EX 50 Attributable FIF income method
Formula

(1)

If a person is using the attributable FIF income method to calculate FIF income or loss from an attributing interest in a FIF, the total FIF income or loss from all their attributing interests in the FIF for the relevant accounting period is calculated using the formula—

net attributable FIF income or loss × income interest.

Definition of items in formula

(2)

The items in the formula in subsection (1) are defined in subsections (3) and (4).

Net attributable FIF income or loss

(3)

Net attributable FIF income or loss is the amount for the FIF and the accounting period found by applying—

(a)

sections EX 18A to EX 21E, EX 24, and EX 25, as modified by subsection (4B), as if the FIF were a CFC and the person’s attributing interests in the FIF were income interests in the CFC; and

(b)

subsections (5) and (6).

Income interest

(4)

Income interest is the person’s income interest in the FIF for the accounting period. The income interest is calculated under all the following CFC rules, applying as if the FIF were a CFC:

Modifications to method of calculating net attributable CFC income or loss

(4B)

The net attributable FIF income or loss of a FIF is calculated as if—

(a)

section EX 20B(5)(c)(i) required that the royalty be paid by a foreign company meeting the requirements of section EX 50(4C):

(b)
(c)

section EX 20B(7)(c) required that the rent be paid by a foreign company meeting the requirements of section EX 50(4C):

(d)

section EX 20B(12)(a) required that the financial arrangement or agreement be an agreement by the CFC to lend money to a foreign company meeting the requirements of section EX 50(4C):

(e)

section EX 21C(2)(a) required—

(i)

the interest holder or other person to have accounts that include the accounts of the CFC, including by proportionate consolidation under NZIAS 31:

(ii)

the interest holder or other person to have accounts that include dividends and net fair value changes in relation to the CFC under NZIAS 39, or include amounts recognised under the equity method in NZIAS 28 or NZIAS 31, and the CFC to have accounts that are prepared under United States generally accepted accounting principles and meet the requirements of section EX 21C(8) for accounts prepared under those principles in the United States of America:

(f)

section EX 21C(3)(a) required—

(i)

the interest holder or other person to have accounts that include the accounts of the members of the test group, including by proportionate consolidation under NZIAS 31:

(ii)

the interest holder or other person to have accounts that include dividends and net fair value changes in relation to the members under NZIAS 39, or include amounts recognised under the equity method in NZIAS 28 or NZIAS 31, and the members to have accounts that are prepared under United States generally accepted accounting principles and meet the requirements of section EX 21C(8) for accounts prepared under those principles in the United States of America:

(g)

section EX 21C(4)(a) required—

(i)

the interest holder or other person to have accounts that include the accounts of the CFC, including by proportionate consolidation under the IFRSE corresponding to NZIAS 31:

(ii)

the interest holder or other person to have accounts that include dividends and net fair value changes in relation to the CFC under the IFRSE corresponding to NZIAS 39, or include amounts recognised under the equity method in the IFRSE corresponding to NZIAS 28 or NZIAS 31, and the CFC to have accounts that are prepared under United States generally accepted accounting principles and meet the requirements of section EX 21C(8) for accounts prepared under those principles in the United States of America:

(h)

section EX 21C(5)(a) required—

(i)

the interest holder or other person to have accounts that include the accounts of the members of the test group, including by proportionate consolidation under the IFRSE corresponding to NZIAS 31:

(ii)

the interest holder or other person to have accounts that include dividends and net fair value changes in relation to the members under the IFRSE corresponding to NZIAS 39, or include amounts recognised under the equity method in the IFRSE corresponding to NZIAS 28 or NZIAS 31, and the members to have accounts that are prepared under United States generally accepted accounting principles and meet the requirements of section EX 21C(8) for accounts prepared under those principles in the United States of America:

(i)

section EX 21D(1)(a) required that none of the other companies in the test group be a CFC:

(j)

section EX 21D(1)(b) required that the CFC hold a voting interest of more than 50% in each of the other companies in the test group:

(k)
(l)

section EX 21E(2)(b) required that none of the other companies in the test group be a CFC:

(m)

section EX 21E(2)(c) required that the CFC hold a voting interest of more than 50% in each of the other companies in the test group:

