(1) After section BC 7(3), the following is added:
“Income tax liability of multi-rate PIEs
- “(4) The income tax liability for a tax year of a multi-rate PIE is determined under subpart HM (Portfolio investment entities).”
(2) In section BC 7, in the list of defined terms, “multi-rate PIE” is inserted.
(3) Subsection (1) applies for the 2010–11 and later income years.

5 Withholding liabilities

(1) Section BE 1(1) is replaced by the following:
“PAYE income payments
- “(1) A person who makes a PAYE income payment must withhold an amount from the payment under the PAYE rules.”
(2) Section BE 1(5) is replaced by the following:
“Employer's superannuation cash contributions
- “(5) A person who makes an employer's superannuation cash contribution must pay ESCT under the ESCT rules.”
(3) Section BE 1(6) is repealed.
(4) In section BE 1, in the list of defined terms, “retirement savings scheme”, “retirement scheme contribution”, “RSCT”, and “RSCT rules” are inserted.
(5) In section BE 1, in the list of defined terms,—
- (a) “employer's superannuation contribution” and “PAYE payment” are omitted:
- (b) “employer's superannuation cash contribution” and “PAYE income payment” are inserted.
(6) In section BE 1, in the list of defined terms, “FDP” and “FDP rules” are omitted.
(7) Subsections (1) and (2) apply for the 2008–09 and later income years.
(8) Subsection (3) applies for all income years beginning on or after 1 July 2009.

6 Other obligations

(1) Section BF 1(d) is repealed.
(2) In section BF 1, in the list of defined terms, “further FDP” is omitted.
(3) Subsection (1) applies for all income years beginning on or after 1 July 2009.

7 Disposal: land used for landfill, if notice of election

(1) Section CB 8(c) is replaced by the following:
- “(c) the person acquiring the land is not an associated person; and”.
(2) Subsection (1) applies for the 2010–11 and later income years.

8 Section CB 26 replaced

(1) Section CB 26 is replaced by the following:
“CB 26 Disposal of certain shares by portfolio investment entities
“When this section applies
“(1) This section applies when—
“(a) the income from the disposal by a person (the entity) of the share is excluded income under section CX 55 (Proceeds from disposal of investment shares); and
“(b) a dividend from the share is—
“(i) declared before the disposal; and
“(ii) paid to a holder of the share who, after the disposal, becomes entitled to the dividend.
“Income
“(2) The entity is treated as deriving an amount of income calculated using the formula—
(shares at declaration – shares on distribution) × dividend.
“Definition of items in formula
“(3) In the formula,—
“(a) shares at declaration is the number of shares held by the entity when the dividend is declared:
“(b) shares on distribution is the number of shares for which the entity derives a dividend:
“(c) dividend is the amount of the dividend per share or, for a share issued by an ICA company, the amount of the dividend per share that is not fully imputed.
“Positive result
“(4) The result of the formula must be a positive amount.
“Defined in this Act: amount, company, dividend, excluded income, fully imputed, ICA company, income, pay, portfolio investment entity, share
“Compare: 2007 No 97 s CB 26”.
(2) Subsection (1) applies for the 2010–11 and later income years.

9 Section CB 27B repealed

(1) Section CB 27B is repealed.
(2) Subsection (1) applies for the 2009–10 and later income years.

10 Heading and section CB 36 replaced

The heading before section CB 36 and section CB 36 are replaced by the following:
“Emissions units under Climate Change Response Act 2002
“CB 36 Disposal of emissions units
“When this section applies
“(1) This section applies when a person disposes of an emissions unit.
“Income
“(2) The amount that the person derives on the disposal is income.
“Surrender of unit: deemed sale at given value
“(3) If the disposal is by surrender under the Climate Change Response Act 2002, the person is treated as having sold the unit, at the time of the surrender, to an unrelated person for an amount equal to—
“(a) the unit's cost, if none of paragraphs (b) to (f) applies; or
“(b) the unit's value under section ED 1(7B) (Valuation of excepted financial arrangements), if that subsection applies and none of paragraphs (c) to (f) apply; or
“(c) zero, if subsection (4) applies; or
“(d) zero, if subsection (5) applies; or
“(e) the unit's market value, if subsection (6) applies; or
“(f) the unit's market value, if subsection (7) applies.
“Surrender of unit: emissions relating to post-1989 forest land
“(4) The person is treated as selling the unit for an amount of zero if the person surrenders the emissions unit for emissions in relation to post-1989 forest land.
“Surrender of unit: deforestation of some pre-1990 forest land
“(5) The person is treated as selling the unit for an amount of zero if—
“(a) the person surrenders the emissions unit in relation to the deforestation of pre-1990 forest land; and
“(b) the person would derive income, other than exempt income or excluded income, from a disposal of the land without timber at the time of the surrender.
“Surrender of post-1989 forest land unit: emissions not relating to post-1989 forest land
“(6) The person is treated as selling a post-1989 forest land emissions unit for an amount equal to the unit's market value if the person surrenders the emissions unit other than for emissions in relation to post-1989 forest land.
“Surrender of unit: free unit other than forest land unit
“(7) The person is treated as selling a unit that is not a forest land unit for an amount equal to the unit's market value if—
“(a) the person surrenders the unit before the period of the emissions to which the unit relates; and
“(b) the unit was transferred to the person under Part 4, subpart 2 of the Climate Change Response Act 2002 at a price of zero.
“Converted unit treated as sold
“(8) If a person converts a New Zealand emissions unit, other than a forest land emissions unit, into a Kyoto unit as defined in section 4(1) of the Climate Change Response Act 2002, the person is treated as having sold the converted unit for an amount equal to—
“(a) the unit's value under section ED 1(7B), if that subsection applies; or
“(b) the unit's cost, otherwise.
“Excluded income: post-1989 forest land emissions unit
“(9) Section CX 51B (Disposal of pre-1990 forest land emissions units) applies to the disposal to another person of a pre-1990 forest land emissions unit.
“Defined in this Act: amount, convert, emissions unit, forest land emissions unit, income, Kyoto emissions unit, New Zealand emissions unit, pre-1990 forest land emissions unit, post-1989 forest land emissions unit, surrender”.

11 New section CC 8B inserted

(1) After section CC 8, the following is inserted:
“CC 8B Certain commercial bills: non-resident holders
“When this section applies
“(1) This section applies when a non-resident holder of a commercial bill who is required to calculate and allocate income and expenditure under neither the financial arrangements rules nor the old financial arrangements rules because of the application of section EW 9(2) to (4) or EZ 45(e) (which relate to the application of the rules)—
“(a) disposes of the commercial bill other than by redemption; or
“(b) redeems a commercial bill whose issuer is an associated person of the non-resident.
“Income: disposal
“(2) The value of the commercial bill on the day the non-resident holder disposes of it is income of the person.
“Income: redemption
“(3) The amount that the non-resident holder receives on redemption is income of the person.
“Defined in this Act: amount, commercial bill, financial arrangements rules, income, non-resident, old financial arrangements rules
“Compare: 2004 No 35 s CZ 8”.
(2) Subsection (1) applies for the 2008–09 and later income years.

12 What is a transfer of value?

(1) After section CD 5(2), the following is added:
“When shares are cancelled
- “(2B) The market value of any transfer from the shareholder to the company on the cancellation of a share of the shareholder's rights as a shareholder is zero.”
(2) In section CD 5, in the list of defined terms, “market value”, “share”, and “shareholder” are inserted.
(3) Subsection (1) applies for the 2008–09 and later income years.

13 When is a transfer caused by a shareholding relationship?

(1) In section CD 6(1)(a)(ii), “shareholder; or” is replaced by “shareholder; and”, and section CD 6(1)(a)(iii) is repealed.
(2) Subsection (1) applies for the 2010–11 and later income years.

14 Section CD 21 repealed

(1) Section CD 21 is repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

15 Returns of capital: off-market share cancellations

(1) In section CD 22(9),—
- (a) in the definition of counted associate, paragraph (b), “is a beneficiary” is replaced by “has benefited or is eligible to benefit”:
- (b) in the definition of non-participating redeemable share, paragraph (b)(iii), “; or” is replaced by “or section FA 2B(2) (Stapled debt securities); or”.
(2) Subsection (1)(a) applies for the 2010–11 and later income years.

16 Treasury stock acquisitions

(1) Section CD 25(4), other than the heading, is replaced by the following:
- “(4) If subsection (2) applies, then, with effect from the cancellation or the first anniversary, depending on which first causes subsection (2) to apply, the available subscribed capital of the class of the share is reduced by the lesser of—
  “(a) the amount paid to the shareholder on the acquisition; and
  “(b) the available subscribed capital per share calculated under the ordering rule and, in the case of the first anniversary, calculated as if the share and any other shares to which this subsection applies on that date were cancelled on that date.”
(2) Subsection (1) applies for the 2008–09 and later income years.

