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Income Tax Act 2007

Tax credits and other credits - Tax credits relating to attributed controlled foreign company income

LK 1: Tax credits relating to attributed CFC income

You could also call this:

“Tax credits for income from foreign companies you control”

You can get a tax credit if you have income from a controlled foreign company (CFC). This credit is for the tax year that matches the income year when you got the CFC income. The credit equals certain amounts of tax paid related to that CFC income:

  • Income tax paid by the CFC
  • Tax withheld and paid for the CFC
  • Foreign income tax paid by the CFC
  • Foreign income tax you paid for the CFC
  • Foreign tax paid by another company for income the CFC earned

If you’re part of a group of companies, you can also get a credit for foreign income tax paid by other companies in your group for the CFC’s income.

There’s a limit on how much of this credit you can use. It’s capped at the amount of income tax you’d owe if your only income was the CFC income from that country.

If you get a refund of some of the tax that gave you the credit, you may need to pay back some or all of the credit you used.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518135.

Topics:
Money and consumer rights > Taxes
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Part L Tax credits and other credits
Tax credits relating to attributed controlled foreign company income

LK 1Tax credits relating to attributed CFC income

  1. A person who has an amount of attributed CFC income for an income year has a tax credit for the tax year corresponding to the income year equal to the following amounts paid or payable in relation to the attributed CFC income:

  2. an amount of income tax paid by the CFC from which the income is derived:
    1. an amount of tax withheld and paid on behalf of the CFC from which the income is derived:
      1. the amount of foreign income tax paid by the CFC from which the income is derived:
        1. the amount of foreign income tax paid by the person in relation to the CFC from which the income is derived:
          1. the amount of foreign tax paid, under legislation of another country or territory that is equivalent of the international tax rules, by a foreign company in relation to income derived by the CFC.

            1. For the purposes of this section and sections LK 2, LK 3, and LK 6, a company that is part of a group of companies that includes a person with attributed CFC income has a tax credit for the tax year corresponding to the income year of an amount that is equal to an amount of foreign income tax paid by the group company in relation to the CFC from which the income is derived.

            2. For the purposes of subsection (1B), the requirements set out in section IC 7 (Place of incorporation or carrying on business) do not apply to disallow the use of the tax credit by group companies under section LK 6.

            3. The amount of the person’s credit in subsection (1) may be reduced or increased if section LK 7 applies.

            4. The person’s use under section LA 2 (Satisfaction of income tax liability) of a credit referred to in subsection (1) is limited to the amount (the quarantined amount) that would be their income tax liability for the tax year if their only assessable income were attributed CFC income derived from a CFC resident in the foreign country or territory referred to in subsection (1) in the accounting period in which the amount of tax giving rise to the credit was paid or payable.

            5. In subsections (1) and (1B), a payment of income tax or foreign income tax by the CFC or person, as applicable, includes an amount of tax withheld from income in New Zealand or another country or territory.

            6. Subsection (7) applies when—

            7. a person has a credit under subsection (1) in relation to an amount of income tax or foreign income tax; and
              1. the credit has been used under section LA 2 (Satisfaction of income tax liability) or is carried forward under section LK 4; and
                1. the person has received a refund, amount, or benefit (the refund) determined directly or indirectly by reference to some or all of the tax paid.

                  1. If the person receives the refund before they assess their income tax liability for a tax year, the amount of tax credit for the tax paid is reduced by the lesser of—

                  2. the amount of the refund:
                    1. the amount of New Zealand tax payable on the foreign-sourced income calculated under section LJ 5 (Calculation of New Zealand tax).

                      1. The amount of the credit—

                      2. must be paid to the Commissioner if it has been used under section LA 2:
                        1. is extinguished, if it is carried forward under section LK 4.

                          1. In subsection (7)(a), the date for payment is 30 days after the later of—

                          2. the date on which the person who paid the tax receives the refund:
                            1. the date of the notice of assessment in relation to which the person has used the credit.

                              1. For the purposes of subsections (5) to (8), the refund is treated as received by the person, whether it is received by the person, a person who paid the foreign income tax, or a person associated with either of them.

                              Compare
                              Notes
                              • Section LK 1(1): substituted (with effect on 1 April 2008), on , by section 340(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(1)(d): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 70(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section LK 1(1)(e): inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 70(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section LK 1(1B) heading: inserted, on (with effect on 1 July 2009), by section 160(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1(1B): inserted, on (with effect on 1 July 2009), by section 160(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1(1C) heading: replaced (with effect on 15 March 2017), on , by section 89 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section LK 1(1C): replaced (with effect on 15 March 2017), on , by section 89 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section LK 1(3): amended (with effect on 30 June 2009), on , by section 340(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(3): amended (with effect on 30 June 2009), on , by section 340(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(4): replaced, on (with effect on 1 April 2008 and applying for the 2008–09 and later income years), by section 160(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1(4): amended, on (with effect on 1 July 2009), by section 160(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1(5) heading: added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(5): added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(6) heading: added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(6): added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(7) heading: added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(7): added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(8) heading: substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 104(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                              • Section LK 1(8): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 104(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                              • Section LK 1(9) heading: added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1(9): added (with effect on 1 April 2008), on , by section 340(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms assessment: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms associated person: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms Commissioner: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms company: inserted, on , by section 160(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1 list of defined terms conduit tax relief: repealed (with effect on 30 June 2009), on , by section 340(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms CTR company: repealed (with effect on 30 June 2009), on , by section 340(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms group of companies: inserted, on , by section 160(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1 list of defined terms income: inserted, on , by section 160(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                              • Section LK 1 list of defined terms international tax rules: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms New Zealand tax: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms notice: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms NRWT: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section LK 1 list of defined terms segment of foreign-sourced income: inserted (with effect on 1 April 2008), on , by section 340(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).