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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Change of residence of companies

EX 24: Companies moving to or from New Zealand

You could also call this:

“How tax accounting periods change when companies move in or out of New Zealand”

When a company changes from being a New Zealand company to a foreign company, or from a foreign company to a New Zealand company, it affects how their accounting periods are set up.

If a company becomes a foreign company, a new accounting period starts on the day it becomes foreign. The old accounting period ends the day before.

If a foreign company stops being foreign, a new accounting period starts on the day it’s no longer foreign. The old accounting period ends the day before.

These changes can make an accounting period shorter for a CFC (Controlled Foreign Company). If this happens, someone who has income or loss from the CFC can choose how to calculate the CFC’s income or loss. They can either:

Use only the results from the shorter period, or
Use a special formula to work out the results based on the full, unshortened period.

The formula takes the income or loss from the full period and adjusts it based on how many days are in the shorter period compared to the full period.

This helps make sure the income or loss is calculated fairly when a company moves between New Zealand and another country.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515485.

Topics:

Money and consumer rights > Taxes

EX 23: Tax concession grey list CFCs, or

“Removed tax rule about certain foreign companies”

EX 25: Change of CFC’s balance date, or

“Rules for changing a foreign company's financial year”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Change of residence of companies

EX 24Companies moving to or from New Zealand

If a company becomes a foreign company, an accounting period of the company starts on the day when the company becomes a foreign company and the former accounting period ends on the previous day.
If a foreign company ceases to be a foreign company, an accounting period of the company starts on the day when the company ceases to be a foreign company and the former accounting period ends on the previous day.
If subsection (1) or (2) applies to shorten an accounting period of a CFC, a person with attributed CFC income or loss from the CFC for the period may choose to calculate the CFC attributable income or loss of the CFC—
using the results for the shortened period only; or
by applying the pro-rating formula in subsection (4) to the results for the unshortened period.

The formula for calculating CFC attributable income or loss under subsection (3)(b) is—
$unshortened period CFC attributable income or loss× days in shortened period ÷ days in unshortened period.$

Where:

Compare

2004 No 35 s EX 25

Notes

Section EX 24(3): amended, on 24 February 2016, by section 142(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EX 24(4): amended, on 24 February 2016, by section 142(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EX 24(4) formula: amended, on 24 February 2016, by section 142(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EX 24 list of defined terms branch equivalent income: repealed, on 24 February 2016, by section 142(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).