17 Property made available intra-group

(1) Section CD 27(1)(b) is replaced by the following:
- “(b) in the absence of this section, the transfer would be a dividend under section CD 6(1)(a)(ii) because the associated company is associated with a shareholder in the first company.”
(2) Section CD 27(3)(a)(ii) is replaced by the following:
- “(ii) the first company is associated with a company (the parent company) that has a voting interest in the associated company and that could have received the transfer of value without the transfer being assessable income or non-resident passive income; and”.
(3) In section CD 27, in the list of defined terms, “FDP” is omitted.
(4) Subsection (1) applies for the 2010–11 and later income years.
(5) Subsection (2) applies for all income years beginning on or after 1 July 2009.

18 Employee benefits

In section CD 32(2), “CE 1(c)” is replaced by “CE 1(1)(c)”.

19 Foreign investment fund income

(1) In section CD 36, after the heading, “ Amount not dividend” is inserted as a subsection heading.
(2) In section CD 36(b)(iv), “method; and” is replaced by “method.”, and paragraph (c) is repealed.
(3) After section CD 36(b), the following are inserted as subsections (2) and (3):
“Exclusion for interests in grey list companies
- “(2) Subsection (1)(b)(iv) does not apply if—
  “(a) the FIF is a grey list company; and
  “(b) the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls.
“Application of rule for certain managed funds
- “(3) Subsection (2) does not apply if—
  “(a) the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
  “(b) the FIF is a foreign investment vehicle.”
(4) Section CD 36(3)(b), is replaced by the following:
- “(b) the FIF is a foreign PIE equivalent.”
(5) In section CD 36, in the list of defined terms, “direct income interest”, “foreign investment vehicle”, “life insurance”, and “portfolio investment entity” are inserted.
(6) In section CD 36, in the list of defined terms, “foreign investment vehicle ” is omitted and “foreign PIE equivalent” is inserted.
(7) Subsection (4) applies for the 2010–11 and later income years.

20 Available subscribed capital (ASC) amount

(1) Section CD 43(8)(b) is replaced by the following:
- “(b) an amount received by the company if the amount is mainly attributable, directly or indirectly, to the payment by the company of a dividend to a controlled foreign company at a time when the company is also a controlled foreign company, regardless of whether either company is a grey list company or non-attributing Australian CFC.”
(2) In section CD 43, in the list of defined terms, “non-attributing Australian CFC” is added.
(3) In section CD 43, in the list of defined terms, “consideration” is inserted.
(4) Subsection (1) applies for all income years beginning on or after 1 July 2009.

21 Available capital distribution amount

(1) After section CD 44(10) the following is inserted:
“Associated persons transactions
- “(10B) No capital gain amount is derived or capital loss amount incurred by a company after 31 March 2010 on disposing of property under an arrangement with an associated person. This subsection is overridden by subsection (10C).
“Close company liquidations
- “(10C) Subsection (10B) does not apply if—
  “(a) the company is a close company; and
  “(b) the associated person is not a company; and
  “(c) the disposal is on the liquidation of the company.”
(2) Section CD 44(11) and (12) is repealed.
(3) After section CD 44(14), the following is inserted:
“Relationship with section CZ 9B
- “(14B) For capital gain amounts derived or capital loss amounts incurred between 1 April 1988 and 31 March 2010, see section CZ 9B (Available capital distribution amount: 1988 to 2010).”
(4) Section CD 44(15) to (17) is repealed.
(5) Subsections (1) to (4) apply for the 2010–11 and later income years.

22 Heading and sections CD 45 to CD 52 repealed

(1) The heading before section CD 45 and sections CD 45 to CD 52 are repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

23 Prevention of double taxation of share cancellation dividends

(1) Section CD 53(3), is replaced by the following:
“Non-taxable dividends
- “(3) Subsection (2) does not apply to the extent to which the dividend is exempt income of the person under sections CW 9 to CW 11 (which relate to income from equity).”
(2) Section CD 53(4) and (5) are repealed.
(3) In section CD 53, in the list of defined terms, “FDP” and “FDP credit” are omitted.
(4) Subsections (1) and (2) apply for all income years beginning on or after 1 July 2009.

24 Amounts derived in connection with employment

(1) After the heading to section CE 1, “Income” is inserted as a subsection heading.
(2) Section CE 1(c) is replaced by the following:
- “(c) the market value of accommodation that the person receives in connection with their employment or service other than an amount paid under section CW 17B (Relocation payments):”.
(3) After section CE 1(g), the following is inserted as subsection (2):
“Meaning of accommodation
- “(2) For the purposes of this section and section CX 28 (Accommodation), accommodation means board or lodging, or the use of a house or living premises, or the use of part of a house or living premises.”
(4) In section CE 1, in the list of defined terms, “accommodation” is inserted.
(5) Subsections (1) to (3) apply for the 2008–09 and later income years.

25 Meaning of expenditure on account of an employee

After section CE 5(3)(b), the following is inserted:
- “(bb) an amount paid under section CW 17B (Relocation payments) or section CW 17C (Payments for overtime meals and certain other allowances):”.

26 Benefits, pensions, compensation, and government grants

In section CF 1(2), in the definition of accident compensation payment, paragraph (f) and subsequent paragraphs are replaced by the following:
- “(f) a payment under the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, of weekly compensation that is not recovered or recoverable under section 248 of that Act:
- “(g) a payment under section 81(1)(b) of the Injury Prevention, Rehabilitation, and Compensation Act 2001 paid by the Corporation as defined in that Act, for attendant care as defined in schedule 1, clause 12 of that Act:
- “(h) a personal service rehabilitation payment for a person under the Injury Prevention, Rehabilitation, and Compensation Act 2001”.

27 New subpart CO inserted

(1) After section CH 10, the following is inserted:
“Subpart CO—Income from voluntary activities
“CO 1 Income from voluntary activities
“Income
“(1) An amount derived by a person in undertaking a voluntary activity is income of the person.
“Relationship with section CW 62B
“(2) This section is overridden by section CW 62B (Voluntary activities).
“Defined in this Act: amount, income”.
(2) Subsection (1) applies for the 2009–10 and later income years.

28 Section CP 1 replaced

(1) Section CP 1 is replaced by the following:
“CP 1 Attributed income of investors in multi-rate PIEs
“When this section applies
“(1) This section applies when a multi-rate PIE attributes an amount of income for an income year calculated under section HM 36 (Calculating amounts attributed to investors) to a person who is an investor in the PIE.
“Income
“(2) The amount is income of the person in the income year of the person in which the PIE’s income year ends.
“Defined in this Act: amount, income, income year, investor, multi-rate PIE, PIE
“Compare: 2007 No 97 s CP 1”.
(2) Subsection (1) applies for the 2010–11 and later income years.

29 When attributed CFC income arises

(1) Section CQ 2(1)(f)(i) is replaced by the following:
- “(i) the CFC has net attributable CFC income for the accounting period under section EX 20C (Net attributable CFC income or loss); or”.
(2) In section CQ 2(1), paragraph (g) is repealed and the following is added:
- “(h) the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B (Non-attributing active CFCs); and
- “(i) the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 (Non-attributing Australian CFCs).”
(3) After section CQ 2(2), the following is inserted:
“Special rule: attributed CFC amount from personal services
- “(2B) If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) (Attributable CFC amount), the person has attributed CFC income from the CFC equal to the product of—
  “(a) the person's income interest in the CFC:
  “(b) the amount by which the CFC's income from personal services exceeds the expenditure incurred by the CFC in deriving the income from personal services.”
(4) Section CQ 2(4) is repealed.
(5) In section CQ 2, in the list of defined terms,—
- (a) “branch equivalent income” is omitted:
- (b) “attributable CFC amount”, “net attributable CFC income”, “non-attributing active CFC”, and “non-attributing Australian CFC” are inserted.
(6) Subsections (1) to (4) apply for all income years beginning on or after 1 July 2009.

30 When FIF income arises

(1) Section CQ 5(3) is replaced by the following:
“FIF income from CFC with FIF interest
- “(3) FIF income also includes an additional amount that a person with an income interest of 10% or more in a CFC has in an income year under section EX 58 (Additional FIF income or loss if CFC owns FIF), whether or not the CFC is a non-attributing Australian CFC under section EX 22 (Non-attributing Australian CFCs).”
(2) In section CQ 5, in the list of defined terms, “non-attributing Australian CFC” is inserted.
(3) Subsection (1) applies for all income years beginning on or after 1 July 2009.

31 Section CQ 7 repealed

Section CQ 7 is repealed.

32 Heading to subpart CR replaced

In subpart CR, the heading is replaced by “Income from insurance”.

33 Sections CR 1 and CR 2 replaced

(1) Sections CR 1 and CR 2 are replaced by the following:
“CR 1 Policyholder base income of life insurer
If, but for this section, a life insurer has an amount of policyholder base income for an income year, and that amount is not income under this Part, the amount is income of the life insurer for the income year.
“Defined in this Act: amount, income, income year, life insurer, policyholder base income
“CR 2 Shareholder base income of life insurer
If, but for this section, a life insurer has an amount of shareholder base income for an income year, and that amount is not income under this Part, the amount is income of the life insurer for the income year.
“Defined in this Act: amount, income, income year, life insurer, shareholder base income”.
(2) Subsection (1) applies––
- (a) on and after 1 July 2010, unless paragraph (b) applies:
- (b) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.

