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EX 1: Meaning of controlled foreign company
or “What counts as a controlled foreign company for New Zealand tax purposes”
You could also call this:

“Four ways to measure a person's control over a foreign company”

When you’re looking at a person’s control interest in a foreign company, there are four different types of rights to consider. These are called categories, and they help figure out how much control someone has.

The four categories are:

  1. Owning shares in the foreign company
  2. Having a say in the decisions shareholders make for the foreign company
  3. Being able to receive income from the foreign company
  4. Being able to get a share of the company’s leftover money and property

There’s a special part of the law called section EX 5 that explains how to work out the control interest for each of these categories in more detail.

When you’re trying to figure out someone’s total control interest, you need to look at each category separately. You’ll add up any direct control interests (things the person owns or controls directly) and indirect control interests (things owned or controlled through other people or companies). You’ll also need to include any interests that belong to people or companies associated with the person you’re looking at. There’s another part of the law called section EX 3 that tells you how to do this calculation for each category.

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Next up: EX 3: Control interest: total of direct, indirect, and associated person interests

or “Total control interest in a foreign company includes direct and indirect interests held by you and connected people”
Next

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of person’s control interest

EX 2Four categories for calculating control interests

  1. Under section EX 5(1), a direct control interest in a foreign company can arise in each of 4 separate categories of rights.

  2. The 4 categories are—

  3. shareholding in the foreign company:
    1. shareholder decision-making rights for the foreign company:
      1. rights to receive income from the foreign company:
        1. rights to receive distributions of the company’s net assets.

          1. In each category, more detailed calculation rules appear in section EX 5.

          2. Accordingly, the rules in section EX 3 for calculating control interests by totalling various direct and indirect control interests and associated parties’ interests are applied on a category by category basis, by reference to those categories of direct control interest.

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