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Income Tax Act 2007

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

EX 10: Indirect income interests

You could also call this:

“How to calculate your share in a foreign company owned through another company”

You have an indirect income interest in a CFC when you have a direct income interest in one CFC, and that CFC has a direct income interest in another CFC. To calculate your indirect income interest, you multiply your direct income interest in the first CFC by the first CFC’s direct income interest in the other CFC.

If there’s a chain of CFCs between you and the final CFC, you still have an indirect income interest in the CFC at the end of the chain. To work this out, you multiply all the direct income interests in the chain together.

For example, if you own 50% of CFC A, and CFC A owns 60% of CFC B, your indirect income interest in CFC B would be 30% (50% x 60% = 30%).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515434.

Topics:
Money and consumer rights > Taxes
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EX 9: Direct income interests, or

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

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EX 11: Options and similar rights in certain cases, or

“Rules for calculating income interest in foreign companies when you have certain rights or options”

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

EX 10Indirect income interests

  1. If a person has a direct income interest in a CFC, and the first CFC has a direct income interest in another CFC, the person has an indirect income interest in the other CFC.

  2. The indirect income interest is calculated by multiplying the person’s direct income interest in the first CFC by the first CFC’s direct income interest in the other CFC.

  3. If there are 2 or more CFCs in a chain of direct income interests between the person and a CFC, the person has an indirect income interest in the CFC at the end of the chain that is calculated by multiplying all the direct income interests in the chain.

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