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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Non-attributing active CFCs

EX 21B: Non-attributing active CFCs

You could also call this:

“Foreign companies you don't have to report income from”

A non-attributing active CFC is a type of foreign company that you might have an interest in. It’s called “non-attributing” because you don’t have to include its income in your tax return. For a CFC to be non-attributing active, you must not have made a special choice about it under section EX 73. The CFC also needs to meet certain rules, either on its own or as part of a group of companies.

There are different ways a CFC can be non-attributing active:

  1. It can meet the requirements of section EX 21D.

  2. It can use special accounting rules (section EX 21E) if it meets certain conditions and you choose to use these rules.

  3. If the CFC is an insurance company, it might be non-attributing active if it follows rules set by the tax commissioner.

When you’re figuring out if your CFCs are non-attributing active, you can’t use the same test result for a CFC in different groups. This helps make sure the rules are applied fairly.

If you only own part of a CFC for part of the year, there are special rules in section EX 21F to decide if it’s non-attributing active.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2550747.

Topics:
Money and consumer rights > Taxes
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EX 21: Attributable CFC amount and net attributable CFC income or loss: calculation rules, or

“Rules for calculating controlled foreign company income and losses”

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EX 21C: Applicable accounting standards for section EX 21E, or

“Rules for choosing accounting standards when determining if a CFC is non-attributing active”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Non-attributing active CFCs

EX 21BNon-attributing active CFCs

  1. Non-attributing active CFC, for an accounting period and a person (the interest holder), means a CFC—

  2. for which the interest holder is not affected by an election under section EX 73 for the accounting period; and
    1. that meets the requirements of subsection (2) or (3), alone or as part of a test group of companies under section EX 21D or EX 21E.

      1. A CFC is a non-attributing active CFC—

      2. under section EX 21D, if the CFC meets the requirements of that section and paragraph (b) does not apply:
        1. under section EX 21E, if—
          1. the CFC meets the requirements of section EX 21C for the use of an applicable accounting standard in the application of section EX 21E; and
            1. the person chooses to use the applicable accounting standard in applying section EX 21E; and
              1. the CFC meets the requirements of section EX 21E.

              2. A CFC that is an insurer meeting the requirements of a determination made by the Commissioner under section 91AAQ of the Tax Administration Act 1994 is a non-attributing active CFC.

              3. In determining whether CFCs are non-attributing active CFCs for an accounting period under a test in section EX 21D or EX 21E, an interest holder must not use the result of a test applied to a test group that includes a CFC if the person, or a member of a wholly-owned group to which the person belongs, uses for the period a result of the same or a different test applied to the CFC, alone or as part of a different test group.

              4. Section EX 21F sets out the requirements for a non-attributing active CFC when an interest holder holds an income interest for only part of an accounting period.

              Notes
              • Section EX 21B: inserted (with effect on 30 June 2009), on , by section 162(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section EX 21B(1): replaced (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 44(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
              • Section EX 21B(2)(b): amended, on , by section 84(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B(2)(b)(i): amended, on , by section 84(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B(2)(b)(ii): amended, on , by section 84(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B(2)(b)(iii): amended, on , by section 84(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B(4) heading: inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on , by section 24(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
              • Section EX 21B(4): inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on , by section 24(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
              • Section EX 21B(4): amended (with effect on 1 July 2009), on , by section 89 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section EX 21B(5) heading: inserted, on (with effect on 1 July 2009), by section 84(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B(5): inserted, on (with effect on 1 July 2009), by section 84(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
              • Section EX 21B list of defined terms group of companies: inserted (with effect on 30 June 2009), on , by section 44(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
              • Section EX 21B list of defined terms income interest: inserted, on , by section 84(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).