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Income Tax Act 2007

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

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

You could also call this:

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

Your control interest in a foreign company is the total of all the interests you have in that company. This includes:

  1. Any direct control interest you have in the company.
  2. Any direct control interests that people connected to you have in the company.
  3. Any indirect control interest you have in the company.
  4. Any indirect control interests that people connected to you have in the company.

Sometimes, the law might treat a control interest as being shared equally among a group of New Zealanders.

When figuring out your control interest, there are some special rules that might apply. These rules cover things like:

  1. Temporarily getting rid of direct control or income interests.
  2. Temporarily getting direct control or income interests.
  3. Temporary increases in the total for control interest categories.
  4. Temporary decreases in the total for control interest categories.
  5. When a mix of changes reduces income.
  6. When a mix of changes increases loss.

These rules are there to make sure people don’t try to change their control interests just to pay less tax.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515414.

Topics:
Money and consumer rights > Taxes
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EX 2: Four categories for calculating control interests, or

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

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EX 4: Limits to requirement to include associated person interests, or

“Rules for counting associated persons' interests in foreign companies”

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

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

  1. A New Zealand resident’s control interest in a foreign company at any time is the total of the following for the relevant control interest category:

  2. any direct control interest that the New Zealand resident holds in the company:
    1. any direct control interests in the company held by persons associated with the New Zealand resident:
      1. any indirect control interests that the New Zealand resident holds in the company:
        1. any indirect control interests in the company held by persons associated with the New Zealand resident.

          1. Section GB 7 (Arrangements involving CFC control interests) may apply to treat a control interest as being held by a group of New Zealand residents in equal proportions.

          2. Any of the following sections may apply to the calculation of a person’s control interest:

          3. section GB 9 (Temporary disposals of direct control or income interests):
            1. section GB 10 (Temporary acquisitions of direct control or income interests):
              1. section GB 11 (Temporary increases in totals for control interest categories):
                1. section GB 12 (Temporary reductions in totals for control interest categories):
                  1. section GB 13 (When combination of changes reduces income):
                    1. section GB 14 (When combination of changes increases loss).

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