Income Tax Act 2004

  • repealed
  • Income Tax Act 2004: repealed, on 1 April 2008, by section ZA 1(1) of the Income Tax Act 2007 (2007 No 97).
MF 4 Credits and debits arising to branch equivalent tax account of company

(1)

There arise as credits to be recorded in the branch equivalent tax account of a branch equivalent tax account company the following amounts:

(a)

an amount (not less than nil) calculated in accordance with the following formula:

((a – b) x c) – d – e

where—

a

is the attributed CFC income derived by the company in the income year

b

is the total amount of any deductions and offsets for the income year that the company is allowed for attributed CFC loss, attributed CFC net loss, FIF loss, and FIF net loss

c

is the basic rate of income tax, expressed as a percentage, stated in—

(i)

schedule 1, part A, clause 5, if the company is not a Maori authority; or

(ii)

schedule 1, part A, clause 2, if the company is a Maori authority

d

is the total amount of any foreign tax credits allowed under section LC 4 or LC 5 that are set off against the company’s income tax liability for the income year

e

is the total amount of credits against the company’s income tax liability for the income year from debit balances in the branch equivalent tax accounts of the company and any other company:

(c)

the amount of any debit balance in the account that the company elects in accordance with section MF 5 to set off against the income tax liability of the company or of another company:

(d)

an amount equal to any refund of dividend withholding payment paid to the company under section NH 4 to the extent that the refund is in respect of an amount of dividend withholding payment paid which gave rise to a debit to the branch equivalent tax account under this section, except, to the extent that the refund is in respect of a dividend withholding payment paid before the date that a credit arises under paragraph (e), a credit does not arise to the extent that the amount of the refund does not exceed the amount of the credit that arises on that date:

(e)

the amount of any particular debit in the company’s branch equivalent tax account at any time (in this paragraph referred to as the specified time), not being a debit which has before the specified time been cancelled out by a subsequent credit, unless there is a group of persons—

(i)

the aggregate of whose minimum voting interests in the company in the period from the date upon which the debit arose until the specified time is equal to or greater than 66%; and

(ii)

in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company in the period is equal to or greater than 66%:

(f)

the amount of any debit balance of the branch equivalent tax account where, during the imputation year, the company ceases to be resident in New Zealand.

(2)

The credits referred to in subsection (1) arise,—

(a)

in the case of a credit referred to in subsection (1)(a), on the date on which the company files a return of income for the income year of the company referred to in that subsection:

(b)

in the case of a credit referred to in subsection (1)(c), on the date the company elects in accordance with section MF 5 to set off the amount against the income tax liability of the company or of another company:

(c)

in the case of a credit referred to in subsection (1)(d), on the date the refund is paid:

(d)

in the case of a credit referred to in subsection (1)(e), at the specified time referred to in that paragraph:

(e)

in the case of a credit referred to in subsection (1)(f), on the date on or on the expiry of which the company ceases to be a resident of New Zealand.

(3)

There arise as debits to be recorded in the branch equivalent tax account of a branch equivalent tax account company the following amounts:

(a)

an amount of dividend withholding payment, calculated before any reduction is allowed under section NH 7, paid by the company in respect of a dividend derived from an income interest in a controlled foreign company, whether the amount is paid directly or by an election to reduce an amount of net loss:

(b)

the amount of any credit balance in the account that the company elects in accordance with section MF 5 to use to reduce an amount of dividend withholding payment payable by the company or any other company under section NH 2:

(c)

an amount equal to any refund of income tax to the extent that the refund would have been made had the company not derived any income other than attributed CFC income in the income year to which the refund relates, except, to the extent that the refund is in respect of income tax paid before the date that a debit arises under paragraph (d), a debit does not arise to the extent that the amount of the refund does not exceed the amount of the debit that arises on that date:

(d)

the amount of any particular credit in the company’s branch equivalent tax account at any time (in this paragraph referred to as the specified time), not being a credit which has before the specified time been cancelled out by a subsequent debit, unless there is a group of persons—

(i)

the aggregate of whose minimum voting interests in the company in the period from the date upon which the credit arose until the specified time is equal to or greater than 66%; and

(ii)

in any case where at any time during that period a market value circumstance exists in respect of the company, the aggregate of whose minimum market value interests in the company in the period is equal to or greater than 66%:

(e)

the amount of any credit balance of the branch equivalent tax account where, during the imputation year, the company ceases to be resident in New Zealand.

