Section FE 13 — Income Tax Act 2007: Financial arrangements entered into with persons outside group

FE 13 Financial arrangements entered into with persons outside group When this section applies (1) This section applies when a natural person, a member of a natural person's New Zealand group, an excess debt entity, or a member of an entity's New Zealand group or worldwide group, enters into a financial arrangement with another person ( person A ) as described in this section and the financial arrangement— (a) provides funds to person A; and (b) would otherwise be included in the calculation of the debt percentage of the natural person, excess debt entity, New Zealand group, or worldwide group. Reduction (2) In the calculation of the debt percentage of the New Zealand group and a worldwide group, the amount of total group debt and total group assets is reduced by the outstanding balance of the financial arrangement. Debt percentage of New Zealand group (3) In the calculation of the debt percentage of a New Zealand group, the reduction applies if the consideration for the financial arrangement is at arm’s length, and person A is 1 of the following: (a) a non-resident who is not carrying on business through a fixed establishment in New Zealand and derives— (i) income that does not have a source in New Zealand: (ii) income with a source in New Zealand, all of which is non-resident passive income or has relief from New Zealand tax available under a double tax agreement; or (b) a person who is not associated with the excess debt entity; or (c) a person who is associated with the excess debt entity but— (i) is not a member of the New Zealand group; and (ii) is a person to whom this subpart may apply under section FE 2 . Debt percentage of worldwide group (4) In the calculation of the debt percentage of a worldwide group, the reduction applies if person A is not associated with the excess debt entity. Defined in this Act: amount , associated person , business , double tax agreement , excess debt entity , financial arrangement , fixed establishment , natural person , New Zealand , non-resident , non-resident passive income , source in New Zealand , total group assets , total group debt , Compare: 2004 No 35 s FG 6 Section FE 13(1): substituted (with effect on 30 June 2009), on 6 October 2009, by section 213(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section FE 13(2): amended (with effect on 30 June 2009), on 6 October 2009, by section 213(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section FE 13(3)(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 56(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section FE 13 list of defined terms double tax agreement : inserted (with effect on 30 June 2009), on 6 October 2009, by section 213(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section FE 13 list of defined terms non-resident passive income : inserted (with effect on 1 July 2011), on 7 May 2012, by section 56(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section FE 13 list of defined terms source in New Zealand : inserted (with effect on 30 June 2009), on 6 October 2009, by section 213(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).