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Income Tax Act 2007

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

EX 21F: Part-period calculations

You could also call this:

“How to determine a company's status when you own it for only part of a period”

This section explains what you need to do if you only own part of a company for a short time. It’s about figuring out if that company is a special type called a “non-attributing active CFC”.

You can decide if the company is this special type if:

  1. The company follows the right accounting rules.
  2. You choose to use these accounting rules.
  3. The company meets certain requirements when you look at its accounts for the time you owned it.
  4. You, or a company in your group, owned part of this company during that time.

If you decide the company is this special type, that decision only applies to you and not to anyone else.

If the company doesn’t meet these requirements, you have to use a different test. This test is called the “default test” and you need to apply it to the whole time period, not just the part you owned the company.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS33774.

Topics:
Money and consumer rights > Taxes
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EX 21E: Non-attributing active CFC: test based on accounting standard, or

“How to determine if a foreign company is actively operating for tax purposes”

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EX 22: Non-attributing Australian CFCs, or

“Australian companies controlled by New Zealanders that meet specific tax conditions”

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

EX 21FPart-period calculations

  1. This section applies for the purposes of sections EX 21B, EX 21C, and EX 21E when an interest holder holds an income interest for only part of an accounting period (the part-period).

  2. The interest holder may determine that a CFC is a non-attributing active CFC if—

  3. the CFC meets the requirements of section EX 21C for the use of applicable accounting standard in the application of section EX 21E; and
    1. the person chooses to use the applicable accounting standard in EX 21E; and
      1. the CFC meets the requirements of section EX 21E, having regard to the accounts for the part-period; and
        1. the person, or a company that is part of the person’s group of companies, holds an income interest in the CFC for the part-period.

          1. A determination under subsection (2) applies for the interest holder and no other person.

          2. If the requirements of subsection (2) are not met, the interest holder must use the default test set out in section EX 21D, applying the test to the full accounting period.

          Notes
          • Section EX 21F: inserted, on (with effect on 1 July 2009), by section 85 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).