Section EX 46 — Income Tax Act 2007: Limits on choice of calculation methods

EX 46 Limits on choice of calculation methods Same method for same FIF (1) If a person has 2 or more attributing interests in the same FIF for the same period, the person must use the same calculation method for calculating FIF income or loss from each interest in that period, except to the extent to which— (a) the interests are of different classes; and (b) this section prevents the same method being used. Accounting profits method [Repealed] (2) [Repealed] Attributable FIF income method (3) A person may use the attributable FIF income method to calculate FIF income or loss from an attributing interest in a FIF for an accounting period only if the person can provide to the Commissioner, if requested, sufficient information to enable the Commissioner to check the calculations required by section EX 50 and,— (a) at all times in the accounting period,— (i) the FIF is a company; and (ii) the item “ income interest ” given by section EX 50(4) for the person and the FIF is 10% or more; and (iii) the person is not a portfolio investment entity: (b) the FIF is a CFC and the person cannot determine the market value of the attributing interest at the beginning of the accounting period except by independent valuation and neither the person nor a person who has a direct income interest of 10% or more in the FIF is— (i) a listed company: (ii) a group investment fund: (iii) a portfolio investment entity: (iv) a superannuation scheme: (v) a unit trust: (vi) a trustee of a trust with a beneficiary described in 1 or more of subparagraphs (i) to (iv). Deemed rate of return method: general rule [Repealed] (4) [Repealed] Deemed rate of return method (5) A person may use the deemed rate of return method to calculate FIF income or loss from an attributing interest in a FIF only if the person is required by section EX 47 to use the deemed rate of return method for the interest. Comparative value method: shares in foreign companies (6) A person may use the comparative value method to calculate FIF income or loss from an attributing interest in a FIF that is a share in a foreign company for an income year only if— (a) the person is a natural person: (b) the person is the trustee of a trust that— (i) has no gifting settlor who is not a natural person or deceased person; and (ii) at all times in the income year, is a complying trust for a distribution made at the time; and (iii) is, at all times in the income year, mainly for the benefit of a natural person for whom the gifting settlors of the trust have natural love and affection (or had natural love and affection when alive) or is mainly for the benefit of an organisation or trust with income that is exempt income under section CW 41 or CW 42 (which relate to the income of charities); and (iv) is not a superannuation scheme: (c) [Repealed] (d) the share is a non-ordinary share described in subsection (10). Fair dividend rate method: shares in foreign companies [Repealed] (7) [Repealed] Fair dividend rate method: exemption for shares in foreign companies (8) A person must not use the fair dividend rate method to calculate FIF income or loss from an attributing interest in a FIF that is a share in a foreign company for an income year if— (a) the share is a non-ordinary share described in subsection (10): (b) the person chooses to use the comparative value method for another attributing interest that is a share in a foreign company and for which the person would be allowed, in the absence of this paragraph, to use the fair dividend rate method. Cost method for shares in foreign companies (9) A person may use the cost method to calculate FIF income or loss from an attributing interest in a FIF that is a share in a foreign company only if— (a) [Repealed] (b) use of the fair dividend rate method is allowed but is not practical because the person cannot determine the market value of the attributing interest at the start of the income year except by an independent valuation. Certain non-ordinary shares (10) For the purposes of subsections (6)(d) and (8)(a), a non-ordinary share in a foreign company is— (a) a fixed-rate share: (b) a non-participating redeemable share: (c) an interest in a non-resident holding directly or indirectly assets of which 80% or more by value at a time in the income year— (i) consist of fixed-rate foreign equities, or financial arrangements providing funds to a person; and (ii) are denominated in New Zealand dollars or, under NZIAS 39, are hedged items having a value in New Zealand dollars governed by a hedging instrument that is highly effective: (cb) an interest in a non-resident if–– (i) the non-resident holds directly or indirectly assets of which 80% or more by value at a time in the income year consist of fixed-rate foreign equities or financial arrangements providing funds to a person ignoring financial arrangements between the non-resident and other members of a group of companies that it is a member of; and (ii) the non-resident is not listed on a recognised exchange or is listed on a recognised exchange but is a foreign PIE equivalent, ignoring section HL 10(4) (Further eligibility requirements relating to investments) for the purposes of this subparagraph; and (iii) the interest is, under NZIAS 39, a hedged item having a value in New Zealand dollars governed by a hedging instrument that is highly effective: (d) a share that involves an obligation— (i) of another person to provide to the investor, directly or indirectly through an arrangement, an amount that is more than the issue price of the share; and (ii) that is non-contingent or subject to a contingency that is sufficiently remote to be immaterial: (e) a share of a kind that the Commissioner determines under section 91AAO of the Tax Administration Act 1994 to be an interest for which the fair