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Income Tax Act 2007

Recharacterisation of certain transactions - Interest apportionment on thin capitalisation - Worldwide group

FE 31C: CFCs in worldwide group for natural persons or trustees described in section FE 2(1)(g)

You could also call this:

“Rules for including overseas companies in worldwide groups for certain individuals and trustees”

This law applies to you if you’re a person or a trustee mentioned in section FE 2(1)(g). It talks about when a company you own a lot of (called an excess debt outbound company) is part of a group of companies around the world (called worldwide group A).

If you own 50% or more of this company in worldwide group A, and you also have an interest in another company not in that group, some special rules apply. Your interest in the other company could be:

  1. An income interest in a controlled foreign company (CFC)
  2. An interest in a foreign investment fund (FIF) that lives in Australia
  3. An interest in a FIF where you use something called the attributable FIF income method

In these cases, the CFC becomes part of worldwide group A.

When figuring out how much of a company you own, the rules in sections FE 38 to FE 41 are 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=DLM2553317.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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FE 31B: Worldwide group for excess debt outbound companies, or

“Defining the global financial group for companies with high overseas debt”

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FE 31D: Worldwide group for entity controlled by non-resident owning body or trustee, or

“How to determine your worldwide group if you're controlled by non-residents or a trustee”

Part F Recharacterisation of certain transactions
Interest apportionment on thin capitalisation: Worldwide group

FE 31CCFCs in worldwide group for natural persons or trustees described in section FE 2(1)(g)

  1. This section applies when a natural person or trustee described in section FE 2(1)(g) has—

  2. a 50% or more ownership interest in an excess debt outbound company that is a member of a worldwide group (worldwide group A); and
    1. an interest, in an entity not part of the worldwide group A, that is—
      1. an income interest in a CFC:
        1. an interest in a FIF that meets the requirements of section EX 35 (Exemption for interest in FIF resident in Australia):
          1. an interest in a FIF for which the natural person or trustee uses the attributable FIF income method.

          2. The CFC is part of the worldwide group A.

          3. For the purposes of this section, ownership interests are determined under sections FE 38 to FE 41.

          Notes
          • Section FE 31C: inserted (with effect on 30 June 2009), on , by section 225(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section FE 31C(1)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 63(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
          • Section FE 31C list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 63(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
          • Section FE 31C list of defined terms FIF: inserted (with effect on 1 July 2011), on , by section 63(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
          • Section FE 31C list of defined terms ownership interest: inserted, on , by section 116(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).