120KBB Interest for most standard method and some estimation method provisional taxpayers

(1)

This section applies if, for a tax year and a provisional taxpayer (the person),—

(a)

section 120KE does not apply for the person for the tax year (for example: a person does not make a required payment, so section 120KE does not apply); and

(b)

the person is an interest concession provisional taxpayer; and

(c)

the provisional tax associates of the person that are liable to pay provisional tax—

(i)

are interest concession provisional taxpayers:

(ii)

use, for the tax year, the GST ratio method described in section RC 5(6) of the Income Tax Act 2007:

(iii)

use, for the tax year, the estimation method described in section RC 7 of the Income Tax Act 2007, and have elected to use a net loss under section IZ 8 of that Act for the tax year; and

(d)

there is no provisional tax interest avoidance arrangement in relation to the person.

(2)

If the person pays the amount of the instalments for the tax year other than the last 1, on or before those relevant instalment dates for the tax year in accordance with sections RC 9 and RC 10 of the Income Tax Act 2007, then, despite section 120KB(2) and (2B) of this Act,—

(a)

the person’s residual income tax for the tax year is not due and payable as set out in section RC 9 of the Income Tax Act 2007 for those relevant instalment dates; and

(b)

the amount of their residual income tax minus the total amount of those relevant instalments for the tax year is due and payable on the last instalment date for the tax year. A negative amount is treated as overpaid tax on the last instalment date, with nothing due and payable on the date.

(3)

If the person fails to pay the amount of any instalments for the tax year other than the last 1 on or before the relevant instalment dates for the tax year in accordance with sections RC 9 and RC 10 of the Income Tax Act 2007, then, despite section 120KB(2) and (2B) of this Act,—

(a)

the person’s residual income tax is not due and payable as set out in section RC 9 of the Income Tax Act 2007 for those instalments; and

(b)

the amount of unpaid tax that a person has in relation to each of those instalments is equal to the lesser of the following amounts, treating a negative amount as zero:

(i)

1 divided by the number of instalment dates for the tax year, multiplied by their residual income tax, minus the amount paid in relation to the instalment:

(ii)

the amount they are liable to pay in accordance with sections RC 9 and RC 10 of the Income Tax Act 2007 in relation to the instalment date minus the amount paid in relation to the instalment date; and

(c)

the amount of unpaid tax that a person has in relation to the final instalment is equal to the amount given by section 120KB(2) less the total amount paid for earlier instalments in the tax year. A negative amount is overpaid tax on the final instalment.

(3B)

For a person who uses the standard method, use of money interest and penalties for provisional tax under Parts 7 and 9 are calculated using the lowest of the amounts under sections RC 5(2) and (3) of the Income Tax Act 2007, for instalment dates prior to the date that the taxpayer provides a return of income for the year before the current income year.

(4)

In this Part,—

(a)

interest concession provisional taxpayer means a person that is liable to pay provisional tax for an income year if—

(i)

the person uses 1 of the standard methods described in section RC 5(2) or (3) of the Income Tax Act 2007 for the tax year:

(ii)
[Repealed]

(b)

provisional tax interest avoidance arrangement means an arrangement involving the manipulation of 1 or more amounts of residual income tax, including a zero amount of residual income tax, with the purpose or effect of defeating the intent and application of this Part:

(c)

provisional tax associate means, for a person (person A),—

(i)

if person A is a company, another company in the same wholly-owned group of companies as person A:

(ii)

if person A is a company, another person that is associated with person A under section YB 3 of the Income Tax Act 2007, treating section YB 3 as requiring 50% voting interests and market value interests instead of 25% and also ignoring section YB 3(3) and (4):

(iii)

if person A is not a company or is a company acting as a trustee, another person that is associated with person A, treating, for the purposes of the definition of associated, section YB 3 as requiring 50% voting interests and market value interests, instead of 25% and also ignoring section YB 3(3) and (4).

Section 120KBB: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 115(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section 120KBB(1)(c): replaced (with effect on 15 April 2020), on 16 May 2020, by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).

Section 120KBB(2): amended (with effect on 1 April 2017), on 18 March 2019, by section 80(1) (and see section 80(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section 120KBB(3): amended (with effect on 1 April 2017), on 18 March 2019, by section 80(2), of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section 120KBB(3)(a): amended (with effect on 1 April 2017), on 23 March 2020, by section 222(1) (and see section 222(6) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section 120KBB(3)(b): amended (with effect on 1 April 2017), on 23 March 2020, by section 222(2) (and see section 222(6) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section 120KBB(3)(b)(ii): amended (with effect on 1 April 2017), on 23 March 2020, by section 222(3) (and see section 222(6) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section 120KBB(3)(c): inserted (with effect on 1 April 2017), on 23 March 2020, by section 222(3) (and see section 222(6) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section 120KBB(3B): inserted (with effect on 1 April 2018), on 23 March 2020, by section 222(4) (and see section 222(7) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

section 120KBB(4)(a)(ii): repealed (with effect on 1 April 2019), on 23 March 2020, by section 222(5) (and see section 222(8) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section 120KBB(4)(c)(iii): amended (with effect on 1 April 2017 and applying for the 2017–18 and later income years), on 29 March 2018, by section 345(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).