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Modifications for a listed country

Last updated 4 December 2006

Working out attributable income for a CFC resident in a listed country is similar to working out attributable income for a CFC resident in an unlisted country. However, more exemptions are provided for CFCs in listed countries.

What if a CFC fails the active income test?

If a CFC fails 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:

  • eligible designated concession income that is adjusted tainted income
  • low-taxed third country income (only where it is of a kind specified in the Regulations)
  • trust amounts arising to the CFC directly that are not subject to tax in a listed country
  • trust amounts arising to the CFC indirectly because the CFC is a partner in a partnership, if the amounts are not subject to tax in a listed country, or
  • FIF income derived directly by the CFC or indirectly as a partner in a partnership.

Any other amounts are notional exempt income.

What if a CFC passes the active income test?

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 (only where it is of a kind specified in the Regulations)
  • trust amounts arising to the CFC directly that are not subject to tax in a 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 listed country, or
  • FIF income derived by the CFC directly or indirectly as a partner in a partnership.

Any other income is notional exempt income.

Diagram 2: Amounts taken into account – listed country CFC

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 (of a kind specified in the Income Tax Regulations 1936) is always included unless the de minimis test is satisfied; trust (including transferor trust) income derived directly or indirectly via a partnership is always included.

Adjusted tainted income

Adjusted tainted income is based on the definition of tainted income used for the active income test. Broadly, it comprises amounts that are either passive income, tainted sales income or tainted services income.

The difference in the definition of tainted income for the active income test and the definition for working out attributable income is that net gains are included in determining the active income test whereas the entire consideration on disposal of an asset is included when working out attributable income.

QC18000