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EX 21B: Non-attributing active CFCs
or “Foreign companies you don't have to report income from”
You could also call this:

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

When you want to find out if a CFC (Controlled Foreign Company) is a non-attributing active CFC, you can use different accounting standards. You can choose one of these standards if section GB 15C doesn’t apply.

You can use New Zealand’s generally accepted accounting practice, including IFRSs (International Financial Reporting Standards). This is allowed if you or someone else has accounts that include the CFC, follow these standards, and are properly audited.

You can also use these standards for a group of companies that includes the CFC. This is okay if the accounts cover all the companies in the group, follow the standards, and are properly audited.

Another option is to use IFRSEs (IFRS Equivalents) for the CFC or its group. Again, the accounts need to include the CFC or group, follow these standards, and be properly audited.

For the audit to be acceptable, it needs to be done by a qualified accountant who is independent and gives a clean opinion on the accounts.

The accounts are considered to follow the standards if they say they do, are properly audited, and the Commissioner doesn’t have good reasons to suspect any dishonesty or mistakes.

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Next up: EX 21D: Non-attributing active CFC: default test

or “Default test for determining if a foreign company is exempt from certain tax rules”
Next

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

EX 21CApplicable accounting standards for section EX 21E

  1. In applying EX 21E to determine whether a CFC is a non-attributing active CFC for a person (the interest holder) with an interest in the CFC, the interest holder may use as an accounting standard (the applicable accounting standard) 1 of the standards given by subsections (2) to (5) and section EZ 32F if section GB 15C (Arrangements related to accounting test for non-attributing active CFC) does not apply.

  2. The interest holder may use generally accepted accounting practice in New Zealand including IFRSs and the framework for differential reporting for entities applying the New Zealand equivalents to the international financial standards reporting regime (the generally accepted accounting practice with IFRS) for the CFC, if the interest holder or another person has accounts that—

  3. include the accounts of the CFC; and
    1. comply with generally accepted accounting practice with IFRS; and
      1. meet the audit requirements of subsection (8).

        1. The interest holder may use generally accepted accounting practice with IFRS for the CFC's test group under section EX 21E(2), if the interest holder or another person has accounts that—

        2. include the accounts of the members of the test group; and
          1. comply with generally accepted accounting practice with IFRS; and
            1. meet the audit requirements of subsection (8).

              1. The interest holder may use IFRSEs for the CFC, if the interest holder or another person has accounts that—

              2. include the accounts of the CFC; and
                1. comply with the relevant IFRSEs; and
                  1. meet the audit requirements of subsection (8).

                    1. The interest holder may use IFRSEs for the CFC's test group under section EX 21E(2), if the interest holder or another person has accounts that—

                    2. include the accounts of the members of the test group; and
                      1. comply with the relevant IFRSEs; and
                        1. meet the audit requirements of subsection (8).

                          1. Repealed

                          2. Repealed

                          3. Accounts meet the audit requirements of this subsection if they—

                          4. are audited by an accountant who is—
                            1. a chartered accountant or an accountant of equivalent professional standard in the country in which the accounts are prepared; and
                              1. independent of the CFC and the person; and
                              2. are given an unqualified opinion or an opinion of equivalent standard in the country in which the accounts are prepared.

                                1. For the purposes of subsections (2) to (5) and section EZ 32F, accounts are treated as complying with the accounting standard relevant to the subsection if—

                                2. the accounts state that they comply with the accounting standard; and
                                  1. the accounts meet the audit requirements of subsection (8); and
                                    1. the Commissioner does not have reasonable grounds to suspect—
                                      1. fraudulent activity by the interest holder, the CFC, a company in the CFC's test group, or the auditor:
                                        1. preparation of the accounts with an intent to mislead:
                                          1. incompetence of the auditor.

                                          Notes
                                          • Section EX 21C: 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 21C(1): amended, on , by section 93(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(6) heading: repealed, on , pursuant to section 93(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(6): repealed, on , by section 93(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(7) heading: repealed, on , pursuant to section 93(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(7): repealed, on , by section 93(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(9): amended, on , by section 93(3) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                                          • Section EX 21C(9)(c)(i): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 25(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                          • Section EX 21C list of defined terms company: inserted (with effect on 1 July 2011), on , by section 25(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).