EX 20C Net attributable CFC income or loss
CFC’s net attributable CFC income or loss

(1)

For the purpose of calculating the attributed CFC income or loss for an accounting period of a person (the interest holder) with an income interest in a CFC,—

(a)

the CFC’s net attributable CFC income for the accounting period is the greater of zero and the amount calculated using the formula in subsection (2):

(b)

the CFC’s net attributable CFC loss for the accounting period is—

(i)

the absolute value of the amount calculated using the formula in subsection (2), if that amount is less than zero:

(ii)

zero, if subparagraph (i) does not apply.

Formula for net attributable CFC income or loss

(2)

The amount of a CFC’s net attributable CFC income or loss for an accounting period is calculated using the rules in section EX 21 and the formula—

attributable CFC − apportioned funding costs − other deductions.

Definition of items in formula

(3)

In the formula in subsection (2),—

(a)

attributable CFC is the CFC’s attributable CFC amount for the accounting period:

(b)
[Repealed]

(c)

apportioned funding costs is the amount calculated using the formula—

funding costs × funding fraction × cost fraction:

(d)

other deductions is the amount of expenditure and loss incurred in the accounting period by the CFC to the extent to which the expenditure and loss meets the requirements of subsection (13).

Definition of items in formula

(4)

The items in the formula in subsection (3)(c) are defined in subsections (6), (10), and (11).

Funding income[Repealed]

(5)

[Repealed]

Funding fraction

(6)

Funding fraction is equal to,—

(a)

if the item funding in subsection (7)(a) is zero, 1; or

(b)

if the item is being used to calculate the item apportioned funding costs and the interest holder chooses to rely on this paragraph, 1; or

(c)

if neither of paragraphs (a) and (b) apply, the amount calculated using the formula—

(funding − group funding) ÷ funding.

Definition of items in formula

(7)

In the formula in subsection (6),—

(a)

funding is the total of amounts, each of which is the outstanding balance for—

(i)

a financial arrangement to which the CFC is a party and which provides funds for the CFC:

(ii)

a fixed rate foreign equity, or share giving a right to a deductible foreign equity distribution, issued by the CFC and held by a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method:

(b)

group funding is the lesser of the item funding and the total of amounts, each of which is the outstanding balance for a financial arrangement, a fixed-rate foreign equity, or a share giving a right to a deductible foreign equity distribution,—

(i)

under which the CFC provides funds to another CFC associated with the CFC under section YB 2 (Two companies) or to a FIF for which the interest holder uses the attributable FIF income method and that is associated with the CFC under section YB 2; and

(ii)

that produces for the CFC an amount that is included in the item arrangement under section EX 20B(4) or is a deductible foreign equity distribution or a distribution for fixed-rate foreign equity.

Asset fraction

(8)

Asset fraction is the amount calculated using the formula—

(attributable CFC’s assets − group funding)
÷ (total CFC’s assets − group funding).

Definition of items in formula

(9)

In the formula in subsection (8),—

(a)

attributable CFC’s assets is the total of amounts for the CFC’s assets, each of which is the value of an asset to the extent to which the asset is used for the purpose of deriving an attributable CFC amount and not used for the purpose of deriving an amount that is not an attributable CFC amount:

(b)

group funding is—

(i)

zero, if subparagraph (ii) does not apply; or

(ii)

the amount of the item group funding referred to in subsection (7)(b), if subsection (6)(c) applies for the interest holder and the CFC:

(c)

total CFC’s assets is the total value of the CFC’s assets.

Funding costs

(10)

Funding costs is the total of amounts in the accounting period, each of which—

(a)

would be a deduction of the CFC relating to a financial arrangement to which the CFC is a party and which provides funds for the CFC:

(b)

is a distribution relating to fixed-rate foreign equity or a deductible foreign equity distribution of the CFC and is paid by the CFC to a company resident in New Zealand, to another CFC, or to a FIF for which the interest holder uses the attributable FIF income method.

Cost fraction

(11)

Cost fraction is,—

(a)

if the CFC is not excessively debt funded under section EX 20D, the amount of the item asset fraction referred to in subsection (8); or

(b)

if the CFC is excessively debt funded under section EX 20D, the lesser of—

(i)

the amount of the item asset fraction referred to in subsection (8):

(ii)

the amount calculated under section EX 20D.

Determining debts and assets of CFC

(12)

For the items referred to in subsection (9), the debts and assets of the CFC are determined under sections FE 8 to FE 11 (which contain rules for determining the apportionment of interest) as if the CFC were—

(a)

an excess debt outbound company; and

(b)

the only member of the CFC’s New Zealand group.

Requirements for item other deductions

(13)

Amounts of expenditure or loss contribute to the item other deductions to the extent to which—

(a)

the amounts do not relate to a financial arrangement or share and—

(i)

are incurred for the purpose of deriving an attributable CFC amount; and

(ii)

are not incurred for the purpose of deriving an amount that is not an attributable CFC amount; and

(iii)

correspond to amounts that would be deductions of the CFC after the adjustments that would be made under sections CH 2 and DB 50 (which relate to adjustments for prepayments) if the CFC were a resident:

(b)

the amounts relate to financial arrangements or shares referred to in the definition of the item funding in subsection (7)(a) and exceed in total the amount given by multiplying the items funding costs and funding fraction, used in calculating the item apportioned funding costs under subsection (3)(c):

(c)

the amounts—

(i)

do not relate to financial arrangements that provide funds for the CFC; and

(ii)

relate to financial arrangements referred to in section EX 20B(4).

Defined in this Act: accounting period, attributable CFC amount, CFC, deductible foreign equity distribution, deduction, financial arrangement, fixed-rate foreign equity, generally accepted accounting practice, income interest, interest, loss, net attributable CFC income, net attributable CFC loss, share

Section EX 20C: inserted (with effect on 30 June 2009), on 6 October 2009, by section 156(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EX 20C(2) formula: replaced (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 87(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(3) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(3): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(3)(b): repealed (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 87(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(4) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(4): replaced (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 87(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(5) heading: repealed (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, pursuant to section 87(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(5): repealed (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 87(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(6) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(6): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(7) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(7): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(7)(a)(ii): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 42(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(7)(b): replaced (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 87(5) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 20C(8) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(8): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(9) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(9): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(9B) heading: repealed (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(9B): repealed (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(10) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(10): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(10)(b): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 42(5) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(11) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(11): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(12): amended (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(6) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(13) heading: inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(7) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(13): inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 42(7) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 20C(13)(a)(iii): replaced, on 1 April 2016 (applying for the 2016–17 and later income years), by section 138(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).