“Income: other income provisions

• “(2) If the association derives from the transaction an amount that would, in the absence of this subsection, be income under a provision in this Part but for the mutual character of the transaction, the amount is income of the association.”

“Surrender of unit: under forest sink covenant

• “(4B) The person is treated as selling the unit for an amount of zero if the person transfers the emissions unit to the Crown under a forest sink covenant under section 67Y of the Forests Act 1949.”

“Surrender of post-1989 forest land emissions unit or forest sink emissions unit: for other purposes

• “(6) The person is treated as selling a post-1989 forest land emissions unit or forest sink emissions unit for an amount equal to the unit's market value if the person surrenders the emissions unit other than—

  • “(a) for emissions in relation to post-1989 forest land:

  • “(b) by a transfer to the Crown under a forest sink covenant under section 67Y of the Forests Act 1949.”

“Excluded income: fishing quota emissions unit

• “(10) Section CX 51C (Disposal of fishing quota emissions units) applies to the disposal to another person of a fishing quota emissions unit.”

“CD 34B Distributions to members of co-operative companies

• “What this section applies to

  “(1) This section applies to a distribution by a co-operative company, or by a company (a subsidiary) in which the co-operative company has a voting interest of 100%, if—

  • “(a) the distribution is made after the Commissioner has received, from the co-operative company, an election in writing to apply this section; and

  • “(b) the election has not been revoked.

  “General rule: co-operative company distributions not dividends

  “(2) If the requirements in subsection (4) are met, a distribution by a co-operative company, or by a subsidiary, to a member of the co-operative company is not a dividend, to the extent to which the distribution is for their––

  • “(a) transaction shares:

  • “(b) projected transactions shareholding:

  • “(c) limited non-transaction shares.

  “Exception: distributions for excess shareholdings

  “(3) Subsection (2)(c) is ignored,––

  • “(a) for a distribution to a member, if the member holds shares in the co-operative company that—

    • “(i) are not transaction shares, are not their projected transactions shareholding, and are not limited non-transaction shares; and

    • “(ii) may entitle members to enter trading transactions:

  • “(b) for all distributions to all members, if the constitution of the co-operative company permits any member to hold shares that––

    • “(i) are not transaction shares, are not their projected transaction shareholding, and are not limited non-transaction shares; and

    • “(ii) may entitle members to enter trading transactions.

  “Requirements

  “(4) For the purposes of subsection (2), the requirements are––

  • “(a) the co-operative company is resident in New Zealand for the period to which the distribution relates; and

  • “(b) the company making the distribution is resident in New Zealand for the period to which the distribution relates; and

  • “(c) the co-operative company believes on reasonable grounds that the member at the time of the distribution––

    • “(i) is resident in New Zealand:

    • “(ii) has a fixed establishment in New Zealand.

  “Meaning of transaction shares

  “(5) In this section, transaction shares means the number of shares in the co-operative company that the member holds for trading transactions that occurred in the period to which the distribution relates. The number of shares must determine the value of the trading transactions.

  “Meaning of limited non-transaction shares

  “(6) In this section, limited non-transaction shares means the member's shares that are not the member's transaction shares or their projected transactions shareholding, and that may entitle the member to enter trading transactions, if the number of those shares is less than or equal to the greater of the following:

  • “(a) 20% of the member's transaction shares on the date of entitlement for the distribution under section 125 of the Companies Act 1993:

  • “(b) 20% of the member's projected transactions shareholding on the date of entitlement for the distribution under section 125 of that Act.

  “Meaning of projected transactions shareholding

  “(7) In this section, projected transactions shareholding means the number of shares in the co-operative company that the member would have had to hold if the trading transactions actually had occurred that the member had projected, using reasonable assumptions, would occur in the period to which the distribution relates. The number of shares must determine the value of the trading transactions.

  “Meaning of trading transactions

  “(8) In this section, trading transactions means transactions between the member and the co-operative company or subsidiary that are––

  • “(a) the sale and purchase of trading stock of the vendor that is not intangible property; and

  • “(b) not subject to section CB 2 (Amounts received on disposal of business assets that include trading stock).

  “Companies Act 1993

  “(9) The 20 working day rule for fixing a date in section 125(2) of the Companies Act 1993 does not apply to members' entitlements to receive distributions that are for transaction shares, projected transaction shareholdings, limited non-transaction shares, or shares described in subsection (3), if––

  • “(a) the co-operative company or the subsidiary, as the case may be, has given a copy of the election described in subsection (1) to the Registrar of Companies before the relevant distributions are paid; and

  • “(b) for the purposes of section 125(1) of the Companies Act 1993, the co-operative company or the subsidiary, as the case may be, fixes a date in relation to members' entitlements to receive distributions before the entitlements arise, and that date is within the year or period to which the distributions relate.