34 New section CR 4 added

(1) After section CR 3, the following is added:
“CR 4 Income for general insurance outstanding claims reserve
“What this section applies to
“(1) This section applies for—
“(a) an insurer who––
“(i) uses IFRS 4, Appendix D for general insurance contracts:
“(ii) is a life insurer who has general insurance contracts; and
“(b) general insurance contracts, excluding contracts having premiums to which section CR 3 (Income of non-resident general insurer) applies.
“Formula for insurer's OCR income
“(2) For an income year (the current year), an insurer has income of the amount by which zero is less than the amount calculated using the formula—
opening outstanding claims reserve
− closing outstanding claims reserve.

“Definition of items in formula
“(3) In the formula,—
“(a) opening outstanding claims reserve is—
“(i) the amount of the insurer’s closing outstanding claims reserve for the income year before the current year (the prior year); or
“(ii) the amount of the insurer's reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer:
“(b) closing outstanding claims reserve is the amount of the insurer’s outstanding claims reserve, calculated at the end of the current year.
“Defined in this Act: amount, general insurance contract, IFRS 4, income, income year, insurer, life insurer, outstanding claims reserve”.
(2) Subsection (1) applies—
- (a) for an insurer who uses IFRS 4,––
  - (i) for the 2009–10 and later income years, unless subparagraph (ii) applies:
  - (ii) for the first income year for which an insurer adopts IFRSs for the purposes of financial reporting and later income years, if that first income year is before the 2009–10 income year and the person chooses to use IFRS 4 in a return of income for that first year:
- (b) for a life insurer,––
  - (i) on and after 1 July 2010, unless subparagraph (ii) applies:
  - (ii) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.

35 Withdrawals

(1) Section CS 1(1)(a)(i) is replaced by the following:
- “(i) a fund to which the member's employer has made for the member's benefit an employer's superannuation cash contribution; or”.
(2) Section CS 1(7)(b) is replaced by the following:
- “(b) in the corresponding tax year, the total of the member's taxable income and the employer's superannuation cash contributions made for the member's benefit is less than $60,000.”
(3) In section CS 1, in the list of defined terms, “employer's superannuation contribution” is replaced by “employer's superannuation cash contribution”.
(4) Subsections (1) and (2) apply for the 2008–09 and later income years.

36 Exclusions of withdrawals of various kinds

(1) In section CS 2(2), (3), and (10), “employer's superannuation contributions” is replaced by “employer's superannuation cash contributions” in each place where it appears.
(2) In section CS 2, in the list of defined terms, “employer's superannuation contribution” is replaced by “employer's superannuation cash contribution”.
(3) Subsection (1) applies for the 2008–09 and later income years.

37 Exclusion of withdrawal on partial retirement

(1) In section CS 6(1)(d), “employer's superannuation contributions” is replaced by “employer's superannuation cash contributions”.
(2) In section CS 6, in the list of defined terms, “employer's superannuation contribution” is replaced by “employer's superannuation cash contribution”.
(3) Subsection (1) applies for the 2008–09 and later income years.

38 Exclusion of withdrawal when member ends employment

(1) In section CS 7(2) to (5), “employer's superannuation contributions” is replaced by “employer's superannuation cash contributions” in each place where it appears.
(2) In section CS 7, in the list of defined terms, “employer's superannuation contribution” is replaced by “employer's superannuation cash contribution”.
(3) Subsection (1) applies for the 2008–09 and later income years.

39 Section CV 10 repealed

(1) Section CV 10 is repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

40 Section CW 3B repealed

Section CW 3B is repealed.

41 Dividend derived by company from overseas

(1) Section CW 9(1), except for the heading, is replaced by the following:
- “(1) A dividend from a foreign company is exempt income if derived by a company that is resident in New Zealand.”
(2) After section CW 9(2), the following is added:
“Non-application to dividends derived by certain PIEs
- “(3) This section does not apply to a dividend derived by a portfolio tax rate entity.”
(3) Section CW 9 is replaced by the following:
“CW 9 Dividend derived from foreign company
“Exempt income
“(1) A dividend from a foreign company is exempt income if derived by a company that is resident in New Zealand.
“Exclusions
“(2) Subsection (1) does not apply to a dividend if the dividend is paid in relation to rights that are—
“(a) a direct income interest of less than 10% in a foreign company described in—
“(i) section EX 31 (Exemption for ASX-listed Australian companies):
“(ii) section EX 32 (Exemption for Australian unit trusts with adequate turnover or distributions):
“(iii) section EX 36 (Venture capital company emigrating to grey list country: 10-year exemption):
“(iv) section EX 37 (Grey list company owning New Zealand venture capital company: 10-year exemption):
“(v) section EX 37B (Share in grey list company acquired under venture investment agreement):
“(vi) section EX 39 (Terminating exemption for grey list company with numerous New Zealand shareholders):
“(b) a fixed-rate foreign equity:
“(c) rights to a deductible foreign equity distribution.
“Non-application to dividends derived by certain PIEs
“(3) This section does not apply to a dividend derived by a portfolio tax rate entity.
“Defined in this Act: company, dividend, deductible foreign equity distribution, exempt income, fixed-rate foreign equity, portfolio tax rate entity, resident in New Zealand”.
(4) Section CW 9(3), except for the heading, is replaced by the following:
- “(3) This section does not apply to a dividend derived by a multi-rate PIE.”
(5) In section CW 9, in the list of defined terms, “multi-rate PIE” is inserted.
(6) Subsection (3) applies for all income years beginning on or after 1 July 2009.
(7) Subsection (4) applies for the 2010–11 and later income years.

42 Proceeds of share disposal by qualifying foreign equity investor

Section CW 12(4), other than the heading, is replaced by the following:
- “(4) In this section,—
  “foreign exempt entity means a person who—
  “(a) is established as a legal entity under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
  “(b) has persons (the members) who hold interests in the capital of the legal entity and who are entitled to shares of the income of the legal entity; and
  “(c) under the laws of the territory or part of the territory is not subject to a tax on income other than as a body that handles income of the members; and
  “(d) is resident in no territory that has laws that treat the legal entity as being subject to a tax on income other than as a body that handles income of the members; and
  “(e) does not have a member who—
  “(i) has, when treated as holding the interests of any person who is associated with the member, an interest of 10% or more in the capital of the legal entity; and
  “(ii) is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
  “(f) does not have a member who, when treated as holding the interests of any person who is associated with the member, has an interest of 10% or more in the capital of the legal entity and who would—
  “(i) be entitled to receive an amount derived from a disposal to which this section would apply; and
  “(ii) receive an amount referred to in subparagraph (i) that, in the absence of this section, would have been reduced by a tax imposed by the Act on the amount or on the proceeds of the disposal in the hands of the legal entity; and
  “(iii) in any circumstances under the laws of the territory in which the member is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for the reduction referred to in subparagraph (ii); and
  “(g) does not have a holder of a direct or indirect interest in the capital of the legal entity who,—
  “(i) is resident in New Zealand:
  “(ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more
  “foreign exempt partnership means an unincorporated body that—
  “(a) is established under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
  “(b) consists of persons (the partners); and
  “(c) under the laws of the territory or part of the territory is not subject to a tax on income other than as a body that handles income of the partners; and
  “(d) has at least 1 partner (the general partner) who is liable for all debts of the unincorporated body and who has significant involvement in, and control of, the business activities of the unincorporated body; and
  “(e) has at least 1 partner (the special partner) whose liability for debts of the unincorporated body is limited and who has limited involvement in, and control of, the business activities of the unincorporated body; and
  “(f) does not have a general partner who is resident in no territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
  “(g) does not have a partner who—
  “(i) has, when treated as holding the interests of any person who is associated with the partner, an interest of 10% or more in the capital of the unincorporated body; and
  “(ii) is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
  “(h) does not have a partner who, when treated as holding the interests of any person who is associated with the partner, has an interest of 10% or more in the capital of the unincorporated body and who—
  “(i) would under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
  “(ii) would in any circumstances under the laws of the territory in which the partner is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
  “(i) does not have a holder of a direct or indirect interest in the capital of the unincorporated body who,—
  “(i) is resident in New Zealand:
  “(ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more
  “foreign exempt person means a person who—
  “(a) is resident in a territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
  “(b) is not a legal entity that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt entity; and
  “(c) is not part of an unincorporated body that meets the requirements of paragraphs (a) to (c) of the definition of foreign exempt partnership; and
  “(d) under the laws of the territory or part of the territory derives the proceeds from a disposal of shares or options that are held by the person; and
  “(e) is not a person who—
  “(i) would under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
  “(ii) would in any circumstances under the laws of the territory in which the person is resident or under the laws of part of the territory be entitled to receive from the government of the territory or part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness, or other compensation for a payment of the tax referred to in subparagraph (i); and
  “(f) does not have a holder of a direct or indirect interest in the capital of the legal entity who,—
  “(i) is resident in New Zealand:
  “(ii) when treated as holding the interests of a person associated with the resident, holds a total direct or indirect interest of 10% or more.”

