• Residency requirement for losses

    Attention

    Warning:

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

    End of attention

    A loss that was incurred in a previous statutory accounting period is only allowable if the CFC was a CFC at the end of that statutory accounting period in which the loss arose and at the end of each of the following statutory accounting periods before the eligible period.

    In addition, certain residency requirements must be met before the loss may be applied against the notional assessable income of that class in the eligible period. If these are not satisfied the loss will not be taken into account.

    Modifications to the general rule deal with cases where a company:

    • remains a resident of the same country, but
    • is treated as changing residence from a listed country to an unlisted country or vice versa as a result of changes to the list(s) of countries or political developments - for example, as a result of the dissolution of a country.

    In these cases, the losses incurred by a CFC in an earlier period are not denied solely because the listing status of a CFC's country of residence changes.

    The following table summarises the availability of losses incurred in previous statutory accounting periods.

    Country of residence of CFC at end of eligible period

    Country of residence of CFC at end of the substituted accounting period in which loss arose

    Consequence

    Listed

    Listed

    Allowable

    Listed

    Unlisted

    Generally not allowable unless the unlisted country arose from the dissolution of the listed country or unless the unlisted country is the same country as the listed country.

    Unlisted

    Unlisted

    Allowable

    Unlisted

    Listed

    Generally not allowable unless the listed country is the same as the unlisted country.

    Note: Losses are not allowable if they were denied in an earlier statutory accounting period

    Last modified: 05 Dec 2006QC 18000