  “Defined in this Act: Commissioner, company, co-operative company, dividend, limited non-transaction shares, projected transaction shareholding, resident in New Zealand, share, trading stock, trading transactions, transaction shares”.

“CW 29B Amounts from Australian complying superannuation schemes reinvested in KiwiSaver schemes

• An amount of income derived in an income year by a natural person from an Australian complying superannuation scheme is exempt income if, in the income year, it is contributed to a KiwiSaver scheme.

  “Defined in this Act: amount, Australian complying superannuation scheme, exempt income, income, income year, KiwiSaver scheme”.

• “(b) ends on 31 December 2014.”

“CX 51C Disposal of fishing quota emissions units

• “Who this section applies to

  “(1) This section applies to a person who disposes of a fishing quota 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 of the individual transferable quota to which the emissions unit relates.

  “Defined in this Act: amount, emissions unit, excluded income, exempt income, fishing quota emissions unit”.

• “(1) This section applies when an emissions unit is transferred to a person for a price of zero—

  • “(a) under section 64, or Part 4, subpart 2, of the Climate Change Response Act 2002:

  • “(b) in relation to a forest sink covenant under section 67Y of the Forests Act 1949 entered by the person.”

• “(1) This section applies when a person incurs a liability—

  • “(a) under the Climate Change Response Act 2002 for emissions relating to post-1989 forest land or pre-1990 forest land:

  • “(b) to transfer emissions units to the Crown under a forest sink covenant under section 67Y of the Forests Act 1949 entered by the person.”

“DB 61 Surrender of certain emissions units for post-1989 forest land emissions

• “When this section applies

  “(1) This section applies when a person surrenders a pre-1990 forest land emissions unit or fishing quota emissions unit to meet a liability under the Climate Change Response Act 2002 to surrender units in relation to post-1989 forest land.

  “Treated as disposal and reacquisition

  “(2) The person is treated as having disposed of the emissions unit to an unrelated person and as having then reacquired it, in each case immediately before the surrender and for an amount equal to the unit's market value at the time.

  “Defined in this Act: amount, emissions unit, fishing quota emissions unit, pre-1990 forest land emissions unit, surrender”.

• “(1) This section applies when an association—

  • “(a) enters into a mutual transaction; and

  • “(b) in relation to the transaction, pays an association rebate to a member.”

• “(3) The deduction is allowed in the income year corresponding to the accounting year for which the association rebate is paid.”

• “(bb) forest sink emissions units:”.

• “(cb) fishing quota emissions units, if the holder of the units would derive income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:”.

• “(db) fishing quota emissions units, if the holder of the units would derive no income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:”.

• “(5C) Despite subsection (5B), for the purposes of subsection (5),—

  • “(a) emissions units described in paragraphs (a) to (cb) may be pooled together:

  • “(b) emissions units described in paragraphs (d) and (db) may be pooled together.”

• “(eb) are not fishing quota emissions units; and”.

• “(b) rounds the figure up or down to the nearest rate specified in schedule 11, column 1 (New banded rates of depreciation); and”.

“Treatment of mothballed assets

• “(3B) Subsection (3)(b) does not apply in relation to an amount of depreciation loss for an item that has been withdrawn from use in deriving assessable income or carrying on a business for the purpose of deriving assessable income. However, this exclusion does not apply to an amount of depreciation loss for which the person has a deduction under section EE 39.”

• “(iii) is treated under IFRSs by the person as a hedge of something that is not a financial arrangement.”

• “(iii) is treated under IFRSs by the person as a hedge of something that is not a financial arrangement; and”.

• “(iii) is treated under IFRSs by the person as a hedge of something that is not a financial arrangement; and”.

“Modification

• “(8) Section EZ 52C (Change of spreading method: Determination G22 to Determination G22A) modifies this section.”

“Modification

• “(9) Section EZ 52C (Change of spreading method: Determination G22 to Determination G22A) modifies this section.”

• “(i) the person's control interest is less than or equal to a control interest in the same category held by another person; and”.

“Part-year calculations: end of transitional adjustments

• “(6) If, for a life insurance policy, the transitional adjustment under section EY 30(7) is calculated for part of an income year, because section EY 30 ceases to apply to the policy before the end of the income year, the life insurer does part-year tax calculations for the policy for the income year, as described in subsection (2), but the income year is divided by the day that section EY 30 ceases to apply. The effect of the part-year calculations is described in subsection (3).”

“Separation of products into separate policies for purposes of transitional adjustment

• “(1B) If a life insurance policy is comprised of 2 or more life insurance product types that are capable of being sold separately, and the life insurance cover amounts for each product type are separately identified in the policy, then each of the product types may be treated as a separate life insurance policy for the purposes of this section.”

