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Income Tax Act 2007

Treatment of tax losses - Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 1: General treatment

You could also call this:

“How to carry forward and use tax losses from CFCs and FIFs”

If you have a tax loss from a controlled foreign company (CFC) or foreign investment fund (FIF), you can carry it forward to use in future tax years. Here’s what you need to know:

If you’re a company, you must follow the rules in section IA 5(2) and (3) or IB 3(2) about carrying forward tax losses. These rules apply to all companies.

You need to use your CFC or FIF tax losses in a specific order, as set out in section IA 9. This helps make sure everything is fair and follows the rules.

If your tax assessment changes, you might need to adjust your CFC or FIF tax loss. Section IA 10 explains when and how to do this.

Your CFC or FIF tax loss is counted on the last day of the tax year when the loss happened.

If you’re part of a group of companies that files taxes together (a consolidated group), and the group has a CFC or FIF tax loss, that loss belongs to the group as a whole, not to any single company in the group.

If companies join together (amalgamate), there are special rules for handling tax losses, including CFC and FIF losses. These rules are in subpart IE, and they’re different from the ones we’ve talked about here.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517801.

Topics:
Money and consumer rights > Taxes
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IQ 1A: When this subpart applies, or

“This explains when you can use overseas investment losses or income in your NZ tax”

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IQ 1B: Losses carried forward to tax year, or

“How you can carry forward CFC and FIF net losses to future tax years”

Part I Treatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 1General treatment

  1. For an amount of a person's attributed CFC net loss or FIF net loss to be carried forward to a tax year,—

  2. the person, if a company, must meet the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies); and
    1. the amount must be used in the order required by section IA 9 (Ordering rules); and
      1. the amount must be adjusted when required by section IA 10 (Amended assessments).

        1. An attributed CFC net loss or a FIF net loss arises on the last day of the tax year in which the loss is attributed.

        2. If a consolidated group has an amount of attributed CFC net loss or FIF net loss, no part of the amount belongs to a company that is part of the consolidated group.

        3. The treatment of tax losses, including amounts of attributed CFC net loss and FIF net loss, on the amalgamation of companies is dealt with under subpart IE (Treatment of tax losses on amalgamation of companies) and the provisions of this subpart do not apply.

        Compare
        Notes
        • Section IQ 1(1): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 93(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section IQ 1(1)(a): amended (with effect on 1 April 2020), on , by section 111(1) (and see section 111(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).