The opportunity to invest in a company FIF which is a bank without attracting FIF taxation is provided through a specific exemption.
This exemption is available for your interest in a foreign bank where the following requirements are satisfied.
- Approved stock exchange
You must hold shares in the bank of a class listed on a stock exchange approved in regulation 152N, Schedule 12 of the Income Tax Regulations (the Regulations). See appendix 1 Approved stock exchanges for more information. Unlisted shares issued by some banks as a substitute for deposits with the bank would not satisfy this criterion.
- Trading requirement
The class of shares you hold in the bank must be widely held and actively traded on a regular basis on a stock market of an approved stock exchange during the period for which you are seeking the exemption.
- Authorised to carry on banking business
The bank must be authorised under the law of its place of residence to carry on banking business.
- Principally engaged in the banking business
The bank must be principally engaged in the active carrying on of banking business. [SECTION 503]
Exemption for an interest in a foreign holding company of a foreign bank
It is not uncommon for a banking business to be structured so that shares in the licensed bank are held by a holding company. Members of the public invest in the bank by acquiring publicly listed shares in the holding company. To allow for this, the exemption for certain shares in a publicly listed foreign bank is extended to an interest that an Australian resident holds in a holding company with a wholly owned subsidiary that is a foreign bank. [SECTION 504]
A company will qualify for the exemption from the FIF measures as a holding company of a bank if the following requirements are satisfied.
- Approved stock exchange
You hold shares in the holding company of a class listed on any stock market of a stock exchange approved in regulation 152N, Schedule 12 of the Regulations. See appendix 1 Approved stock exchanges for more information.
- Designated a bank
The holding company is included in a class of companies designated as a bank or engaged in banking on either:
- an approved stock exchange or
- an approved international sectoral classification system.
See appendix 3 Approved international sectoral classification systems for more information.
- Trading requirement
- The class of shares you have in the holding company must be widely held and actively traded on a regular basis on a stock market of an approved stock exchange during the period in which the exemption applies.
- If the holding company has only one subsidiary, that subsidiary must be wholly owned and have been principally engaged in the active carrying on of a banking business.
- If the holding company has more than one subsidiary, the principal activities of the wholly owned subsidiaries in the group, taken together as an economic unit, must be the active carrying on of a banking business.
In each case, the subsidiary or, where there is more than one subsidiary, at least one of the wholly owned subsidiaries must be authorised under the law of its place of residence to carry on banking business.