• “(c) the amount of life insurance cover at the finish of a cover review period, or at the finish of any shorter period, if the life insurer chooses to measure within the cover review period, has not increased by more than the greater of 10% and the percentage change in the consumer price index for the relevant period, as compared to the amount of life insurance cover at the beginning of the relevant cover review period; and

• “(d) no new or replacement individual life is covered for a period beginning after the grandparenting start day.”

• “(e) to the extent to which, looking through to the individual lives covered, the amount of life insurance cover at the finish of a cover review period, or at the finish of any shorter period, if the life insurer chooses to measure within the cover review period, has not increased by more than the greater of 10% and the percentage change in the consumer price index for the relevant period, as compared to the amount of life insurance cover at the beginning of the relevant cover review period.”

“When this section does not apply: life insurance cover increase for whole cover review period

• “(5B) This section does not apply for a policy for the whole of an income year if a cover review period finishes in the year and, for that cover review period, there has been an increase in the amount of life insurance cover as described in subsection (2)(c) or (3)(e) and the life insurer has not made an election for measuring within the cover review period under those subsections.

“When this section does not apply: continuity

• “(5C) This section does not apply for a policy for any period after this section has ceased to apply for the policy.”

“Meaning of multiple life policy

• “(14) Multiple life policy—

  • “(a) means a life insurance policy with multiple individuals' life insurance cover grouped under it, if the group of individuals is identified in the policy:

  • “(b) does not include—

    • “(i) a workplace group policy:

    • “(ii) credit card repayment insurance:

    • “(iii) life reinsurance to the extent to which it reinsures a workplace group policy or credit card repayment insurance.”

• “(15) Workplace group policy means a life insurance policy with multiple individuals' life insurance cover grouped under it, or life reinsurance to the extent to which it reinsures such a life insurance policy, if—

  • “(a) the individuals under the policy are—

    • “(i) a group that includes, or consists of, a class of employees of an employer or group of employers, and may include 1 or more of the employers or directors of the employers, and the policy is sponsored by the employers or by the trustees of a superannuation scheme:

    • “(ii) members of a union registered under the Employment Relations Act 2000 or members of an industry association, and the union or association is the sponsor of the policy:

    • “(iii) the spouses, civil union partners, and de facto partners of employees or members described in subparagraphs (i) and (ii); and

  • “(b) in the case of the sponsor being the employer,—

    • “(i) the employer is required to offer an employee who is a member of the relevant class the opportunity to join the life insurance policy; and

    • “(ii) the life insurer and the employer have entered an agreement about who pays the premium.”

“EZ 52C Change of spreading method: Determination G22 to Determination G22A

• “How and when this section applies

  “(1) This section does not alter or affect a person's tax position in relation to Determination G22: Optional convertible notes denominated in New Zealand dollars convertible at the option of the holder or the person's litigation of their tax position in relation to Determination G22. It does not alter or affect the Commissioner's assessment of, or litigation of, that tax position. It applies after Determination G22 has applied for a person's financial arrangement, and only if, for the financial arrangement,––

  • “(a) Determination G22A: Optional convertible notes denominated in New Zealand dollars did not apply while Determination G22 applied, because of the application of section 90AE of the Tax Administration Act 1994, or the application of Determination G22A, clause 3(1)(b); and

  • “(b) Determination G22A starts applying immediately after––

    • “(i) section 90AE of the Tax Administration Act 1994 stops applying; or

    • “(ii) Determination G22A, clause 3(1)(b) stops applying.

  “Spreading method adjustment

  “(2) Despite sections EW 26 and EW 27 (which relate to changes of spreading method), the person must not calculate a spreading method adjustment under section EW 27 for the change of spreading method, for the financial arrangement, from Determination G22 to Determination G22A.

  “Part years under Determinations instead of spreading method adjustment

  “(3) In the income year in which subsection (2) applies, for the financial arrangement, Determination G22 applies for the part-year before the change to Determination G22A, and Determination G22A applies for the part-year after the change from Determination G22.

  “Defined in this Act: amount, assessment, financial arrangement, spreading method

“EZ 52D Base price adjustment: financial arrangements to which Determination G22 and Determination G22A applied

• “How and when this section applies

  “(1) This section does not alter or affect a person's tax position in relation to Determination G22 or the person's litigation of their tax position in relation to Determination G22. It does not alter or affect the Commissioner's assessment of, or litigation of, that tax position. It applies after Determination G22 has applied for a person's financial arrangement, and only if, for the financial arrangement,––

  • “(a) section EZ 52C applied; and

  • “(b) Determination G22A applies when the person is required to calculate a base price adjustment for the financial arrangement.

  “Consideration adjustment

  “(2) For the financial arrangement, the consideration referred to in section EW 31(7) (Base price adjustment formula) is adjusted in accordance with subsections (3) to (6).

  “Issuer

  “(3) If the person is the issuer of the financial arrangement, an amount calculated under subsections (5) and (6) is added to all consideration that has been paid, and all consideration that is or will be payable, by the issuer for or under the financial arrangement.