(4)

The debits referred to in subsection (3) arise,—

(a)

in the case of the debit referred to in subsection (3)(a), on the date the dividend withholding payment is paid:

(b)

in the case of a debit referred to in subsection (3)(b), on the date by which the company is required by section NH 3 to pay to the Commissioner the dividend withholding payment that is reduced by the relevant amount of the credit balance:

(c)

in the case of a debit referred to in subsection (3)(c), on the date the refund is paid:

(d)

in the case of a debit referred to in subsection (3)(d), at the specified time referred to in that paragraph:

(e)

in the case of a debit referred to in subsection (3)(e), on the date on or on the expiry of which the company ceases to be resident in New Zealand.

(5)

Subject always to the express provisions of this Act, subsections (1)(e) and (3)(d) are intended to limit the circumstances in which a taxpayer, being a company, may carry forward a branch equivalent tax account debit or credit for subsequent utilisation to those where the tax benefit arising from such utilisation is obtained or available to be obtained (directly or indirectly) at least to the extent of 66%, only by the same natural persons holding (directly or indirectly) rights in relation to the company who—

(a)

by virtue of holding (directly or indirectly) such rights, bore the dividend withholding payment or tax liability giving rise to the branch equivalent tax account debit or credit:

(b)

held (directly or indirectly) such rights at the time of the event giving rise to the branch equivalent tax account debit or credit.

(6)

For the purposes of subsections (1)(e) and (3)(d),—

(a)

in respect of any period referred to in either of those provisions, the minimum voting interest or market value interest of any person in the company in the period is equal to the lowest voting interest or market value interest (as the case may be) which that person holds in the company during that period; and

(b)

section MF 3(2)(b) does not apply, and—

(i)

any credit in the company’s branch equivalent tax account is treated as continuing to exist until treated as being cancelled out by a subsequent debit in accordance with paragraph (c); and

(ii)

any debit in the company’s branch equivalent tax account is treated as continuing to exist until treated as being cancelled out by a subsequent credit in accordance with paragraph (d); and

(c)

in determining whether any credit in the company’s branch equivalent tax account has been cancelled out by any subsequent debit,—

(i)

any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit has been so cancelled out; and

(ii)

the amount of any debit is offset against the amount of any credit in the order in which the credits arise; and

(d)

in determining whether any debit in the company’s branch equivalent tax account has been cancelled out by any subsequent credit,—

(i)

any amount of credit may be taken into account only once for the purpose of ascertaining whether any debit has been so cancelled out; and

(ii)

the amount of any credit is offset against the amount of any debit in the order in which the debits arise; and

(e)

any credit arising on or before 16 December 1988 is deemed to have been cancelled out by a subsequent debit before the specified time referred to in subsection (3)(d); and

(f)

in the case of any credit arising after 16 December 1988 and before 1 April 1992 (not being a credit cancelled out before 1 April 1992 by a subsequent debit), the credit is deemed first to arise in the company’s branch equivalent tax account on 1 April 1992, but a debit is deemed to arise in accordance with subsection (3)(d) in respect of that credit at any time if and to the extent that, at that specified time, that credit still exists and a debit would have arisen in respect of that credit in accordance with section 394ZZP(3)(d) of the Income Tax Act 1976 as that paragraph applied before its repeal and replacement by section 60 of the Income Tax Amendment Act (No 2) 1992, had that paragraph continued to apply but with the figure “75” omitted and the figure “66” substituted.

(7)

[Repealed]

Compare: 1994 No 164 s MF 4

Subsection (2)(a) was amended, as from 1 October 2005, by section 236 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting “or paragraph (b)”.

Section MF 4(7): repealed (with effect on 19 December 2007), on 6 October 2009, by section 830 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section MF 4(7): added (with effect from 1 October 2007), on 19 December 2007, by section 164 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).