Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

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

LK 9: Use of company’s credits carried forward

You could also call this:

“How a company in a group can use its leftover tax credits from the previous year”

When you’re part of a group of companies and you have extra credits from the previous tax year, you can use them in a specific way. First, you must use these credits to pay the group’s tax bill for the current year. But you can only use up to a certain amount, which is called the ‘quarantined amount’.

If you still have credits left after paying the group’s tax, you can use them to pay your own company’s tax bill or even help another group of companies pay their tax. However, there are some special rules in sections LK 10 and LK 11 that might change how you can use these leftover credits.

If you still have credits remaining after all of this, you don’t lose them. Instead, you can keep them and use them next year. This is explained in section LK 4(2).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518170.

Topics:
Money and consumer rights > Taxes
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LK 8: Tax credits of consolidated companies, or

“Tax credits are shared among companies in a consolidated group”

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LK 10: When group membership lacking in tax year in which credit arises, or

“How tax credits work when a company joins or leaves a group”

Part L Tax credits and other credits
Tax credits relating to attributed controlled foreign company income

LK 9Use of company’s credits carried forward

  1. This section applies when a company that is part of a consolidated group of companies in an income year has a credit carried forward for the tax year corresponding to the income year.

  2. The amount must first be used to satisfy the income tax liability of the consolidated group for the income year. However, the amount must not be more than the consolidated group’s quarantined amount.

  3. If, after applying subsection (2), an amount remains, the amount may be used to satisfy the income tax liability of the company or the income tax liability of another consolidated group in the income year. Sections LK 10 and LK 11 override this subsection.

  4. If, after applying subsections (2) and (3), a balance remains, the amount must be carried forward to the next income year under section LK 4(2).

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