43 Dividends paid by qualifying companies

(1) Section CW 15(1), other than the heading, is replaced by the following:
- “(1) To the extent to which the amount of a dividend that a qualifying company pays to a person resident in New Zealand is more than a fully imputed distribution, the amount is exempt income of the person.”
(2) In section CW 15, in the list of defined terms, “fully imputed” is inserted.

44 Expenditure on account, and reimbursement, of employees

(1) After section CW 17(3), the following is added:
“Depreciation loss included
- “(4) In this section, expenditure includes an amount of depreciation loss.
“Relationship with sections CW 17B and CW 17C
- “(5) This section does not apply to an amount referred to in section CW 17B (Relocation payments) or CW 17C (Payments for overtime meals and certain other allowances).”
(2) In section CW 17, in the list of defined terms, “depreciation loss” is inserted.
(3) Subsection (1) does not apply in relation to a tax position taken by a person—
- (a) in the period from 1 April 2008 to the date on which this Act receives the Royal assent; and
- (b) in relation to a deduction for an amount of depreciation loss; and
- (c) relying on section CW 17 in the absence of the amendment made by subsection (1).

45 New sections CW 17B and CW 17C inserted

After section CW 17, the following are inserted:
“CW 17B Relocation payments
“Exempt income
“(1) An amount that an employer pays to or on behalf of an employee in connection with the expenses of the employee in a work-related relocation is exempt income of the employee.
“Actual expenditure
“(2) The amount paid must be no more than the actual cost incurred by or on behalf of the employee on an expense that the Commissioner lists as an eligible relocation expense in a determination made under subsection (6).
“Time limit
“(3) Subsection (1) applies only to expenditure incurred to the end of the tax year following that in which the relocation occurs. For the purposes of this subsection, a temporary move that has not been treated as a work-related relocation under this section is ignored.
“Meaning of work-related relocation
“(4) Work-related relocation means a relocation of the place where an employee lives that is required—
“(a) because the employee's workplace is not within reasonable daily travelling distance of their residence; and
“(b) as a result of the employee—
“(i) taking up new employment with a new employer; or
“(ii) taking up new duties at a new location with their existing employer; or
“(iii) continuing in their current position but at a new location.
“Exemption from distance test
“(5) The requirement in subsection (4)(a) for a person's workplace to be beyond reasonable travelling distance of their residence does not apply to a person whose accommodation forms an integral part of their work.
“Determinations
“(6) The Commissioner may issue a determination for the purposes of this section under section 91AAR of the Tax Administration Act 1994 to provide a list of eligible relocation expenses, and may extend or modify the list from time to time as required. The Commissioner must give at least 30 days' notice of the implementation date of any alteration.
“Defined in this Act: amount, Commissioner, employee, employer, exempt income, tax year, work-related relocation
“CW 17C Payments for overtime meals and certain other allowances
“Exempt income: overtime meals
“(1) An amount that an employer pays to or on behalf of an employee for a meal for the employee when the employee is working overtime is exempt income of the employee.
“Exempt income: certain sustenance allowances
“(2) An amount that an employer pays to an employee as a sustenance allowance for the employee for a day is exempt income of the employee if—
“(a) the employee works a minimum of 7 hours on the day; and
“(b) their employment requires them—
“(i) to work outdoors and away from their employment base for most of the day; and
“(ii) to undertake a long period of physical activity in travelling through a neighbourhood or district on foot or by bicycle; and
“(c) it is not practicable for the employer to provide sufficient sustenance on the day for the period when the employee is working outdoors; and
“(d) the allowance recognises—
“(i) the arduous physical nature of the employee's work as described in paragraph (b); and
“(ii) that the employer would normally provide tea, coffee, water, or similar refreshments at the employment base in the course of their business.
“Eligibility requirements: overtime meals
“(3) Subsection (1) applies only if—
“(a) the employee has worked at least 2 hours' overtime on the day of the meal; and
“(b) either—
“(i) the employee's employment agreement provides for pay for overtime hours worked; or
“(ii) the employer has an established policy or practice of paying for overtime meals.
“Eligibility requirements: sustenance allowances
“(4) Subsection (2) applies only if the employer has an established policy or practice of paying a sustenance allowance.
“Actual cost or reasonable estimate
“(5) The amount paid must be—
“(a) the actual cost to the employee, and for an overtime meal referred to in subsection (1), with documentation required for amounts over $20 per meal; or
“(b) a reasonable estimate of the expenditure likely to be incurred by the employee or a group of employees for whom an amount is payable.
“Meaning of overtime
“(6) For the purposes of this section, overtime, for a person and a day, means time worked for an employer on the day beyond the person's ordinary hours of work as set out in their employment agreement.
“Defined in this Act: amount, employee, employer, exempt income, overtime, pay”.

46 Section CW 37 repealed

(1) Section CW 37 is repealed.
(2) Subsection (1) applies for an amount derived by a company as a large budget screen production grant if—
- (a) the final application for the large budget screen production grant is made on or after 1 October 2009; and
- (b) the company does not incur before 1 July 2008 an amount of $3,000,000 or more in expenditure on the project to which the large budget screen production grant relates.

47 Local and regional promotion bodies

In section CW 40, in the list of defined terms, “associated person” is omitted.

48 Charities: business income

Insection CW 42(5), (7), (8), and (9), “subsection (1)(b)” is replaced by “subsection (1)(c)”.

49 New section CW 59C inserted

(1) After section CW 59B, the following is inserted:
“CW 59C Life reinsurance outside New Zealand
An amount of life reinsurance claim derived by a life insurer is exempt income to the extent to which, for the relevant life reinsurance policy, deductions for premiums are denied under section DR 3 (Life reinsurance outside New Zealand).
“Defined in this Act: amount, claim, deduction, exempt income, income, life insurer, life reinsurance, life reinsurance policy, New Zealand, premium”.
(2) Subsection (1) applies––
- (a) on and after 1 July 2010, unless paragraph (b) applies:
- (b) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.

50 New section CW 62B inserted

(1) After section CW 62, the following is inserted:
“CW 62B Voluntary activities
“Exempt income
“(1) When a volunteer, in undertaking a voluntary activity, derives an amount that is a reimbursement payment to cover actual expenses incurred by them, the amount is exempt income of the volunteer.
“Estimated expenditure
“(2) For the purposes of subsection (1)—
“(a) a person may make a reasonable estimate of the amount of expenditure likely to be incurred by the volunteer for which reimbursement is payable; and
“(b) the amount estimated is treated as if it were the amount incurred.
“Payments partly reimbursement and partly honorarium
“(3) If the person paying the amount to the volunteer makes a payment to them that is only partly a reimbursement of expenses, the person must identify the portion of the amount that is the reimbursement, and treat the remainder as an honorarium, being a schedular payment to which the PAYE rules apply.
“Who is a volunteer?
“(4) For the purposes of this section, a volunteer means a person who freely undertakes an activity in New Zealand—
“(a) chosen either by themselves or by a group of which they are a member; and
“(b) that provides a benefit to a community or another person; and
“(c) for which there is no purpose or intention of private pecuniary profit for the person.
“Honoraria
“(5) For the purposes of this section, and schedule 4, part B (Rates of tax for schedular payments), an honorarium means an amount that a person receives for providing services that—
“(a) is paid at a rate that is less than the market rate for providing the services; and
“(b) is an amount for which, in the normal course, no payment is fixed for the services provided.
“Nature of reimbursement payment
“(6) For the purposes of this section, it does not matter whether—
“(a) an amount of a reimbursement payment is paid in 1 sum or not:
“(b) the amount is paid during an income year or at the end of an income year.
“Relationship with section RD 8(3)
“(7) A determination made by the Commissioner under section RD 8(3) (Schedular payments) may apply to modify an amount of expenditure under this section.
“Defined in this Act: amount, exempt income, honorarium, income year, New Zealand, pay, PAYE rules, schedular payment, volunteer”.
(2) Subsection (1) applies for the 2009–10 and later income years.

51 Meaning of fringe benefit

(1) In section CX 2(5), the words before paragraph (a) are replaced by the following:
- “(5) A benefit may be treated for the purposes of the FBT rules as being provided by an employer to an employee under—”.
(2) In section CX 2, in the list of defined terms, “FBT rules” is inserted.
(3) Subsections (1) and (2) apply for the 2010–11 and later income years.

52 Contributions to superannuation schemes

(1) Section CX 13(2), other than the heading, is replaced by the following:
- “(2) This section does not apply if the contribution is an employer's superannuation cash contribution.”
(2) In section CX 13, in the list of defined terms, “employer's superannuation contribution” is replaced by “employer's superannuation cash contribution”.
(3) Subsection (1) applies for the 2008–09 and later income years.

