Section EX 7 — Income Tax Act 2007: Indirect control interests

EX 7 Indirect control interests How indirect control interests arise (1) A person has an indirect control interest in a foreign company to the extent to which the rules in this section attribute to them some or all of the direct control interests held by a CFC in the foreign company. Attribution of CFC’s direct interests (2) A CFC’s direct control interest in another foreign company is attributed under subsections (3) to (11). Associates (3) For the purposes of this section, the CFC is treated as also holding any direct control interests in the foreign company held by persons associated with the CFC. Attribution to smallest controlling group (4) Subsections (6) to (11) apply to attribute the CFC’s direct control interests to the smallest controlling group, to ensure that the attribution exercise does not dilute recognition of a factual chain of control. Attribution on basis of respective income interests (5) If the CFC’s direct control interests are attributed to more than 1 person, the direct control interests are divided in proportion to each group member’s respective income interest in the CFC. One controlling group (6) If there is only 1 group of New Zealand residents whose control interests have caused the CFC to be a CFC under section EX 1 , the CFC’s direct control interests are treated as being held by that group. More than 1 group (7) If there is more than 1 group whose control interests have caused the CFC to be a CFC under section EX 1 , the CFC’s direct control interests are attributed to the smallest group. Equal smallest groups (8) If there are 2 or more groups that are equally the smallest, and 1 group has the greatest total control interests in the CFC, the attribution is to that group. Equal smallest groups with equal greatest control interests (9) If there are 2 or more smallest groups with equal greatest total control interests in the CFC, the attribution is made in full to each group. No double counting (10) Despite subsection (9), for the purpose of determining whether a foreign company is a CFC, a direct control interest may be counted only once. Sequential application (11) If a foreign company becomes a CFC under this section, this section is then applied to attribute its direct control interests. Defined in this Act: associated person , CFC , control interest , direct control interest , foreign company , income interest , New Zealand resident , Compare: 2004 No 35 s EX 7 Section EX 7 list of defined terms control : repealed, on 1 April 2010, by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).