LJ 2 Tax credits for foreign income tax
Amount of credit

(1)

A person described in section LJ 1(2)(a) has a tax credit for a tax year for an amount of foreign income tax paid on a segment of foreign-sourced income, determined as if the segment were the net income of the person for the tax year. The amount of the New Zealand tax payable is calculated under section LJ 5.

Limitation on amount of credit

(2)

The amount of the person’s credit in subsection (1) must not be more than the amount of New Zealand tax payable by the person in relation to the segment calculated under section LJ 5(2), modified as necessary under section LJ 5(4).

Amount adjusted

(3)

The amount of the person’s credit in subsection (1) may be reduced or increased if either section LJ 6 or LJ 7 applies.

When person both resident in New Zealand and another country

(4)

A person described in section LJ 1(2)(a) who has, because they are a citizen or resident of, or are domiciled in, a foreign country, paid foreign income tax on their assessable income, has a credit under subsection (1). However, the amount of the credit is limited to the amount of foreign income tax that would have been paid in the foreign country if the person were treated as not a citizen or resident of, or domiciled in, that foreign country.

Multi-rate PIEs and their investors

(5)

For a multi-rate PIE and an investor in a multi-rate PIE, the amount of a tax credit is limited to the extent allowed under subpart HM (Portfolio investment entities).

When subsection (7) applies

(6)

Subsection (7) applies to a person who derives an amount from an attributing interest in a FIF when the amount is treated as not being income under section EX 59(2) (Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method).

Tax credit

(7)

The person has a tax credit under this subpart for foreign income tax paid on or withheld in relation to the amount. The calculation of the maximum amount of the tax credit is made under section LJ 5(2), modified so that the item segment in the formula is the amount of FIF income from the attributing interest that the person derives in the period referred to in section EX 59(2).

Defined in this Act: amount, assessable income, attributing interest, FIF, FIF income, foreign income tax, income, income tax liability, investor, multi-rate PIE, net income, New Zealand, New Zealand tax, pay, segment of foreign-sourced income, tax credit, tax year

Compare: 2004 No 35 ss LC 1(1), (1B), (1C), LC 2

Section LJ 2(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 336(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(5) heading: substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 336(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(5): substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 336(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(6) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(6): added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(7) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2(7): added (with effect on 1 April 2008), on 6 October 2009, by section 336(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms attributing interest: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms FIF: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms FIF income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms income: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms multi-rate PIE: inserted, on 1 April 2010, by section 336(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms portfolio tax rate entity: repealed, on 1 April 2010, by section 336(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section LJ 2 list of defined terms tax credit: inserted (with effect on 1 April 2008), on 6 October 2009, by section 336(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).