EW 31 Base price adjustment formula
Calculation of base price adjustment

(1)

A person calculates a base price adjustment using the formula in subsection (5).

When formula applies

(2)

The person calculates the base price adjustment for the income year in which section EW 29 applies to them.

Positive base price adjustment

(3)

A base price adjustment, if positive, is income, under section CC 3 (Financial arrangements), derived by the person in the income year for which the calculation is made. However, it is not income to the extent to which it arises from expenditure incurred by the person under the financial arrangement in earlier income years and for which a deduction was denied in those income years.

Negative base price adjustment

(4)

A base price adjustment, if negative, is expenditure incurred by the person in the income year for which the calculation is made. The person is allowed a deduction for the expenditure under sections DB 6 to DB 8 (which relate to deductions for interest) or, if none of those sections applies, under section DB 11 (Negative base price adjustment).

Formula

(5)

The formula is—

consideration − income + expenditure + amount remitted.

Definition of items in formula

(6)

The items in the formula are defined in subsections (7) to (11).

Consideration

(7)

Consideration is all consideration that has been paid, and all consideration that is or will be payable, to the person for or under the financial arrangement, minus all consideration that has been paid, and all consideration that is or will be payable, by the person for or under the financial arrangement. For the purposes of this subsection, the following are ignored:

(a)

non-contingent fees, if the relevant method is not the IFRS financial reporting method in section EW 15D:

(b)

non-integral fees, if the relevant method is—

(i)

the IFRS financial reporting method in section EW 15D:

(ii)

the modified fair value method in section EW 15G.

Consideration in particular cases

(8)

If any of sections EW 32 to EW 48, or EZ 52D applies, the consideration referred to in subsection (7) is adjusted under the relevant section.

Income

(9)

Income is—

(a)

income derived by the person under the financial arrangement in earlier income years; and

(b)

dividends derived by the person from the release of the obligation to repay the amount lent; and

(c)

income derived under section CF 2(2) and (3) (Remission of specified suspensory loans).

Expenditure

(10)

Expenditure is expenditure incurred by the person under the financial arrangement in earlier income years.

Amount remitted

(11)

Amount remitted

(a)

is an amount (a remission) that is not included in the consideration paid or payable to the person because it has been remitted—

(i)

by the person; or

(ii)

by law; but

(b)

does not include a remission that is self-remission.

Defined in this Act: amount, consideration, deduction, dividend, fair value method, financial arrangement, IFRS, income, income year, non-contingent fee, non-integral fee, pay, self-remission

Compare: 2004 No 35 s EW 31

Section EW 31(4): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 34(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section EW 31(7): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section EW 31(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 147(1)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 31(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 147(1)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 31(7): amended, on 1 April 2008, by section 379(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EW 31(7)(a): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section EW 31(7)(b): replaced, on 29 March 2018 (with effect on 1 April 2008), by section 80(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section EW 31(8): amended, on 26 September 2010, by section 41 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).

Section EW 31(9)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 147(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section EW 31(11): replaced (with effect on 1 April 2011 and applying for income years beginning on or after that date), on 30 March 2017, by section 73(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section EW 31 list of defined terms fair value method: inserted, on 29 March 2018 (with effect on 1 April 2008), by section 80(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section EW 31 list of defined terms IFRS: inserted, on 1 April 2008, by section 379(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EW 31 list of defined terms non-integral fee: inserted, on 1 April 2008, by section 379(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EW 31 list of defined terms self-remission: inserted (with effect on 1 April 2011), on 30 March 2017, by section 73(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).