A number of exemptions from accruals taxation are provided for amounts taxed in a comparable tax country listed in the Income Tax Regulations 1936 (the Regulations).
Countries listed for accruals taxation purposes are called listed countries. These countries are listed in attachment A of appendix 1. Countries not listed for accruals taxation purposes are called unlisted countries (a subset of unlisted countries is 'section 404 countries').
Summary of the terms used to refer to countries
Listed countries
Listed countries are those listed in Schedule 10 of the Regulations. Amounts taxed at full rates by listed countries are generally exempt from accruals taxation.
Unlisted countries
Unlisted countries are those that are not listed countries. This includes section 404 countries for all purposes of the CFC rules except the application of section 404.
Section 404 countries
Section 404 countries are those listed as 'section 404 countries' in Schedule 10 of the Regulations. The list of section 404 countries is in attachment A of appendix 1.
Section 404 excludes from attributable income dividends paid from a company resident in a listed country or section 404 country to a CFC that is also resident in a listed or section 404 country.
When is a CFC a resident of a listed country?
A CFC is treated as a resident of a listed country if:
- the CFC is not a Part X Australian resident, and
- the CFC is treated as a resident of a listed country under the tax laws of that country.
When is a CFC a resident of a section 404 country?
A CFC is a resident of a section 404 country if:
- the CFC is not a Part X Australian resident
- the CFC is treated as a resident of a section 404 country under the tax laws of that country, and
- the CFC is not treated as a resident of a listed country at that time for the purposes of the tax law of the 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 a 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.