Eligible designated concession income

Normally, amounts derived in a listed country are exempt from accruals taxation. It is assumed that all income derived by a controlled foreign company, resident in a listed country, has been comparably taxed. However, the exemption does not apply for amounts of eligible designated concession income.

An amount is generally treated as designated concession income if it is not comparably taxed in a listed country. In these cases income has either no tax or a reduced amount of tax.

For example, the USA exempts income from certain government bonds from USA tax. Such income falls within the left hand side of the diagram below. If that income is also 'tainted', the controlled foreign company rules would apply to tax that income in Australia. The Income Tax Regulations 1936 contain a list of types of income that have the benefit of 'designated concessions' in the seven listed countries.

Determining attributable income

The full list of these concessions can be found in Schedule 9 of the Income Tax Regulations 1936. There are only a few specific concessions listed for each of the listed countries, which means there are only a limited number of situations in which a controlled foreign company will derive income that is subject to tax under these rules.

Schedule 9 of the Income Tax Regulations 1936 has more information on the different types of eligible designated concession income.

    Last modified: 21 Feb 2012QC 25356