Treatment of residence changes arising from changes to the lists of countries



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The operation of section 457 is modified if an unlisted country CFC is treated as having changed residence to a listed country as a result of the unlisted country becoming listed. In this case, section 457 will not apply to tax the retained profits of a CFC if the CFC was a resident of the newly listed country for three or more years before the country became listed.

If a CFC has been a resident of a newly listed country for less than three years, section 457 does apply but only to the realised profits of the CFC. Gains on the disposal of assets held at the residence change time are included in the attributable income of the CFC when they are realised. These gains are included in attributable income even though the CFC may satisfy the active income test in the period when the gains are realised.

Last modified: 05 Dec 2006QC 18000