Taxation (International and Other Provisions) Act 2010 section 371KC

How to determine the territory in which a CFC is resident

Section 371KC explains how to determine the territory of residence of a controlled foreign company (CFC) for the purposes of applying the excluded territories exemption (ETE).

• A CFC's territory of residence is determined using the general residency rules in Chapter 20 of the Act (section 371TA)
• Where residency cannot be established under the general rules and a fallback rule is used (based on place of incorporation or double taxation arrangements), an additional tax liability condition must be met
• The additional condition requires that, throughout the entire accounting period, the CFC or persons with interests in the CFC must be liable to tax on the CFC's income under the law of the territory in question
• If the additional condition is not satisfied and no territory of residence can be determined, the excluded territories exemption cannot apply for that accounting period