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Inland Revenue

Tax Policy

Qualifying companies amendment

(Clause 66)

Summary of proposed amendment

It is proposed that qualifying companies will be excluded from having any income interests in a CFC or interests of 10% or more in a FIF.

Application date

The change would apply to income years beginning on or after 1 July 2009.

Key features

It is proposed that section HA8B(b) be amended to replace “attributing interests” with “interests”.


As part of the Taxation (International Tax, Life Insurance and Remedial Matters) Act 2009, an exemption was introduced for foreign dividends derived by companies. This means that the exemption applies to qualifying companies even though these companies are able to pass exempt income out to their shareholders with no further tax. This is inconsistent with the fact that exempt foreign income would usually be taxed if received directly by an individual taxpayer or when un-imputed dividends were paid by a company to individual shareholders.

An amendment was made in the Taxation (International Tax, Life Insurance and Remedial Matters) Act 2009 to address this issue. However, the amendment refers to “attributing interests” in a FIF. This means that non-attributing active FIFs and FIFs that qualify for the grey list exemption could be under-taxed as these are not attributing interests.