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EX 8: Income interests: total of direct and indirect interests
or “Calculating your total income interest in a foreign company”
You could also call this:

“How your share of ownership or control in a foreign company is calculated”

You have a direct income interest in a Controlled Foreign Company (CFC) if you hold any of these:

  1. Shares in the foreign company
  2. Decision-making rights for the company
  3. The right to receive or control the company’s income
  4. The right to receive or control the company’s assets if they are given out

Your direct income interest is the percentage of the total that you hold. If the percentages are different for each category, your direct income interest is the highest one.

When working out your direct income interest for shares, we look at the available subscribed capital per share. For decision-making rights, we use the highest percentage if it varies between different types of rights.

For income rights, we assume the income is given out on the last day of the accounting period, your entitlement doesn’t change during this time, and some interest payments count as income distribution.

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Next up: EX 10: Indirect income interests

or “How to calculate your share in a foreign company owned through another company”
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Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of person’s income interest

EX 9Direct income interests

  1. A person has a direct income interest in a CFC at any time if they hold—

  2. any of the shares in the foreign company:
    1. any of the shareholder decision-making rights for the company:
      1. a right to—
        1. receive any income of the company for the accounting period in which the time falls; or
          1. have the income of the company for the accounting period in which the time falls dealt with in their interest or on their behalf:
          2. a right to—
            1. receive any of the value of the net assets of the company, if they are distributed; or
              1. have the net value of the assets, if they are distributed, dealt with in their interest or on their behalf.

              2. The person’s direct income interest is the percentage of the total that the person holds.

              3. However, if the percentage varies between the different categories, the person’s direct income interest is the highest.

              4. When the direct income interest in the category in subsection (1)(a) is calculated, the percentage is the total of the available subscribed capital per share calculated under the slice rule of the shares held as a percentage of the total available subscribed capital per share calculated under the slice rule of all shares in the company.

              5. When the direct income interest in the category in subsection (1)(b) is calculated, if the percentage varies between the rights described in the different paragraphs of the definition of shareholder decision-making rights in section YA 1 (Definitions), the highest percentage is taken.

              6. When the direct income interest in the category in subsection (1)(c) is calculated, it is assumed that—

              7. the income is distributed on the last day of the accounting period; and
                1. the person’s entitlement is unchanged during the period; and
                  1. a payment of interest on a debenture subject to section FA 2 (Recharacterisation of certain debentures), FA 2B (Stapled debt securities), or FZ 1 (Treatment of interest payable under debentures issued before certain date) is a distribution of income.

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                    Notes
                    • Section EX 9(1)(c): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 85(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                    • Section EX 9(1)(d): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 85(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                    • Section EX 9(6)(c): amended (with effect on 1 April 2008), on , by section 151 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).