Credits on attribution from company FIFs
Under the foreign tax credit system, a foreign tax credit may be allowed for a share of the foreign tax paid by a first tier FIF on its income and gains where:
- a resident company and the FIF are related companies at the end of the FIF's notional accounting period, and
- the resident company has used the calculation method to decide the FIF income for the company's interest in the FIF.
In addition, a credit for tax paid by the second tier FIF may be given where the resident company:
- has used the calculation method to decide the FIF income of the second tier FIF, and
- the taxpayer and the first and second tier FIFs are companies, and
- the taxpayer is related to both the first and second tier FIFs at the end of the notional accounting period of the second tier FIF.
In this case, a foreign tax credit may be allowed in accordance with the foreign tax credit system for a share of the foreign tax paid by the second tier FIF on its income and gains.
A credit will be allowed only where the resident company and the FIF or FIFs are related companies. This is consistent with the general treatment of foreign taxes paid on underlying income under the foreign tax credit system and is also consistent with the CFC measures.