Section LK 7 — Income Tax Act 2007: Taxable distributions and NRWT rules

LK 7 Taxable distributions and NRWT rules When this section applies (1) This section applies when a CFC receives a taxable distribution in an accounting period and, for a person with an income interest of 10% or more in the CFC under the rules in sections EX 14 to EX 17 (which relate to the 10% threshold and variations in income interest level), the taxable distribution gives rise to attributed CFC income to which section EX 19 (Taxable distribution from non-complying trust) applies. When credit not allowed (2) The person does not have a tax credit in relation to tax paid on the taxable distribution unless the tax is substantially the same as non-resident withholding tax (NRWT). Amount of tax on distribution (3) The amount of tax that gives rise to the credit must not be more than an amount calculated using the formula— person's taxable distribution × foreign tax paid. total distribution Definition of items in formula (4) In the formula in subsection (3),— (a) person’s taxable distribution is the amount of the taxable distribution derived by the CFC, including a payment of tax that meets the requirements of subsection (2): (b) total distribution is the total amount of the distribution derived by the CFC, including a payment of tax that meets the requirements of subsection (2): (c) foreign tax paid is the payment of tax that meets the requirements of subsection (2). Amount of person’s credit (5) The amount of a credit of a person under this section is equal to an amount calculated using the formula— section EX 18 income interest × amount of tax. Definition of items in formula (6) In the formula in subsection (5),— (a) section EX 18 income interest is the income interest of the person used to calculate attributed CFC income under section EX 18 (Formula for calculating attributed CFC income or loss) for the accounting period corresponding to the tax year: (b) amount of tax is the amount of tax determined under subsection (3). Defined in this Act: accounting period , amount , amount of tax , attributed CFC income , CFC , distribution , income interest , non-resident withholding tax , NRWT , NRWT rules , pay , tax year , taxable distribution , Compare: 2004 No 35 s LC 4(7)