Section EX 63 — Income Tax Act 2007: Consequences of changes in method

EX 63 Consequences of changes in method Changes between cost-based methods and look-through methods (1) Subsection (2) applies if a person holding an attributing interest in a FIF changes the calculation method for calculating FIF income or loss from the interest— (a) from 1 of the 4 cost-based calculation methods (the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method) to the attributable FIF income method; or (b) from a look-through calculation method (the attributable FIF income method, the accounting profits method, or the branch equivalent method) to 1 of the 4 cost-based calculation methods. Treatment as sale for market value (2) The person is treated as having— (a) disposed of the interest to an unrelated person immediately before the start of the first accounting period to which the new method applies; and (b) reacquired it immediately after the start of the period; and (c) received for the disposal and paid for the reacquisition an amount equal to the interest’s market value at the time. Changes from comparative value method or fair dividend rate method to cost method or deemed rate of return method (3) If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to either of the cost method and the deemed rate of return method for calculating FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and (b) reacquired it immediately after the start of the income year; and (c) received for the disposal and paid for the reacquisition an amount equal to the interest’s market value at the time of the disposal. Changes from cost method or deemed rate of return method to comparative value method or fair dividend rate method (4) If a person holding an attributing interest in a FIF changes from either of the cost method or the deemed rate of return method to either of the comparative value method or fair dividend rate method for calculating FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and (b) reacquired it immediately after the start of the income year; and (c) received for the disposal and paid for the reacquisition an amount equal to,— (i) for a person changing from the cost method, what would have been the interest’s opening value under section EX 56 if the person had applied the cost method for the income year; or (ii) for a person changing from the deemed rate of return method, the interest’s closing book value under section EX 55(7) for the preceding income year. Changes between comparative value method and fair dividend rate method (5) If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to the other of the comparative value method and the fair dividend rate method for calculating the FIF income or loss from the interest, the person is treated as having— (a) disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and (b) reacquired the interest at the start of the income year; and (c) received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal. Defined in this Act: accounting period , accounting profits method , amount , attributable FIF income method , attributing interest , branch equivalent method , calculation method , comparative value method , cost method , deemed rate of return method , fair dividend rate method , FIF , FIF income , income year , loss , market value , pay , Compare: 2004 No 35 s EX 51 Section EX 63(1)(a): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 42(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 63(1)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 42(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section EX 63(5) heading: added, on 1 April 2008, by section 399 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 63(5): added, on 1 April 2008, by section 399 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 63 list of defined terms attributable FIF income method : inserted (with effect on 1 July 2011), on 7 May 2012, by section 42(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).