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IQ 2B: Effect of attributed CFC net loss and FIF net loss from before first affected year
or “Handling overseas tax losses from before a specific year”
You could also call this:

“How to use a specific overseas investment loss when certain income calculation methods aren't available”

If you have a special kind of loss called a FIF net loss, calculated using something called the branch equivalent method, this section explains what you can do with it. This applies if you had the loss before a certain tax year and it’s related to a FIF (which is a kind of overseas investment) in a specific country.

You can use this loss in the current tax year if:

  • You can’t use the attributable FIF income method for your FIF investment this year
  • You would be able to use that method if your investment met certain requirements
  • You don’t have a big enough stake (10% or more) in a CFC in that country this year
  • You don’t have any other FIF investments in that country where you can use the attributable FIF income method

If all of these things are true, you can subtract your FIF net loss from any FIF income you earn this year from investments in that same country. You can only subtract up to the amount of FIF income you have.

If you have more of this loss than you can use this year, don’t worry. You can keep the leftover amount and use it in future tax years, following the same rules.

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Next up: IQ 3: Ring-fencing cap on FIF net losses

or “Limit on using past FIF losses to reduce current income tax”
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Part I Treatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 2CEffect of FIF net loss if attributed FIF income method not available

  1. This section applies for a person and a country (the jurisdiction) when—

  2. the person has an amount (the available BE loss) of FIF net loss calculated using the branch equivalent method—
    1. relating to a tax year (the loss year) before the first tax year for which this section applies to the person; and
      1. relating to a FIF that is resident in the jurisdiction in the loss year; and
        1. carried forward to a tax year (the current year) in which this section applies to the person; and
        2. the person is not able to use the attributable FIF income method in the current year for the person's interest in the FIF; and
          1. the person would be able to use the attributable FIF income method in the current year for the person's interest in the FIF if the interest met the requirements of section EX 46(3)(a)(ii) (Limits on choice of calculation methods); and
            1. the person does not have an income interest of 10% or more in a CFC in the jurisdiction in the current year; and
              1. the person does not have an attributing interest in a FIF in the jurisdiction in the current year for which the person can use the attributable FIF income method.

                1. The person's available BE loss is available to be subtracted from the person's FIF income, to the extent of the FIF income, in the current year from the FIF, if the FIF is resident in the jurisdiction in the current year.

                2. If the person cannot use all of the available BE loss in the current year, the surplus is available to be carried forward for use under subsection (2) in another tax year.

                Notes
                • Section IQ 2C: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 67(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).