dividend rate method is not available. Commissioner’s determination overriding subsection (10)(a) to (d) (11) Subsection (10)(a) to (d) does not apply to a share if the Commissioner determines under section 91AAO of the Tax Administration Act 1994 that the share is an interest for which the fair dividend rate is available. Meaning of gifting settlor (12) A gifting settlor , for a trust (the relevant trust ), means a person who— (a) makes a transfer of value, by disposing of property, to the trustee of— (i) the relevant trust: (ii) a trust with a trustee who settles property on the relevant trust, directly or through the trustees of other trusts; and (b) is not the trustee of a trust. Defined in this Act: accounting period , accounting profits method , amount , attributable FIF income method , attributing interest , calculation method , Commissioner , company , comparative value method , complying trust , cost method , deemed rate of return method , direct income interest , exempt income , fair dividend rate method , FIF , FIF income , financial arrangement , fixed-rate foreign equity , foreign company , foreign PIE equivalent , generally accepted accounting practice , grey list company , income , income year , loss , market value , PIE , portfolio investment entity , recognised exchange , share , shareholder , superannuation scheme , tax , trustee , Compare: 2004 No 35 s EX 40 Section EX 46(2) heading: repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, pursuant to section 32(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(2): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(3) heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(3): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(4) heading: repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, pursuant to section 32(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(4): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(5) heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(5): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(6)(b): substituted, on 1 April 2008, by section 392(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46(6)(b)(iii): amended (with effect on 1 April 2008), on 6 October 2009, by section 173(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(6)(b)(iv): added (with effect on 1 April 2008), on 6 October 2009, by section 173(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(6)(c): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(5) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(6)(d): substituted (with effect on 1 April 2008), on 6 October 2009, by section 173(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(7) heading: repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, pursuant to section 32(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(7): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(8): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(7) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(8)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 173(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(9)(a): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 32(8) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46(10) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 173(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(10): amended (with effect on 1 April 2008), on 6 October 2009, by section 173(7) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(10)(a): substituted (with effect on 30 June 2009), on 29 August 2011, by section 39(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section EX 46(10)(c): substituted, on 1 April 2008, by section 392(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46(10)(c)(i): amended (with effect on 1 April 2009), on 7 December 2009, by section 30 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section EX 46(10)(cb): inserted (with effect on 1 April 2009), on 6 October 2009, by section 173(9) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(10)(cb)(i): amended (with effect on 1 April 2009), on 7 December 2009, by section 30 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section EX 46(10)(cb)(ii): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 173(10) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46(11) heading: amended, on 1 April 2008, by section 392(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46(11): amended, on 1 April 2008, by section 392(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46(12) heading: added, on 1 April 2008, by section 392(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46(12): added, on 1 April 2008, by section 392(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 46 list of defined terms attributable FIF income method : inserted (with effect on 1 July 2011), on 7 May 2012, by section 32(9)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46 list of defined terms branch equivalent method : repealed (with effect on 1 July 2011), on 7 May 2012, by section 32(9)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 46 list of defined terms fixed-rate foreign equity : inserted (with effect on 1 January 2009), on 6 October 2009, by section 173(13) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46 list of defined terms foreign investment vehicle : repealed, on 1 April 2010, by section 173(12)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46 list of defined terms foreign PIE : repealed (with effect on 1 April 2008), on 6 October 2009, by section 173(11)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46 list of defined terms foreign PIE equivalent : inserted, on 1 April 2010, by section 173(12)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EX 46 list of defined terms PIE : inserted, on 1 April 2010, by section 173(12)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).