• What if a CFC passes the active income test?

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    If a CFC passes the active income test, amounts that would be assessable if the CFC were a resident are included in attributable income to the extent they represent the following:

    • low-taxed third country income
    • trust amounts arising to the CFC directly that are not subject to tax in a broad-exemption listed country
    • trust amounts arising to the CFC indirectly because the CFC is a partner in a partnership, provided that the amounts are not subject to tax in a broad-exemption listed country
    • FIF income derived by the CFC directly or indirectly as a partner in a partnership.

    Any other income is notional exempt income.

    Diagram of amounts taken into account

    Other income is not included; tainted EDCI derived directly or indirectly via a partnership is only included if CFC fails the active income and de minimis tests; low-taxed third country income is always included unless the de minimis test is satisfied; trust and FIF income derived directly or indirectly via a partnership is always included - FIF income may be exempt if the de minimis test is satisfied.

    Last modified: 05 Dec 2006QC 17522