Foreign Equity Investments

Question 1

What is a controlled foreign company?

Answer 1

• Foreign Company
• < 5 NZ residents have control interest
• Single NZ resident has constrol>40% and no non-resident has greater control

Question 2

CFC Rules?

Answer 2

Only attribute “Passive Income”
Amount remitted depends on income interest
Attributed CFC is assessable income

Question 3

What are exemptions to the CFC rules?

Answer 3

Passive income <5% total income
Income interst in CFC <10%
Non- Attributing Aussie CFC

Question 4

FIF income rules?

Answer 4

Attributing interest in FIF
No exemptions
Total interests >$50,000

Question 5

What is an attributing interest?

Answer 5

Shares in a foreign company
Superannuation (Foreign)
Foreign life insurance

Question 6

Fait Dividend rate (FDR) formula

Answer 6

(0.05 x Opening value) + quick sale adjustment

Question 7

What is the quick sale adjustment

Answer 7

Lesser of Peak holding method
(0.05 x Peak holding x Average cost)

Quick sale gain
(Gain - (Interest x Average cost)

Question 8

Corporate Value Method (CV) Method

Answer 8

FIF income = (Closing Value + Gains) - (Opening Value + costs)

Question 9

What method does a natural person use?

Answer 9

If they elect to use CV, any loss will be set to zero,
If they must use it (Non ordinary shares),
can result in a loss