(n)
(o)
(p)

the references in section EX 21E(7)(f) and (g) to “NZIAS 39” were to “whichever is appropriate of NZIAS 39, an equivalent IFRSE, and an equivalent standard or principle included in United States generally accepted accounting principles”:

(q)

section EX 21E(9)(a) required that an amount in the category be a dividend that is—

(i)

not included in the attributable CFC amount for the accounting period under section EX 20B(3)(a) to (c); and

(ii)

paid by a company other than 1 from which the person does not have additional FIF income or loss under subsection (6) because of the application of subsection (7B)(b):

(r)

the references in section EX 21E(10)(c) and (d) to “NZIAS 39” were to “whichever is appropriate of NZIAS 39, an equivalent IFRSE, and an equivalent standard or principle included in United States generally accepted accounting principles”:

(s)

the references in section EX 21E(12)(d) to “NZIAS 39” were to “whichever is appropriate of NZIAS 39, an equivalent IFRSE, and an equivalent standard or principle included in United States generally accepted accounting principles”:

(t)

the reference in section EX 21E(12)(g) to “NZIAS 32” were a reference to “whichever is appropriate of NZIAS 32, an equivalent IFRSE, and an equivalent standard or principle included in United States generally accepted accounting principles”.

Requirements for foreign company making payments to FIF

(4C)

A foreign company making payments to a FIF meets the requirements of this subsection if—

(a)

the person uses the attributable FIF income method for the foreign company or would be able to use that method in the absence of section EX 35; and

(b)

the foreign company, if it were a CFC, would be a non-attributing active CFC under section EX 21B(2) in the absence of section EX 20B(5)(c)(i), (7)(c), and (12)(a); and

(c)

a group of persons holds total voting interests of more than 50% in the FIF and in the foreign company; and

(d)

the FIF and the foreign company each have a taxed FIF connection with the same country or territory.

Taxable distributions

(5)

If the FIF derives a taxable distribution from a non-complying trust in the accounting period,—

(a)

the taxable distribution is excluded when calculating the FIF’s net attributable FIF income or loss, due to the combined effect of subsection (1) and section EX 21(32); and

(b)

the person has additional attributed CFC income calculated by multiplying the taxable distribution by the person’s income interest in the FIF; and

(c)

the person is liable for income tax on the additional attributed CFC income at the rate in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) that applies to amounts under section HC 22 (Use of tax losses to reduce taxable distributions from non-complying trusts).

Calculation of additional FIF income or loss

(6)

If the FIF has an income interest in a foreign company for the accounting period and, as a result, the person has an indirect attributing interest in the foreign company, the person has additional FIF income or loss calculated using the formula—

interest × FIF’s FIF income or loss.

Definition of items in formula

(7)

In the formula in subsection (6),—

(a)

interest is the person’s income interest in the FIF for the period:

(b)

FIF’s FIF income or loss is the FIF’s FIF income or loss for the period from foreign companies in which the person has an indirect attributing interest, calculated under the rules in section EX 58(4) and (5) as if—

(i)

the FIF were the CFC referred to; and

(ii)

the FIF’s interest in the foreign company were an attributing interest, despite any application of section EX 34.

Exception to subsection (6)

(7B)

A person does not have additional FIF income or loss under subsection (6) from a FIF with an interest in a foreign company if—

(a)

the foreign company meets the test for a non-attributing active CFC under section EX 21B(2) and the person—

(i)
[Repealed]

(ii)

is able to include the foreign company in the same test group as the FIF under section EX 21D or EX 21E:

(b)

the FIF would meet the test for a non-attributing active CFC under section EX 21B(2)(b) if the items added passive and reported revenue under section EX 21E(5), (8), and (10) for the FIF included the amounts given by subsection (7C)(a)—

(i)

relating to the FIF’s interests in each member of a grouping of one or more foreign companies including the foreign company; and

(ii)

reported in the accounts of the FIF, or in the consolidated accounts of the FIF’s test group under section EX 21E.

