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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Calculation of attributed CFC income or loss

EX 19: Taxable distribution from non-complying trust

You could also call this:

“Tax on money your company gets from a rule-breaking trust”

This law talks about what happens when a company you partly own gets money from a trust that doesn’t follow the rules. If your company gets this money, it’s not counted as part of the company’s regular income. Instead, you have to pay extra tax on it yourself.

The amount of extra tax you pay depends on how much of the company you own and how much money the company got from the trust. You work it out by multiplying these two numbers together.

You have to pay tax on this extra money at a special rate. This rate is the same one that’s used for other money that comes from trusts that don’t follow the rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515464.

Topics:
Money and consumer rights > Taxes
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EX 18: Formula for calculating attributed CFC income or loss, or

“How to work out your share of a foreign company's income or loss”

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EX 20: Reduction in attributed CFC loss, or

“How CFC losses may be reduced to match actual financial losses”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of attributed CFC income or loss

EX 19Taxable distribution from non-complying trust

  1. This section applies when—

  2. a CFC derives a taxable distribution from a non-complying trust in an accounting period; and
    1. a person has attributed CFC income or loss from the CFC for the period, or would have if the taxable distribution were included in the CFC’s net attributable CFC income.

      1. The taxable distribution is excluded under section EX 21(32) when calculating the CFC’s net attributable CFC income or loss, and instead the person has additional attributed CFC income.

      2. The amount of the additional attributed CFC income is calculated using the formula—

        person’s income interest in CFC for accounting period × taxable distribution.

        Where:

        • The person is liable for income tax on the additional attributed CFC income at the rate in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) that applies to amounts under section HC 19 (Taxable distributions from non-complying trusts).

        • Repealed
        Compare
        Notes
        • Section EX 19(1)(b): amended (with effect on 30 June 2009), on , by section 155(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section EX 19(2): amended (with effect on 30 June 2009), on , by section 155(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section EX 19(4): amended, on , by section 384 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
        • Section EX 19(5) heading: repealed (with effect on 30 June 2009), on , pursuant to section 155(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section EX 19(5): repealed (with effect on 30 June 2009), on , by section 155(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section EX 19 list of defined terms branch equivalent income: repealed (with effect on 30 June 2009), on , by section 155(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section EX 19 list of defined terms net attributable CFC income: inserted (with effect on 30 June 2009), on , by section 155(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).