53 Benefits provided instead of allowances

In section CX 19(1)(b), “transport costs).” is replaced by “transport costs); or” and the following is added:
- “(c) an amount that, if it had been paid, would have been exempt income under section CW 17B (Relocation payments).”

54 Section CX 28 replaced

(1) Section CX 28 is replaced by the following:
“CX 28 Accommodation
The value of accommodation that an employer provides to an employee in connection with the employment or services is not a fringe benefit.
“Defined in this Act: accommodation, employee, employer, employment, fringe benefit”.
(2) Subsection (1) applies for the 2008–09 and later income years.

55 Section CX 39 repealed

(1) Section CX 39 is repealed.
(2) Subsection (1) applies––
- (a) on and after 1 July 2010, unless paragraph (b) applies:
- (b) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.

56 Government grants to businesses

(1) Section CX 47(1)(d)(i) is replaced by the following:
- “(i) expenditure that they incur and for which they would be allowed a deduction in the absence of section DF 1 (Government grants to businesses):”.
(2) Section CX 47(3) is replaced by the following:
“Exclusion
- “(3) This section does not apply to a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent to which the grant relates to expenditure—
  “(a) incurred by the recipient before the grant; and
  “(b) for which the recipient would be allowed a deduction in the absence of section DF 1.”
(3) In section CX 47, in the list of defined terms, “large budget screen production grant” is omitted.
(4) Subsection (1) applies for the 2008–09 and later income years.
(5) Subsection (2) applies for an amount derived by a company as a large budget screen production grant if—
- (a) the final application for the large budget screen production grant is made on or after 1 October 2009; and
- (b) the company does not incur before 1 July 2008 an amount of $3,000,000 or more in expenditure on the project to which the large budget screen production grant relates.

57 Amounts remitted as condition of new start grant

(1) Section CX 48(1), other than the heading, is replaced by the following:
- “(1) This section applies when in an income year of a person—
  “(a) the person carries on a business of—
  “(i) animal husbandry:
  “(ii) poultry-keeping:
  “(iii) beekeeping:
  “(iv) breeding horses other than bloodstock:
  “(v) horticulture:
  “(vi) cropping; and
  “(b) the person is paid a new start grant for the business for an event that is declared to be an emergency event; and
  “(c) the person in carrying on the business—
  “(i) incurs a liability for expenditure or loss before the declaration of the emergency event; and
  “(ii) before the date that is 3 months after the end of the period for which the declaration applies, takes the liability into account in calculating the person’s taxable income for an income year; and
  “(d) the liability referred to in paragraph (c)(i) is forgiven or otherwise remitted—
  “(i) as a prerequisite for the payment of the new start grant; and
  “(ii) before the date that is 18 months after the end of the period for which the declaration applies; and
  “(e) the amount of the remitted liability is income of the person under section CG 2 (Remitted amounts).”
(2) In section CX 48, in the list of defined terms,––
- (a) “qualifying event” is omitted:
- (b) “emergency event” is inserted.

58 Section CX 48B repealed

Section CX 48B is repealed.

59 New heading and section CX 48C inserted

Before section CX 49, the following is inserted:
“Government funding of film and television
“CX 48C Government funding additional to government screen production payments
“When this section applies
“(1) This section applies when a public authority makes a payment to a person for a project if—
“(a) the payment is not in the nature of a grant or subsidy; and
“(b) the payment is not a grant-related suspensory loan; and
“(c) the person receives a government screen production payment for the project in addition to the payment.
“Excluded income
“(2) The payment is excluded income of the person.
“Defined in this Act: excluded income, government screen production payment, grant-related suspensory loan, pay, public authority”.

60 New heading and section CX 48D inserted

(1) After section CX 48C, the following is inserted:
“Research and development
“CX 48D Tax credits for expenditure on research and development
The amount of a tax credit that a person has under subpart LH (Tax credits for expenditure on research and development) is excluded income of the person.
“Defined in this Act: amount, excluded income, tax credit”.
(2) Subsection (1) applies for the 2008–09 and later income years.

61 New heading and section CX 51B inserted

After section CX 51, the following is inserted:
“Emissions units under Climate Change Response Act 2002
“CX 51B Disposal of pre-1990 forest land emissions units
“Who this section applies to
“(1) This section applies to a person who disposes of a pre-1990 forest land emissions unit other than by surrender.
“Excluded income: disposal
“(2) An amount of income that the person derives from the disposal is excluded income if, at the time of the disposal, the person would not derive income, other than exempt income or excluded income, from a disposal without timber of the pre-1990 forest land to which the emissions unit relates.
“Defined in this Act: amount, emissions unit, excluded income, income, pre-1990 forest land, pre-1990 forest land emissions unit, surrender”.

62 Proceeds from certain disposals by portfolio investment entities or New Zealand Superannuation Fund

Section CX 55(1)(b) is replaced by the following:
- “(b) resident in Australia and—
  “(i) not treated as resident in a country other than Australia under an agreement between Australia and the other country that would be a double tax agreement if negotiated between New Zealand and the other country; and
  “(ii) included in an index that is an approved index under the ASX Market Rules, made under Chapter 7 of the Corporations Act 2001 (Aust); and
  “(iii) required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account.”

63 Section CX 55 replaced

(1) Section CX 55 is replaced by the following:
“CX 55 Proceeds from disposal of investment shares
“What this section applies to
“(1) This section applies in an income year to the following entities unless the entity is assured, under an arrangement with another person, of having a gain on the disposal:
“(a) a portfolio investment entity other than a life fund PIE:
“(b) the New Zealand Superannuation Fund:
“(c) a life insurer.
“Excluded income
“(2) An amount that the entity derives from the disposal in the income year of a share issued by a company referred to in subsection (3) is—
“(a) excluded income of the entity for the income year, if the entity is described in subsection (1)(a) or (b); or
“(b) excluded income of the entity for the income year to the extent to which the amount is actuarially determined to be policyholder base income, if the entity is a life insurer.
“Particular company
“(3) The company referred to in subsection (2) is,—
“(a) at all times in the income year, a company resident in New Zealand and not treated under and for the purposes of a double tax agreement as not resident in New Zealand; or
“(b) a company that meets the following requirements:
“(i) a company that, at all times in the income year, is resident in Australia and not treated as resident in a country other than Australia under an agreement between Australia and the other country, that would be a double tax agreement if negotiated between New Zealand and the other country; and
“(ii) a company that, at the start of the income year or at the time the shares are first acquired in the income year, is included in an approved index under the ASX Market Rules made under Chapter 7 of the Corporations Act 2001 (Aust); and
“(iii) a company that, at all times in the income year, is required under the Income Tax Assessment Act 1997 (Aust) and the Income Tax Assessment Act 1936 (Aust) to maintain a franking account.
“Non-participating redeemable shares
“(4) This section does not apply to a non-participating redeemable share.
“Defined in this Act: actuarially determined, amount, arrangement, company, double tax agreement, excluded income, income year, life fund PIE, life insurer, non-participating redeemable share, policyholder base income, portfolio investment entity, resident in Australia, resident in New Zealand, share”.
(2) Subsection (1) applies—
- (a) for a portfolio investment entity, including a life fund PIE, and the New Zealand Superannuation Fund, for the 2010–11 and later income years:
- (b) for a life insurer, other than in relation to a life fund PIE,—
  - (i) on and after 1 July 2010, unless subparagraph (ii) applies:
  - (ii) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.
Section 63(2)(b)(i): amended (with effect on 7 October 2009), on 8 December 2009, by section 166 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

64 Portfolio investor allocated income and distributions of income by portfolio investment entities

After section CX 56(3), the following is added:
“When trustees choose 19.5% portfolio investor rate
- “(4) Subsection (1) does not apply in relation to portfolio investor allocated income derived by a trustee who has chosen a portfolio investor rate of 19.5%.”

