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Condition 1 - Is the CFC a resident of a foreign country?

Last updated 4 December 2006

The CFC must be a resident of a particular country throughout the statutory accounting period. A change of residence of the CFC does not mean that the CFC will fail the active income test. However, it must have been a resident of a particular country both before and after the change.

New companies

If a CFC was in existence for only part of a statutory accounting period, it must be a resident of a particular country throughout the period in which it existed - that is, in the period from incorporation to the end of the statutory accounting period.

Treatment of dormant companies

The term in existence does not include a company that is dormant within the meaning of Part VI of the Companies Act 1981. A CFC that is dormant for the whole of the statutory accounting period will fail the active income test. However, because the CFC is dormant, it will have no income or gains and will have no attributable income.

Is the CFC resident in a particular country?

Yes

Read on.

No

The CFC has failed the active income test. Go straight to part 3.

QC18000