, on (applying for the 2010–11 and later income years), by section 149(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
- Section EX 1(2)(b)(ii): substituted, on (applying for the 2010–11 and later income years), by section 149(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
- Section EX 1 list of defined terms control: repealed, on , by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).