65 Section CX 56 replaced

(1) Section CX 56 is replaced by the following:
“CX 56 Attributed income of certain investors in multi-rate PIEs
“When this section applies
“(1) This section applies when an investor in a multi-rate PIE derives income attributed under section CP 1 (Attributed income of investors in multi-rate PIEs) in an income year, and—
“(a) the prescribed investor rate for the investor in the relevant calculation period is more than zero; and
“(b) that rate is not more than the tax rate notified under section HM 60 (Notified rates) in relation to the investor when the PIE calculates—
“(i) its income tax liability under section HM 47 (Calculation of tax liability or tax credit of multi-rate PIEs) in relation to the income; or
“(ii) a voluntary payment under section HM 45 (Voluntary payments) that is intended to be a final payment of its income tax liability in relation to the income.
“When this section does not apply
“(2) This section does not apply when—
“(a) the PIE calculates its income tax liability using the quarterly calculation option under section HM 43 (Quarterly calculation option) and the amount is attributed to an investor who is treated under section HM 61 (Certain exiting investors zero-rated) as zero-rated:
“(b) an amount of attributed PIE income is derived by a trustee who has chosen an investor rate of 19.5% under section HM 58 (Optional investor rates for trustees: 30%, 19.5%).
“Excluded income
“(3) The amount is excluded income of the investor.
“Defined in this Act: amount, attribution period, calculation period, excluded income, income, income tax liability, income year, investor, multi-rate PIE, pay, PIE, prescribed investor rate, quarter
“CX 56B Distributions to investors in multi-rate PIEs
An amount of income derived by an investor in a multi-rate PIE as a distribution of or dividend of the PIE is excluded income of the investor.
“Defined in this Act: amount, dividend, excluded income, income, investor, multi-rate PIE
“CX 56C Distributions to investors by listed PIEs
“Resident investors
“(1) If an investor in a listed PIE derives an amount in an income year as a distribution by or dividend of the PIE, the amount is excluded income of the investor if they—
“(a) are resident; and
“(b) are a natural person or a trustee; and
“(c) do not include the amount as income in a return of income for the income year.
“Imputed dividends
“(2) If subsection (1)(a) to (c) does not apply to the investor, the amount is excluded income to the extent to which the amount of the distribution or dividend is more than the amount that is fully credited as described in section CD 43(26) (Available subscribed capital amount).
“Defined in this Act: amount, dividend, excluded income, income year, investor, listed PIE, PIE, resident, return of income, trustee”.
(2) Subsection (1) applies for the 2010–11 and later income years.

66 Section CX 57 replaced

(1) Section CX 57 is replaced by the following:
“CX 57 Credits for investment fees
“When this section applies
“(1) This section applies when—
“(a) a multi-rate PIE includes a credit for fees in the calculation of its tax liability under section HM 47 (Calculation of tax liability or tax credit of multi-rate PIEs) in relation to an investor in an investor class of the PIE; and
“(b) an amount of the credit is attributed to the investor as a member of the class.
“Excluded income
“(2) The amount allocated is excluded income of the investor.
“Defined in this Act: amount, excluded income, investor, investor class, multi-rate PIE, PIE”.
(2) Subsection (1) applies for the 2010–11 and later income years.

67 New section CZ 9B inserted

After section CZ 9, the following is inserted:
“CZ 9B Available capital distribution amount: 1988 to 2010
“When this section applies
“(1) This section applies for the purposes of section CD 44 (Available capital distribution amount) in relation to capital gain amounts derived or capital loss amounts incurred in the period that starts on 1 April 1988 and ends on 31 March 2010.
“Related person transactions
“(2) No capital gain amount is derived or capital loss amount incurred by a company disposing of property under an arrangement with a related person. But this subsection does not apply if—
“(a) the company is a close company; and
“(b) the related person is not a company; and
“(c) the disposal is not on the liquidation of the company.
“Meaning of related person
“(3) In this section, related person means a person related to a company (the first company) because 1 of the following applies to the person and the first company:
“(a) the person owns, can control, directly or indirectly, or has the right to acquire 20% or more of the first company's ordinary shares; or
“(b) the person owns, can control, directly or indirectly, or has the right to acquire 20% or more of the voting rights of shareholders in the first company; or
“(c) the person is a company and the first company owns, can control, directly or indirectly, or has the right to acquire 20% or more of the ordinary shares in the person; or
“(d) the person is a company and the first company owns, can control, directly or indirectly, or has the right to acquire 20% or more of the voting rights of shareholders in the company; or
“(e) the person is a company and 20% or more of the shares or voting rights in the person are owned or controlled by persons that also own, control, or have the right to acquire 20% or more of the shares or voting rights in the first company; or
“(f) the person is a partner or co-venturer of the first company; or
“(g) the person is the trustee of a trust and the first company, or a person who is a related person of the first company under this subsection, benefits or can benefit under the trust, directly or indirectly; or
“(h) the person is a partnership and 1 or more persons, that are related persons of the first company under this subsection, are entitled to 50% or more of the partnership's assets or profits or are able to control the partnership.
“Look-through relatives and nominees
“(4) For the purposes of subsection (3), a person is treated as holding anything held by—
“(a) their spouse, civil union partner, or de facto partner; or
“(b) their child; or
“(c) a child of their spouse, civil union partner, or de facto partner; or
“(d) a spouse, civil union partner, or de facto partner of their child, or of a child of their spouse, civil union partner, or de facto partner.
“Look-through interposed companies
“(5) For the purposes of subsection (3)(e), if shares or voting rights in a company are owned or controlled by another company, a look-through approach must be applied. The look-through approach requires that—
“(a) the shares or voting rights are treated as if owned or controlled by the shareholders in the other company; and
“(b) if a shareholder in the other company is a company, that shareholder's portion of the shares or voting rights are treated as if owned or controlled by the shareholders in the shareholder company; and
“(c) the approach is applied in the same way to any chain of companies, whatever the length of the chain.
“Defined in this Act: amount, close company, company, liquidation, related person, share, shareholder, trustee”.

68 Determining tax liabilities

(1) Section DB 3(4), other than the heading, is replaced by the following:
- “(4) This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply.”
(2) In section DB 3, in the list of defined terms, “capital limitation” is inserted.
(3) Subsection (1) applies for the 2008–09 and later income years.

69 Interest: not capital expenditure

(1) Section DB 6(3) is repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

70 Interest: most companies need no nexus with income

(1) Section DB 7(7) is repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

71 Interest: money borrowed to acquire shares in group companies

(1) Section DB 8(7) is repealed.
(2) Subsection (1) applies for all income years beginning on or after 1 July 2009.

72 New section DB 10B inserted

After section DB 10, the following is inserted:
“DB 10B Interest or expenditure connected to stapled debt security
“No deduction
“(1) A company that issues a stapled debt security is denied, while section FA 2B(2) (Stapled debt securities) applies to the security, a deduction for—
“(a) interest payable under the security:
“(b) expenditure or loss incurred in connection with the security:
“(c) expenditure or loss incurred in borrowing the money secured by or owing under the security.
“Relationship with sections DB 5 to DB 8
“(2) This section overrides sections DB 5 to DB 8.
“Link with subpart DA
“(3) This section overrides the general permission.
“Defined in this Act: deduction, general permission, interest, pay, stapled debt security”.

73 Cost of revenue account property

(1) Section DB 23(2)(a) is repealed.
(2) In section DB 23(2)(b), “Proceeds from certain disposals by portfolio investment entities or New Zealand Superannuation Fund” is replaced by “Proceeds from disposal of investment shares”.
(3) In section DB 23, in the list of defined terms, “portfolio investment entity” is omitted.
(4) Subsections (1) and (2) apply for the 2010–11 and later income years.

74 Charitable or other public benefit gifts by company

(1) In section DB 41(2), “a society, institution, association, organisation, trust, or fund of any of the kinds described in section LD 3(2) (Meaning of charitable or other public benefit gift) or set out in schedule 32 (Recipients of charitable or other public benefit gifts)” is replaced by “a donee organisation”.
(2) In section DB 41, in the defined terms list,—
- (a) “close company”, “company”, “recognised exchange”, and “share” are omitted:
- (b) “donee organisation” is inserted.

75 Property misappropriated by employees or service providers

(1) Section DB 42(2), other than the heading, is replaced by the following:
- “(2) This section does not apply when a person who misappropriates property is associated with the person who carries on the business.”
(2) Subsection (1) applies for the 2010–11 and later income years.

76 Portfolio investment entities: zero-rated portfolio investors and allocated losses

(1) Section DB 53(1), other than the heading, is replaced by the following:
- “(1) This section applies in relation to an investor in a portfolio investor class of a portfolio tax rate entity when—
  “(a) either—
  “(i) the entity pays tax under section HL 22 (Payments of tax by portfolio tax rate entity making no election) and the investor exits from the entity during a portfolio calculation period; or
  “(ii) the investor is a zero-rated portfolio investor for the period; and
  “(b) the period includes a portfolio allocation period for which the investor is allocated an amount of portfolio investor allocated loss under subpart HL (Portfolio investment entities).”
(2) Subsection (1) applies for the 2008–09 and later income years.

77 Section DB 53 replaced

(1) Section DB 53 is replaced by the following:
“DB 53 Attributed PIE losses of certain investors
“When this section applies
“(1) This section applies to an investor in a multi-rate PIE when—
“(a) an amount of attributed PIE loss is attributed under section HM 36 (Calculating amounts attributed to investors) to an investor for an attribution period in a tax year; and
“(b) either the investor is—
“(i) a zero-rated investor; or
“(ii) treated under section HM 61 (Certain exiting investors zero-rated) as zero-rated.
“Deduction
“(2) The investor is allowed a deduction for the amount allocated to the investor's income year in which the PIE's tax year ends.
“Link with subpart DA
“(3) This section supplements the general permission. The general limitations still apply.
“Defined in this Act: amount, attributed PIE loss, attribution period, deduction, exit period, general limitation, general permission, income tax liability, income year, investor, multi-rate PIE, PIE, quarter, tax year, zero-rated investor
“Compare: 2007 No 97 s DB 53”.
(2) Subsection (1) applies for the 2010–11 and later income years.

