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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 6: Pre-consolidation losses: general treatment

You could also call this:

“What happens to a company's losses before it joins a group”

If you are part of a company in a consolidated group, this rule applies when you have a loss carried forward from a previous year under section IQ 1B. You must first use this loss to reduce the group’s net income for the year. If the loss is from a controlled foreign company, you can only use it to reduce income from that same company in the same country. If the loss is from a foreign investment fund, you can only use it to reduce income from that same fund in the same country. If you still have some of the loss left after reducing the group’s net income, you can use it to reduce your own net income, or you can give it to another group to use under section IQ 4, or you can use it under section IC 5. You can only use the loss in these ways if you 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=DLM1517814.

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

IQ 6Pre-consolidation losses: general treatment

  1. This section applies if a company that is part of a consolidated group has under section IQ 1B an attributed CFC net loss or FIF net loss carried forward to a tax year.

  2. The first use of the amount must be by the company under subsection (3) or (4) in making the amount available to the consolidated group to subtract from its net income, so far as it extends, for the tax year.

  3. If the amount is an attributed CFC net loss, it may be used only to the extent to which it is no more than the attributed CFC income that the consolidated group derives in the tax year from a CFC resident in the country in which the loss arose.

  4. If the amount is a FIF net loss, it may be used only to the extent to which it is no more than the FIF income that the consolidated group derives in the tax year from a FIF resident in the country in which the loss arose.

  5. If, after applying subsection (2), some of the amount remains, the company may—

  6. subtract the remaining amount from its net income for the tax year; or
    1. make the remaining amount available to another consolidated group to subtract from its net income for the tax year under section IQ 4; or
      1. make the remaining amount available under section IC 5 (Company B using company A’s tax loss).

        Compare
        Notes
        • Section IQ 6(1): amended (with effect on 1 April 2008), on , by section 65(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
        • Section IQ 6(5)(b): amended, on , by section 101 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).