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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:

“How to use pre-existing company losses when joining a consolidated group”

If you are part of a company that has joined a consolidated group, and your company has a special kind of loss called an attributed CFC net loss or FIF net loss from before joining the group, there are rules about how you can use this loss.

First, your company must use the loss to reduce the consolidated group’s income for the tax year. This is the main way the loss can be used.

If your loss is an attributed CFC net loss, you can only use it to reduce income that the consolidated group gets from a CFC in the same country where the loss happened. You can’t use more of the loss than the amount of this income.

If your loss is a FIF net loss, you can only use it to reduce income that the consolidated group gets from a FIF in the same country where the loss happened. Again, you can’t use more of the loss than the amount of this income.

If there’s still some loss left after doing this, your company has three choices:

  1. You can use the leftover loss to reduce your own company’s income for the tax year.
  2. You can let another consolidated group use the leftover loss to reduce their income for the tax year.
  3. You can share the leftover loss with another company using the rules in section IC 5.

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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.

Topics:
Money and consumer rights > Taxes
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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 IQ 5; 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).