78 Section DB 54 replaced

(1) Section DB 54 is replaced by the following:
“DB 54 Treatment of credits for investment fees
“When this section applies
“(1) This section applies when an investor in an investor class of a multi-rate PIE incurs expenses in relation to their investor interest, and the entity includes the amount in the calculation of its tax liability under section HM 47 (Calculation of tax liability or tax credit of multi-rate PIEs) in relation to the investor.
“No deduction
“(2) The investor is denied a deduction for the amount.
“Link with subpart DA
“(3) This section overrides the general permission.
“Defined in this Act: amount, deduction, general permission, investor, investor class, investor interest, multi-rate PIE
“Compare: 2007 No 97 s DB 54”.
(2) Subsection (1) applies for the 2010–11 and later income years.

79 Expenditure incurred in deriving exempt dividend

(1) Section DB 55(1) and (2) are replaced by the following:
“Deduction
- “(1) A company that derives a dividend that is exempt income of the company under section CW 9 (Dividend derived from foreign company) is allowed a deduction of the amount of the expenditure incurred by the company in deriving the dividend.”
(2) In section DB 55, in the list of defined terms, “CTR company” is omitted.
(3) Subsection (1) applies for all income years beginning on or after 1 July 2009.

80 Heading and section DB 60 replaced

The heading after section DB 59 and section DB 60 are replaced by the following:
“Emissions units and liabilities under Climate Change Response Act 2002
“DB 60 Acquisition of emissions units
“When this section applies
“(1) This section applies when a person is transferred an emissions unit under section 64, or Part 4 subpart 2, of the Climate Change Response Act 2002 for a price of zero.
“No deduction
“(2) The person is denied a deduction for an amount of expenditure or loss incurred as consideration for the emissions unit.
“Link with subpart DA
“(3) Subsection (2) overrides the general permission.
“Defined in this Act: amount, emissions unit, general permission, loss”.

81 New section DB 60B inserted

(1) After section DB 60, the following is inserted:
“DB 60B Liabilities for emissions
“When this section applies
“(1) This section applies when a person incurs a liability under the Climate Change Response Act 2002 for emissions relating to post-1989 forest land or pre-1990 forest land.
“No deduction
“(2) The person is denied a deduction for the liability.
“Link with subpart DA
“(3) Subsection (2) overrides the general permission.
“Defined in this Act: amount, deduction, general permission, post-1989 forest land, pre-1990 forest land”.
(2) Subsection (1) applies for deductions accrued on or after 1 January 2008.

82 Contributions to employees' superannuation schemes

(1) In section DC 7(1), “for a contribution” is replaced by “for a superannuation contribution”.
(2) In section DC 7(1B), “for a contribution” is replaced by “for a superannuation contribution”.
(3) In section DC 7, in the list of defined terms, “superannuation contribution” is inserted.
(4) Subsections (1) and (2) apply for the 2008–09 and later income years.

83 Criteria for approval of share purchase schemes: before period of restriction ends

(1) Section DC 13(5)(d) is replaced by the following:
- “(d) the trustee to be prohibited from applying the amount of any dividend to the repayment of a sum owing to the company or to the trustee; and”.
(2) Subsection (1) applies for the 2008–09 and later income years.

84 Employment-related activities

(1) The heading to section DD 4(3) is replaced by “Relocation expenses, employees' meals, and sustenance allowances”.
(2) Section DD 4(3)(a) is replaced by the following:
- “(a) an amount that is exempt income of an employee under sections CW 17B and CW 17C (which relate to relocation expenses, expenditure on overtime meals, and sustenance allowances):”.
(3) In section DD 4, in the list of defined terms, “amount” is inserted.

85 Interpretation: reimbursement and apportionment

In section DD 10(a), “section CW 17 (Expenditure on account, and reimbursement of employees)” is replaced by “sections CW 17, CW 17B, and CW 17C (which relate to expenditure and reimbursement of employees)”.

86 Heading to subpart DF

In the heading to subpart DF, “, funding,” is inserted after “grants”.

87 Government grants to businesses

(1) Section DF 1(6) is repealed.
(2) In section DF 1, in the list of defined terms, “large budget screen production grant” is omitted.
(3) Subsection (1) applies for an amount derived by a company as a large budget screen production grant if—
- (a) the final application for the large budget screen production grant is made on or after 1 October 2009; and
- (b) the company does not incur before 1 July 2008 an amount of $3,000,000 or more in expenditure on the project to which the large budget screen production grant relates.

88 Payments for social rehabilitation

In section DF 4(3)(b), “part H,” is replaced by “part I,”.

89 New section DF 5 added

After section DF 4, the following is added:
“DF 5 Government funding additional to government screen production payments
“When this section applies
“(1) This section applies when a public authority makes a payment (the funding payment) to a person for expenditure incurred in a project if—
“(a) the funding payment is not in the nature of a grant or subsidy; and
“(b) the funding payment is not a grant-related suspensory loan; and
“(c) the person receives a government screen production payment for the project in addition to the funding payment; and
“(d) the person would be allowed a deduction for the expenditure in the absence of this section; and
“(e) the payment is excluded income under section CX 48C (Government funding additional to government screen production payments).
“No deduction for expenditure
“(2) The person is denied, to the extent of the amount of the funding payment, the deduction for the expenditure that would be allowed in the absence of this section.
“Deduction for payments to public authority
“(3) The person is allowed a deduction for the amount of a payment (the return payment) made to the public authority to the extent to which the return payment is required by the arrangement under which the funding payment is made.
“Links with subpart DA
“(4) In this section—
“(a) subsection (2) overrides the general permission; and
“(b) subsection (3) supplements the general permission and overrides the capital limitation; the other general limitations still apply.
“Defined in this Act: capital limitation, deduction, excluded income, general limitation, general permission, government screen production payment, grant-related suspensory loan, pay, public authority”.

90 When attributed CFC loss arises

(1) After the heading to section DN 2, “General rule” is inserted as a subsection heading.
(2) Section DN 2(f) and (g) are replaced by the following:
- “(f) the CFC has a net attributable CFC loss for the accounting period under section EX 20C (Net attributable CFC income or loss); and
- “(h) the CFC is not a non-attributing active CFC for the accounting period, under section EX 21B (Non-attributing active CFCs); and
- “(i) the CFC is not a non-attributing Australian CFC for the accounting period, under section EX 22 (Non-attributing Australian CFCs).”
(3) After section DN 2(i), the following is added as subsection (2):
“Special rule: Attributable CFC amount from personal services
- “(2) If a person and a non-attributing active CFC or non-attributing Australian CFC meet the requirements of subsection (1)(a) to (e) and the CFC derives income from personal services that is an attributable CFC amount under section EX 20B(3)(h) (Attributable CFC amount), the person has attributed CFC loss from the CFC equal to the product of—
  “(a) the person's income interest in the CFC:
  “(b) the amount by which the CFC's expenditure incurred in deriving the income from personal services exceeds the income from personal services.”
(4) In section DN 2, in the list of defined terms,—
- (a) “branch equivalent loss” is omitted:
- (b) “attributable CFC amount”, “net attributable CFC loss”, “non-attributing active CFC”, and “non-attributing Australian CFC” are inserted.
(5) Subsections (2) and (3) apply for all income years beginning on or after 1 July 2009.

91 When FIF loss arises

(1) Section DN 6(3) is replaced by the following:
“FIF loss from CFC with FIF interest
- “(3) FIF loss also includes an amount of additional FIF loss that a person with an income interest of 10% or more in a CFC has in an income year under section EX 58 (Additional FIF income or loss if CFC owns FIF), whether or not the CFC is a non-attributing Australian CFC under section EX 22 (Non-attributing Australian CFCs).”
(2) In section DN 6, in the list of defined terms, “non-attributing Australian CFC” is inserted.
(3) Subsection (1) applies for all income years beginning on or after 1 July 2009.

92 Section DO 11B repealed

(1) Section DO 11B is repealed.
(2) Subsection (1) applies for the 2009–10 and later income years.

93 Forestry business on land bought from the Crown, Maori owners, or holding company: no deduction

(1) In the heading to section DP 8(3), “section FA 2” is replaced by “sections FA 2 and FA 2B”.
(2) In section DP 8(3),“as it applies to substituting debentures, does” is replaced by “, as it applies to substituting debentures, and section FA 2B (Stapled debt securities) do”.

