Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

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

IQ 4: Group companies using attributed CFC net losses

You could also call this:

“How group companies can share certain overseas tax losses”

When you’re part of a group of companies, you can sometimes share your tax losses with other companies in your group. This rule explains how you can share a special kind of loss called an attributed CFC net loss or FIF net loss.

If your company has one of these losses left over after using it for your own taxes, you might be able to give some of it to another company in your group. But there are some rules you need to follow:

Your group of companies must be wholly-owned. This means one company owns all the others completely.

The rules for sharing these losses work similarly to the rules for sharing other kinds of tax losses, but with some differences.

There’s a limit on how much of the loss you can share. You can’t share more than you have left over after using it for your own taxes.

The company you’re sharing with can only use the loss to reduce their income from the same country where the loss came from. They also can’t use more of the loss than the income they have from that country, after taking into account some other specific amounts.

These rules help make sure that companies in a group can share their losses fairly, but only in certain situations and up to certain amounts.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517807.

Topics:
Money and consumer rights > Taxes
Previous

IQ 3: Ring-fencing cap on FIF net losses, or

“Limit on using past FIF losses to reduce current income tax”

Next

IQ 5: Group companies using FIF net losses, or

“Removal of rule for group companies sharing foreign investment fund losses”

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

IQ 4Group companies using attributed CFC net losses

  1. This section supplements the general rules relating to the grouping of net losses when, for a tax year (the current tax year), a company (company A) that is part of a group of companies has an amount—

  2. of attributed CFC net loss for the current tax year or carried forward from an earlier tax year, or FIF net loss for the current tax year or carried forward from an earlier tax year; and
    1. remaining after section IQ 2 is applied for the current tax year and before any amount is made available to another company under this section.

      1. For determining whether company A may make available an amount of attributed CFC net loss or FIF net loss to another company (company B) in the group of companies, the general rules relating to the grouping of net losses are modified as follows:

      2. the group of companies must be a wholly-owned group of companies; and
        1. subpart IC (Grouping tax losses) and section GB 4 (Arrangements for grouping tax losses: companies) apply as if an amount of attributed CFC net loss or FIF net loss were a tax loss component; and
          1. subsection (3) overrides sections IC 5(1)(d) and IC 8 (which impose limits on the amount of transferred tax loss); and
            1. section IA 3(2) (Using tax losses in tax year) and subpart IP (Meeting requirements for part-years) do not apply.

              1. The amount of attributed CFC net loss or FIF net loss that company A may make available to company B in the tax year is limited by the following:

              2. the total amount made available by company A to group companies must not exceed the amount referred to in subsection (1); and
                1. the resulting reduction in company B's net income in the tax year must not exceed the total amount that company B derives in the tax year of attributed CFC income from CFCs, or FIF income calculated under the attributable FIF income method from FIFs, resident in the country or territory (the jurisdiction) in which the loss arose, reduced by the total of the following:
                  1. the total amount of the attributed CFC income or FIF income taken into account in calculating a deduction of company B under section DN 4 or DN 8 (which relate to ring-fencing caps on deductions):
                    1. the total amount of attributed CFC net loss or FIF net loss that company B derives in the tax year from CFCs or FIFs resident in the jurisdiction:
                      1. the total amount of attributed CFC net loss or FIF net loss, from CFCs or FIFs resident in the jurisdiction, that company B carries forward to the tax year and is available tax loss for company B:
                        1. the total amount of attributed CFC net loss or FIF net loss, from CFCs or FIFs resident in the jurisdiction, that is made available to company B for the tax year under this section by a company other than company A.

                        Compare
                        Notes
                        • Section IQ 4(1): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 97(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4(2) heading: substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), pursuant to section 97(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4(2): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 97(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4(2)(c): amended (with effect on 1 April 2008), on , by section 154(1) (and see section 154(2) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                        • Section IQ 4(3): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 97(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4(3)(b): amended (with effect on 1 July 2011), on (applying for income years beginning on or after 1 July 2011), by section 97(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4(3)(b)(iii): amended (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 97(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4 list of defined terms available tax loss: inserted (with effect on 30 June 2009), on , by section 97(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4 list of defined terms FIF net loss: inserted (with effect on 1 April 2008), on , by section 97(6) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section IQ 4 list of defined terms tax loss: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).