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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Ten percent threshold and variations in income interest level

EX 16: Income interests for certain purposes

You could also call this:

“How your ownership in foreign companies affects your tax obligations”

This law is about how to figure out your income from a company in another country that you partly own. It’s called a controlled foreign company or CFC.

If you own part of a CFC, you might need to pay tax on some of its income. But this law says that on some days, your share of the income might be counted as zero. This happens if you don’t live in New Zealand or if you’ve just moved to New Zealand and are still settling in.

Even if your share is counted as zero, you still have to pay tax on any money you actually get from the CFC. You also have to pay tax on any money you get from a foreign investment fund (FIF) while you’re living in New Zealand.

There are two other rules that this law doesn’t change. One rule is about when you have to pay tax on CFC income. The other is about when you have to pay tax on FIF income. Both of these rules say you have to pay tax on this income while you’re living in New Zealand.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515452.

Topics:
Money and consumer rights > Taxes
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“Calculating income interest in foreign companies includes associated people's interests”

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Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Ten percent threshold and variations in income interest level

EX 16Income interests for certain purposes

  1. This section applies for the purposes of determining the attributed CFC income or loss of a person for a period if the person holds an income interest in the CFC on a day in the period.

  2. For the purposes of calculating the attributed CFC income or loss of a person for a period, the person has an income interest in a CFC of zero on a day in the period if, on the day, the person is—

  3. a non-resident:
    1. a transitional resident.

      1. This section does not override—

        1. section CQ 2(3) (When attributed CFC income arises), which treats any attributed CFC income as being derived while the person deriving it is a New Zealand resident; or
          1. section CQ 5(4) (When FIF income arises), which treats any foreign investment fund (FIF) income as being derived while the person deriving it is a New Zealand resident.

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            Notes
            • Section EX 16(3)(a): repealed, on , by section 136(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
            • Section EX 16 list of defined terms attributed repatriation: repealed, on , by section 136(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).