EX 21D Non-attributing active CFC: default test
CFC as part of test group

(1)

A person (the interest holder) with an interest in a CFC may choose to apply this section for the CFC as a member of a group (a test group) if the group consists of companies—

(a)

each of which is subject to the laws of the same country or territory and—

(i)

has a taxed CFC connection with the country or territory:

(ii)

would be a non-attributing active CFC if not treated as part of a test group and would have a taxed CFC connection with the country or territory in the absence of paragraph (c) of the definition of taxed CFC connection; and

(b)

in each of which an income interest of more than 50% is held by—

(i)

the interest holder:

(ii)

companies that are all members of a wholly-owned group of companies that includes the interest holder; and

(c)

each of which is required to use the same currency under section EX 21(4); and

(d)

that are consolidated for the purposes of this section—

(i)

using like tax treatments for like transactions and for other events in similar circumstances; and

(ii)

eliminating in full all balances, transactions, income, and expenses arising between members of the test group.

CFC as part of test group for part of accounting period

(1B)

An interest holder who acquires, or disposes of, an interest in a CFC (the first CFC) after the beginning of an accounting period may choose to apply this section to group the first CFC with other CFCs as a test group for the accounting period if—

(a)

the CFCs in the test group are all acquired, or all disposed of, in the accounting period by the interest holder or by members (the wholly-owned members) of a wholly-owned group of companies that includes the interest holder; and

(b)

for the period in the accounting period in which the interest holder holds the interest in the first CFC, the interest holder or the wholly-owned members hold an income interest under section EX 17 of more than 50% in the first CFC and in each other CFC in the test group; and

(c)

the interest holder, or the wholly-owned members, own the first CFC and each other CFC in the test group—

(i)

at the beginning of the accounting period; or

(ii)

at the end of the accounting period; and

(d)

the requirements of subsection (1)(a), (c), and (d) are met.

Threshold ratio

(2)

A CFC is a non-attributing active CFC under section EX 21B(2)(a) for an accounting period and a person if the amount calculated under subsection (3) using the formula in subsection (4)—

(a)

is less than 0.05; and

(b)

is not zero under subsection (3)(f).

Application of formula

(3)

In using the formula in subsection (4)—

(a)

each item in the formula is determined—

(i)

for the CFC’s consolidated test group, if the interest holder chooses to apply the formula to the test group; or

(ii)

for the CFC, if subparagraph (i) does not apply; and

(b)

each item in the formula is determined for a test group after amounts included in the item are adjusted to remove amounts corresponding to income interests not held by the interest holder; and

(c)

a reference to a company that is associated is treated as being a reference to a company that is—

(i)

associated with a member of the CFC’s test group, although not a member of the CFC’s test group, if the interest holder chooses to apply the formula to the test group; or

(ii)

associated with the CFC, if subparagraph (i) does not apply; and

(d)

a reference to a company that is in the same group of companies is treated as being a reference to a company that is—

(i)

in the same group of companies as a member of the CFC’s test group, although not a member of the CFC’s test group, if the interest holder chooses to apply the formula to the test group; or

(ii)

in the same group of companies as the CFC, if subparagraph (i) does not apply; and

(e)

a numerator or denominator that is a negative number is treated as being zero; and

(f)

the amount calculated using the formula is zero if the denominator is zero.

Formula

(4)

The amount that determines whether the CFC is a non-attributing active CFC is calculated using the formula—

(attributable − attributable adjustments) ÷ (gross − gross adjustments).

Definition of items in formula

(5)

The items in the formula are defined in subsections (6) to (9).

Attributable

(6)

Attributable is the attributable CFC amount for the accounting period.

Attributable adjustments

(7)

Attributable adjustments is the total of amounts included in the item attributable, in subsection (6), that are—

(a)

if the interest holder chooses that this paragraph apply, income derived from the supply of personal services—

(i)

included in an attributable CFC amount under section EX 20B(3)(h); and

(ii)

not included in an attributable CFC amount under another paragraph of section EX 20B(3) and (4):

(b)

if the interest holder chooses that this paragraph apply, the cost of revenue account property producing an amount (the included amount) included in the attributable CFC amount under section EX 20B(3)(k) to the extent, not exceeding the included amount, to which

(i)

the cost is treated as a deduction of the CFC in the accounting period; and

(ii)

the deduction exceeds the amount of any income under subpart CH (Adjustments) relating to the deduction.

Gross

(8)

Gross is the annual gross income for the accounting period in the absence of income under subpart CQ (Attributed income from foreign equity).

Gross adjustments

(9)

Gross adjustments is the total of the following amounts for the accounting period:

(a)

the amount of the item “attributable adjustments” in subsection (7):

(b)

expenditure or loss that is included in the calculation of the attributable CFC amount under section EX 20B:

(c)

income derived from a company that would meet the requirements of subsection (1)(a) to (c) for a member of a test group with the CFC:

(cb)

income that is derived from a fixed establishment by a member of the test group and is not an attributable CFC amount, if the member is included in the test group under subsection (1)(a)(ii):

(d)

income from a supply that meets the requirements of section GB 15B (Supplies affecting default test for non-attributing active CFC).

Defined in this Act: accounting period, annual gross income, associated non-attributing active CFC, attributable CFC amount, CFC, company, fixed establishment, group of companies, income, interest, non-attributing active CFC, resident in New Zealand, royalty, taxed CFC connection, wholly-owned group of companies

Section EX 21D: inserted (with effect on 30 June 2009), on 6 October 2009, by section 162(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EX 21D(1)(a): 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 90(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 21D(1)(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 90(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 21D(1B) heading: inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 24 February 2016, by section 140(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 21D(1B): inserted (with effect on 1 July 2009 and applying for income years beginning on or after that date), on 24 February 2016, by section 140(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 21D(7): amended (with effect on 30 June 2009), on 7 September 2010, by section 44 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).

Section EX 21D(7)(b): amended (with effect on 30 June 2009), on 7 December 2009, by section 27(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section EX 21D(9)(cb): inserted (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on 30 June 2014, by section 90(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 21D list of defined terms fixed establishment: inserted (with effect on 30 June 2009), on 30 June 2014, by section 90(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 21D list of defined terms taxed CFC connection: inserted (with effect on 1 July 2009), on 7 May 2012, by section 26(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 21D list of defined terms wholly-owned group companies: inserted (with effect on 30 June 2009), on 30 June 2014, by section 90(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).