Section LJ 5 — Income Tax Act 2007: Calculation of New Zealand tax

LJ 5 Calculation of New Zealand tax What this section does (1) This section provides the rules that a person must use to calculate the amount of New Zealand tax for an income year in relation to each segment of foreign-sourced income of the person that is allocated to the income year. Calculation for single segment (2) If the person has a notional income tax liability of more than zero, the amount of New Zealand tax for the income year relating to the allocated segment is calculated using the following formula, the result of which can not be less than zero: (segment − person's deductions) × notional liability. person's net income Definition of items in formula (3) In the formula in subsection (2),— (a) segment is the amount of the segment of foreign-sourced income for the income year: (b) person's deductions is the amount of the person's deduction for the tax year corresponding to the income year that is attributable to the segment of foreign-sourced income: (c) person's net income is the person's net income for the tax year corresponding to the income year under section BD 4(1) to (3) (Net income and net loss): (d) notional liability is the person's notional income tax liability for the income year under subsection (5). When subsection (4B) applies (4) Subsection (4B) applies for the income year when the total amount of New Zealand tax for all segments of foreign-sourced income of the person calculated under subsection (2) is more than the notional income tax liability. Modification to results of formula for single segment (4B) Each amount of New Zealand tax calculated under subsection (2) in relation to each segment of foreign-sourced income is adjusted by multiplying the amount by the following ratio: person's notional income tax liability NZ tax. Definition of item in formula (4C) In the formula in subsection (4B), NZ tax is the amount given by adding together the result of the calculation under subsection (2), for each segment of assessable income from all sources, including assessable income sourced in New Zealand. Person’s notional income tax liability (5) For the purposes of this section, a person’s notional income tax liability for a tax year is calculated using the formula— (person’s net income − losses) × tax rate. Definition of items in formula (6) In the formula in subsection (5),— (a) person’s net income is the person’s net income for the tax year: (b) losses — (i) is the amount of the loss balance carried forward to the tax year that the person must subtract from their net income under section IA 4(1)(a) (Using loss balances carried forward to tax year): (ii) must be no more than the amount of the person's net income: (c) tax rate is the basic rate of income tax set out in schedule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits). Defined in this Act: amount , deduction , income tax , income tax liability , loss balance , net income , New Zealand , New Zealand tax , segment of foreign-sourced income , tax loss component , tax year , Compare: 2004 No 35 s LC 14 Section LJ 5(1) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(1): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(2) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(2): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(3) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(3): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4B) heading: substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4B): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4C) heading: inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(4C): inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 101(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section LJ 5(6)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 338(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section LJ 5(6)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section LJ 5 list of defined terms New Zealand : inserted (with effect on 1 April 2008), on 6 October 2009, by section 338(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).