Foreign tax credits of controlled foreign companies – transition

(Clause 74)

Summary of proposed amendment

The Bill rewords transitional provisions dealing with foreign tax credits arising under the old international tax rules, and being carried forward under the new international tax rules, to ensure the policy intent of these provisions is realised.

Application date

Income years beginning on or after 1 July 2009.

Detailed analysis

All references are to the Income Tax Act 2007 unless stated.

Subsections LK 5B(1) and LK 5B(2)

These provisions are intended to reduce carried-forward foreign tax credits of controlled foreign companies (CFCs).

The Bill rewords the provision to make clear that the transitional rule applies to all carried-forward credits, as intended

The changes proposed are analogous to those for carried-forward losses (see commentary on carried-forward losses above).