• Exclusions from tainted services income

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    General exclusions

    Tainted services income does not include:

    • royalties
    • any income in respect of a lease of land
    • any income from trading in tainted assets
    • gains from currency exchange rate fluctuations, commodity investments and assets.

    Manufacturing exclusion

    There is an exclusion from tainted services income where the service relates to goods manufactured by a CFC. For example, payments for after sales service or income derived under a service contract for equipment manufactured by a CFC.

    Hospitality exclusion

    Also not included in tainted services income are services that, broadly, arise from the tourism and hospitality industry. These amounts are services provided in connection with a hotel, motel, guesthouse, restaurant, bar or other place of entertainment or recreation.

    Passive and tainted services income exclusion

    Tainted services income does not include passive income or tainted sales income. This prevents double counting.

    Exclusion for services income derived from a CFC resident in the same country

    Amounts of services income will not be treated as tainted if the following three requirements are satisfied:

    • the amounts are derived from an associated CFC resident in the same country
    • the amounts are subject to the normal company rate of tax in that country and
    • the payment of the amounts did not wholly or partly give rise to a notional allowable deduction for the associated CFC.

    For more information on these requirements, refer to the exclusion for rental income discussed earlier in this section.

    This exclusion is available only for statutory accounting periods of CFCs commencing on or after 1 July 1997.

    Last modified: 05 Dec 2006QC 17522