94 Sections DR 1 to DR 3 replaced

(1) Sections DR 1 to DR 3 are replaced by the following:
“DR 1 Policyholder base allowable deduction of life insurer
“Deduction
“(1) If, but for this section, a life insurer has an amount of policyholder base allowable deduction for an income year and that amount is neither a deduction under this Part nor denied as a deduction under this Part, the amount is a deduction of the life insurer for the income year.
“No cross-deducting: section EY 2
“(2) A policyholder base allowable deduction is not allowed against shareholder base income. Section EY 2 (Policyholder base) deals with allowing policyholder base allowable deductions against policyholder base income, and deals with deductions that relate to the life insurer's schedular income derived by their life fund PIE that is a multi-rate PIE.
“Link with subpart DA
“(3) Subsections (1) and (2) override the general permission.
“Defined in this Act: amount, deduction, general permission, income year, life fund PIE, life insurer, multi-rate PIE, policyholder base allowable deduction, policyholder base income, shareholder base income
“DR 2 Shareholder base allowable deduction of life insurer
“Deduction
“(1) If, but for this section, a life insurer has an amount of shareholder base allowable deduction for an income year and that amount is neither a deduction under this Part nor denied as a deduction under this Part, the amount is a deduction of the life insurer for the income year.
“No cross-deducting
“(2) A shareholder base allowable deduction is not allowed against policyholder base income.
“Link with subpart DA
“(3) Subsections (1) and (2) override the general permission.
“Defined in this Act: amount, deduction, general permission, income year, life insurer, policyholder base income, shareholder base allowable deduction
“DR 3 Life reinsurance outside New Zealand
“No deduction
A life insurer is denied a deduction for life reinsurance premiums they incur if the relevant life reinsurance policy,––
“(a) was not offered in New Zealand:
“(b) was not entered into in New Zealand.
“Defined in this Act: amount, deduction, general permission, income year, life insurer, life reinsurance, life reinsurance policy, New Zealand
“DR 4 Life insurers' claims reserves
“No deduction on account of claims
“(1) For a life insurer's life insurance policies, the life insurer is denied a deduction relating to the life insurer's outstanding claims or for a claim's expenditure or loss for an income year, except as provided by––
“(a) section EY 24 (Outstanding claims reserving amount: non-participation policies not annuities):
“(b) subsection (2).
“Deduction for payments of current claims
“(2) The life insurer is allowed a deduction for the amount of expenditure or loss of a claim paid under a life insurance policy for the income year.
“Link with subpart DA
“(3) This section supplements the general permission. The general limitations still apply.
“Defined in this Act: claim, deduction, general limitation, general permission, life insurance policy, life insurer”.
(2) Subsection (1) applies––
- (a) on and after 1 July 2010, unless paragraph (b) applies:
- (b) for an income year that includes 1 July 2010 and later income years, if the life insurer chooses to apply the new life insurance rules in this Act in a return of income for the tax year corresponding to the first relevant income year.

95 Film production expenditure

(1) Section DS 2(4) is replaced by the following:
“Timing of deduction
- “(4) The deduction is allocated under—
  “(a) section EJ 4 or EJ 5 (which relate to expenditure incurred in acquiring film rights) if the film is one for which a government screen production payment is made; or
  “(b) section EJ 7 or EJ 8 (which relate to film production expenditure) if the film is not one for which a government screen production payment is made.”
(2) In section DS 2, in the list of defined terms—
- (a) “large budget screen production grant” is omitted:
- (b) “government screen production payment” is inserted.

96 Meaning of film reimbursement scheme

(1) Section DS 4(5), other than the heading, is replaced by the following:
- “(5) For the purposes of subsection (3), a shareholder in a loss-attributing qualifying company and the company are associated persons, in addition to the associated persons described in the provisions of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or in the 1988 version provisions.”
(2) Section DS 4(5), other than the heading, is replaced by the following:
- “(5) For the purposes of subsection (3), a shareholder in a loss-attributing qualifying company and the company are associated persons, in addition to the associated persons described in subpart YB (Associated persons and nominees).”
(3) In section DS 4, in the list of defined terms, “1973 version provisions”, “1988 version provisions”, and “1990 version provisions” are inserted.
(4) In section DS 4, in the list of defined terms, “1973 version provisions”, “1988 version provisions”, and “1990 version provisions” are omitted.
(5) Subsection (2) applies for the 2010–11 and later income years.

97 New section DT 1A inserted

(1) Before section DT 1, the following is inserted:
“DT 1A Ring-fenced allocations
“When this section applies
“(1) This section applies to an amount of a person's deductions for expenditure and loss for an income year to the extent to which it is—
“(a) petroleum exploration expenditure:
“(b) petroleum development expenditure:
“(c) residual expenditure.
“Basis for allocation of deductions
“(2) If, but for this subsection, an amount that relates to petroleum mining operations undertaken outside New Zealand would be allocated to an income year (the current year), including an amount carried forward and allocated to the current year, the amount that is allocated to the current year is no more than the amount of the person's income derived for the current year from all petroleum mining operations undertaken outside New Zealand.
“Excess allocations: carried forward and re-instated next year
“(3) Any excess not allocated to the current year because of subsection (2) is carried forward and treated as—
“(a) relating to petroleum mining operations undertaken outside New Zealand for the next income year; and
“(b) allocated to that next income year.
“Restriction on reinstating excess allocations
“(4) Despite subsection (3), the excess is not allocated to the next income year, and no deduction is allowed or allocated to any income year for the excess, if sections IA 5 and IP 3 (which relate to the carrying forward of tax losses for companies) would not have allowed the excess to be carried forward to that next income year in a loss balance, treating the excess as a tax loss component arising on the last day of the current year.
“Defined in this Act: deduction, income year, loss balance, New Zealand, petroleum development expenditure, petroleum exploration expenditure, petroleum mining operation, residual expenditure, tax loss component”.
(2) Subsection (1) applies for expenditure incurred on or after 4 March 2008.

98 Arrangement for petroleum exploration expenditure and sale of property

(1) In section DT 2(1)(b), the words before subparagraph (i) are replaced by the following:
- “(b) the person or a person associated with them under the provisions of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions may dispose of property—”.
(2) In section DT 2(1)(b), the words before subparagraph (i) are replaced by the following:
- “(b) the person or a person associated with them may dispose of property—”.
(3) In section DT 2(1)(c), subparagraphs (ii) and (iii) are replaced by the following:
- “(ii) a petroleum permit; or
- “(iii) material or a permit that relates to petroleum mining operations undertaken outside New Zealand, and that material or permit are substantially the same as those described in subparagraphs (i) or (ii), with necessary modifications made to this subpart and the Crown Minerals Act 1991.”
(4) In

opening outstanding claims reserve − closing outstanding claims reserve.

New Zealand Legislation: Acts

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Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 No 34 (as at 08 December 2009), Public Act

Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009

Note

Contents

1 Title

2 Commencement

Part 1Amendments to Income Tax Act 2007

3 Income Tax Act 2007

4 Income tax liability of person with schedular income

“Income tax liability of multi-rate PIEs

5 Withholding liabilities

“PAYE income payments

“Employer's superannuation cash contributions

6 Other obligations

7 Disposal: land used for landfill, if notice of election

8 Section CB 26 replaced

“CB 26 Disposal of certain shares by portfolio investment entities

“When this section applies

“Income

“Definition of items in formula

“Positive result

9 Section CB 27B repealed

10 Heading and section CB 36 replaced

“Emissions units under Climate Change Response Act 2002

“CB 36 Disposal of emissions units

“When this section applies

“Income

“Surrender of unit: deemed sale at given value

“Surrender of unit: emissions relating to post-1989 forest land

“Surrender of unit: deforestation of some pre-1990 forest land

“Surrender of post-1989 forest land unit: emissions not relating to post-1989 forest land

“Surrender of unit: free unit other than forest land unit

“Converted unit treated as sold

“Excluded income: post-1989 forest land emissions unit

11 New section CC 8B inserted

“CC 8B Certain commercial bills: non-resident holders

“When this section applies

“Income: disposal

“Income: redemption

12 What is a transfer of value?

“When shares are cancelled

13 When is a transfer caused by a shareholding relationship?

14 Section CD 21 repealed

15 Returns of capital: off-market share cancellations

16 Treasury stock acquisitions

17 Property made available intra-group

18 Employee benefits

19 Foreign investment fund income

“Exclusion for interests in grey list companies

“Application of rule for certain managed funds

20 Available subscribed capital (ASC) amount

21 Available capital distribution amount

“Associated persons transactions

“Close company liquidations

“Relationship with section CZ 9B

22 Heading and sections CD 45 to CD 52 repealed

23 Prevention of double taxation of share cancellation dividends

“Non-taxable dividends

24 Amounts derived in connection with employment

“Meaning of accommodation

25 Meaning of expenditure on account of an employee

26 Benefits, pensions, compensation, and government grants

27 New subpart CO inserted

“Subpart CO—Income from voluntary activities

“CO 1 Income from voluntary activities

“Income

“Relationship with section CW 62B

28 Section CP 1 replaced

“CP 1 Attributed income of investors in multi-rate PIEs

“When this section applies

“Income

29 When attributed CFC income arises

“Special rule: attributed CFC amount from personal services

30 When FIF income arises

“FIF income from CFC with FIF interest

31 Section CQ 7 repealed

32 Heading to subpart CR replaced

33 Sections CR 1 and CR 2 replaced

Part 1
Amendments to Income Tax Act 2007