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IQ 8: When group membership lacking in tax year of use
or “How tax deductions work when a company joins a group with overseas investment losses”
You could also call this:

“When a foreign company loss changes from one type to another”

If you have a loss from a controlled foreign company (CFC) in a tax year, it might change into a foreign investment fund (FIF) loss. This happens because of a rule in the Income Tax Amendment Act (No 2) 1993.

When this change occurs, you treat the CFC loss as if it were a FIF loss from that tax year. It’s like the CFC has become a FIF.

When working out how much this loss is, you can’t use the attributable FIF income method unless you were already using it to figure out your FIF income or loss for that investment when the change from CFC to FIF happened.

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Next up: IS 1: General treatment of mineral miners' net losses

or “How mineral miners' tax losses are treated differently”
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Part I Treatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 9When attributed CFC net loss becomes FIF net loss

  1. This section applies if, in a tax year, a person has an attributed CFC net loss that, under section 38 of the Income Tax Amendment Act (No 2) 1993, becomes a FIF net loss.

  2. The attributed CFC net loss is treated as a FIF net loss of the person with effect from the tax year, as if the CFC were a FIF.

  3. For the purposes of subsection (2) and the calculation of the amount of the loss, the attributable FIF income method is not used unless the person calculates their FIF income or net loss under the attributable FIF income method in relation to the interest on the date of the transition from an attributed CFC net loss to a FIF net loss.

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Notes
  • Section IQ 9(3): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 78(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
  • Section IQ 9 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 78(2)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
  • Section IQ 9 list of defined terms branch equivalent method: repealed (with effect on 1 July 2011), on , by section 78(2)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).