A number of exemptions from accruals taxation are provided for amounts taxed in a comparable tax country listed in the Income Tax Regulations. Before 1 July 1997, the same list was also used to provide exemptions under the foreign tax credit system. There are now separate lists for the exemptions.
Countries listed for accruals taxation purposes are called broad-exemption listed countries. These countries are listed in part 1 of attachment A in appendix 1. Countries not listed for accruals taxation purposes are called non-broad-exemption listed countries.
Countries listed for the purposes of the foreign tax credit system but not for accruals taxation purposes are called limited-exemption listed countries. These countries are listed in part 2 of attachment A in appendix 1. Countries on either the broad-exemption or limited-exemption lists are treated as listed for the purposes of the foreign tax credit system. Countries not on either list are called unlisted countries.
Summary of the terms used to refer to countries
Broad-exemption listed countries
The term broad-exemption reflects that Amounts taxed at full rates by countries on the broad-exemption list are generally exempt from both accruals taxation and taxation on repatriation to Australia.
Limited-exemption listed countries
The term limited-exemption reflects that Amounts taxed at full rates by countries on the limited-exemption list are generally exempt from tax on repatriation to Australia. An exemption from accruals taxation is not available, however, for amounts taxed in a limited-exemption listed country.
Listed countries
Listed countries are countries on the list of broad-exemption countries or on the list of limited-exemption countries.
Unlisted countries
Unlisted countries are countries that are not on either the broad-exemption or limited-exemption lists.
Non-broad-exemption listed countries
Non-broad-exemption listed countries are countries that are not on the list of broad-exemption countries. They comprise unlisted countries and countries on the list of limited-exemption countries.
Transitional rules
The broad-exemption and limited-exemption lists apply for statutory account periods of CFCs commencing on or after 1 July 1997. Unless otherwise stated, when working out the attributable income of a CFC for a statutory accounting period commencing before 1 July 1997, treat references to broad-exemption listed countries in this guide as references to countries on the original list (see Former list of countries.
When is a CFC a resident of a broad-exemption listed country?
A CFC is treated as a resident of a broad-exemption listed country if:
- the CFC is not a Part X Australian resident, and
- the CFC is treated as a resident of the broad-exemption listed country under the tax laws of that country.
A CFC that is a resident of both a broad-exemption listed country and another country is treated as a resident of a broad-exemption listed country.
When is a CFC a resident of a limited-exemption listed country?
A CFC is treated as a resident of a limited-exemption listed country if:
- the CFC is not a Part X Australian resident, and
- the CFC is treated as a resident of the limited-exemption listed country under the tax laws of that country.
A CFC that is a resident of both a limited-exemption listed country and an unlisted country is treated as a resident of a limited-exemption listed country.
When is a company a resident of an unlisted country?
A company is treated as a resident of an unlisted country if the company is neither a Part X Australian resident nor a resident of a listed country.
Rules that determine the particular country of residence
In some cases, it is necessary to determine whether a company is treated as a resident of a particular unlisted country- - for example, for determining the active income test.
A company is treated as a resident of a particular unlisted country if :
- the company is treated as resident under a tax law of the unlisted country, and
- the company is not treated as resident of any other unlisted country under the tax law of that country.
If a company is treated as a resident of more than one unlisted country under the tax laws of those countries and is incorporated in one of those countries, it is treated as resident in the country of incorporation.
If a company is not treated as a resident under the tax law of any unlisted country, it will be a resident of the unlisted country in which its management and control is solely or principally located.
If a company is not treated as a resident under the tax law of any unlisted country and does not have its central management and control solely or principally in an unlisted country, it will be a resident of the unlisted country in which it is incorporated.