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

You could also call this:

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

You might be part of a group of companies that work together. Sometimes, a company in your group might have extra money saved up from paying taxes in another country. This is called a credit.

If your company wasn’t always part of the group when it got this credit, there are some rules about how much of it your group can use.

You can use two amounts added together:

  1. The amount your company could use on its own if it wasn’t in the group.

  2. The amount each company in the group could use if they weren’t working together as a group.

When figuring out how much tax your group owes, you need to look at a special rule called FM 3. This rule talks about how much tax your group has to pay as a whole.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518172.

Topics:
Money and consumer rights > Taxes
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LK 9: Use of company’s credits carried forward, or

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

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LK 11: When group membership lacking in tax year in which credit used, or

“Rules for using tax credits when a company isn't in a group for the whole year”

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

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

  1. This section applies when a company that is part of a consolidated group of companies has a credit carried forward for a tax year, but the company was not part of the same consolidated group as 1 or more companies in the consolidated group in an earlier tax year in which the credit arises.

  2. The amount of the credit carried forward and made available for the consolidated group to use under section LK 9(2) is limited to the sum of—

  3. the amount of the credit carried forward that the company could use under section LA 2 or LA 4 (which relate to the company’s income tax liability), if the company were not part of the consolidated group for the tax year; and
    1. the amount that each company in the consolidated group would have under section LK 6 in relation to the amount of credit carried forward if—
      1. the consolidation of the companies is ignored; and
        1. all required steps are presumed taken for section LK 6 to apply.

        2. In subsection (2), section FM 3 (Liability of consolidated groups and group companies) applies to the calculation of the income tax liability.

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