Section EX 11 — Income Tax Act 2007: Options and similar rights in certain cases

EX 11 Options and similar rights in certain cases Increase in income interest (1) The rules in this section apply to increase a person’s income interest in a CFC (the first CFC ) in some cases. Entitlement to acquire (2) This section applies when the person, or some other person, such as another CFC taken into account when calculating an indirect income interest of the person in the first CFC, has at any time an entitlement (the option ) to acquire 1 of the things listed in section EX 9(1) in relation to the first CFC but does not hold it. Actual holder outside CFC rules attribution (3) For this section to apply, the actual holder of the thing subject to the option must not be— (a) another CFC: (b) a New Zealand resident, unless they are a New Zealand resident whose income interest in the first CFC for the accounting period in question is less than 10% under sections EX 14 to EX 17 . Terms of option indicating economic ownership (4) For this section to apply, the option must have 1 of the following features: (a) in the absence of this section, the effect of the option would be to defeat the intent and application of subpart CQ (Attributed income from foreign equity) or DN (Attributed losses from foreign equity) or this subpart, taking into account the economic benefit that the person gets as a result of the CFC deriving income: (b) the consideration payable for the exercise of the option is less than the market value of the thing acquired at the time of the acquisition: (c) the holder of the option (or an associated person) has directly or indirectly funded or assisted the actual holder to acquire or hold the thing subject to the option. Calculation as if option exercised (5) If each requirement for this section to apply is met, the person’s income interest is calculated as if the option holder had exercised the option. Defined in this Act: accounting period , associated person , CFC , income , income interest , indirect income interest , New Zealand resident , pay , Compare: 2004 No 35 s EX 11 Section EX 11(3)(b): amended, on 1 April 2008, by section 382 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).