(c)
[Repealed]

Requirements for test under subsection (7B)(b)

(7C)

In determining whether a FIF would meet the requirements of subsection (7B)(b) for an accounting period,—

(a)

the amounts required to be included in the items are—

(i)

amounts recognised in profit and loss under the equity method under whichever is appropriate of NZIAS 28, NZIAS 31, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America:

(ii)

amounts recognised in profit or loss under proportionate consolidation under whichever is appropriate of NZIAS 31, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America:

(iii)

dividends and net fair value changes recognised in profit or loss in relation to investments accounted for under whichever is appropriate of NZIAS 39, an equivalent IFRSE, and an equivalent standard or principle in the generally accepted accounting principles in the United States of America; and

(b)

an interest holder must not use the result of the test applied to the FIF and a foreign company as a member of a grouping of foreign companies if the interest holder uses for the period a result of the test applied to the FIF and a different grouping of foreign companies.

Application of CFC rules tax credit rules

(8)

The rules in sections LK 1 to LK 7 (which relate to tax credits for attributed CFC income) apply to allow the person to claim foreign tax credits but on the basis of the assumptions made in subsection (9). The rules in those sections allow foreign tax credits relating to attributed CFC income but apply a jurisdictional ring-fencing approach to the use of tax credits.

Assumptions in reading tax credit rules

(9)

Sections LK 1 to LK 7 are applied as if—

(a)

the FIF were a CFC; and

(b)

the FIF income of the person from the FIF were attributed CFC income; and

(c)

the person’s income interest, calculated under subsection (4) were their relevant income interest for the purposes of those sections; and

(d)

any relevant person’s FIF income calculated under the attributable FIF income method from a FIF that is resident in the relevant country were attributed CFC income.

Reduction in FIF loss to economic loss

(10)

In the cases described in subsections (11) and (12), the amount of any FIF loss calculated under subsections (1) and (6) is reduced to be equal to the person’s corresponding economic loss, if any.

Application of subsection (10): no economic loss

(11)

Subsection (10) applies if the person suffers no, or substantially no, economic loss corresponding to the FIF loss, whether because of a call option, a put option, or any other reason.

Application of subsection (10): FIF loss excessive

(12)

Subsection (10) also applies if the amount of FIF loss is more than any corresponding economic loss suffered by the person, whether because of the application of the rules for calculating the person’s income interest or any other reason.

Defined in this Act: accounting period, attributable FIF income method, amount, attributed CFC income, attributing interest, CFC, FIF, FIF income, FIF loss, foreign company, income interest, income tax, indirect attributing interest, loss, net attributable CFC income, net attributable FIF income, non-attributing active CFC, non-complying trust, non-resident, NZIAS 28, NZIAS 31, NZIAS 39, quarter, tax, taxable distribution, taxed FIF connection, voting interest

Compare: 2004 No 35 s EX 43

Section EX 50 heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(1): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(2)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(1) formula: amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(2)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(3) heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(3): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(4B) heading: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(4B): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(4C) heading: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(4C): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(4C)(a): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 17 July 2013, by section 52(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

Section EX 50(5)(a): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(5) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(5)(c): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 50(6): amended (with effect on 1 April 2014 and applying for the 2014–15 and later income years), on 24 February 2016, by section 148(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 50(6): amended (with effect on 1 April 2014 and applying for the 2014–15 and later income years), on 30 June 2014, by section 95(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 50(7)(b): amended (with effect on 1 April 2014 and applying for the 2014–15 and later income years), on 30 June 2014, by section 95(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section EX 50(7B) heading: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(7B): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50(7B)(a)(i): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 48(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 50(7B)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 48(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 50(7B)(c): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 48(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 50(7C) heading: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 48(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 50(7C): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 2 November 2012, by section 48(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section EX 50(9)(d): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 35(7) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms branch equivalent income: repealed (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms branch equivalent method: repealed (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms indirect attributing interest: inserted (with effect on 1 April 2014), on 24 February 2016, by section 148(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 50 list of defined terms net attributable CFC income: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms net attributable FIF income: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms non-attributing active CFC: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms NZIAS 28: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms NZIAS 31: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms NZIAS 39: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section EX 50 list of defined terms taxed FIF connection: inserted (with effect on 1 April 2014), on 24 February 2016, by section 148(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 50 list of defined terms taxed FIF relationship: repealed (with effect on 1 April 2014), on 24 February 2016, by section 148(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section EX 50 list of defined terms voting interest: inserted (with effect on 1 July 2011), on 7 May 2012, by section 35(8)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).