  “Holder

  “(4) If the person is a holder of the financial arrangement, an amount, referrable to the person's holding, calculated under subsections (5) and (6) is added to all consideration that has been paid, and all consideration that is or will be payable, to the holder for or under the financial arrangement.

  “Calculation

  “(5) For the purposes of subsections (3) and (4) the amount is calculated using the following formula:

  X − Z.

  “Definition of items in formula

  “(6) In the formula,––

  • “(a) X is, for the financial arrangement, an amount equal to the item s in Determination G22, clause 6(1), if that item were calculated in accordance with that Determination at the time immediately before the change of spreading method described in section EZ 52C(2):

  • “(b) Z is, for the financial arrangement, an amount equal to the item s in Determination G22, clause 6(1), if that item were calculated in accordance with that Determination at the time when it first applied.

  “Defined in this Act: amount, consideration, financial arrangement”.

“GC 1 Disposals of trading stock at below market value

• “When this section applies

  “(1) This section applies when a person disposes of trading stock for—

  • “(a) no consideration:

  • “(b) an amount that is less than the market value of the trading stock at the time of disposal.

  “Market value consideration

  “(2) The person is treated as deriving an amount equal to the market value of the trading stock at the time of disposal.

  “Market value expenditure

  “(3) If the person disposes of the trading stock to another person, an amount equal to the market value of the trading stock at the time of disposal is treated as expenditure incurred by the other person in acquiring the trading stock.

  “Shares in trading stock

  “(4) In this section, trading stock includes an interest in trading stock.

  “Exclusions

  “(5) This section does not apply to a disposal of trading stock—

  • “(a) under a relationship agreement:

  • “(b) by the person to another person who is not associated with them, for use by the other person in a farming, agricultural, or fishing business that is affected by a self-assessed adverse event:

  • “(c) under a share-lending arrangement, by a share user to a share supplier or by a share supplier to a share user.

  “Defined in this Act: amount, associated person, business, relationship agreement, self-assessed adverse event, share, share-lending arrangement, share supplier, share user, trading stock”.

“GC 3B Disposals of emissions units

• “When section GC 1 applies

  “(1) Section GC 1 applies to a disposal of an emissions unit as if the emissions unit were trading stock.

  “Exclusions

  “(2) Section GC 1 does not apply to a disposal of an emissions unit if the disposal is—

  • “(a) the surrender of the unit under the Climate Change Response Act 2002:

  • “(b) the transfer of the unit to the Crown under a forest sink covenant under section 67Y of the Forests Act 1949:

  • “(c) the transfer of a forest land emissions unit—

    • “(i) from the person (the transferor) who receives the unit from the Crown; and

    • “(ii) to a person (the transferee) as a party to a forestry rights agreement as defined in the Forestry Rights Registration Act 1983; and

    • “(iii) as required by a provision of the forestry rights agreement relating to the allocation of income or emissions units between the transferor and the transferee.

  “Defined in this Act: disposal, emissions unit, trading stock”.

• “(a) to have a distribution of profits to shareholders imputed or, to the extent not imputed, distributed as exempt income; and”.

“HA 11B When requirements no longer met: LAQCs

• “When status lost

  “(1) If a company is an LAQC in an income year, but does not meet the requirements of sections HA 1(3) and HA 5 to HA 10 for the next income year, its status as a qualifying company is treated as ended from the start of that next income year.

  “Regaining status

  “(2) The company may become a qualifying company again if it subsequently meets the requirements set out in sections HA 5 to HA 9.

  “Defined in this Act: company, income year, LAQC, qualifying company”.

“Treatment of losses incurred before company has LAQC status

• “(5) Despite subsection (2), a company that has a tax loss component arising in an income year in which it is a qualifying company but before it acquires LAQC status, may include the amount in a loss balance (the pre-LAQC loss balance) for the tax year corresponding to the income year, but only to the extent to which the tax loss component remains unused at the end of the tax year.

“Using pre-LAQC loss balance

• “(5B) For the tax year referred to in subsection (1), a pre-LAQC loss balance carried forward from the previous tax year is used in the following order:

  • “(a) first, the LAQC must use the amount under section IA 4 (Using loss balances carried forward to tax year); and

  • “(b) secondly, for a remaining unused amount of the loss balance, the LAQC may choose to use the amount under section IA 3 (Using tax losses in tax year); and

  • “(c) thirdly, for a remaining unused amount of the loss balance, the LAQC must include the amount in the company's loss balance under section IA 3(4) at the end of the tax year.

“Continuity requirements and ordering rules

• “(5C) The uses referred to in subsection (5B) are subject to the continuity requirements set out in section IA 5 (Restrictions on companies' loss balances carried forward) and the ordering rules set out in section IA 9 (Ordering rules).”

• “(2) Despite section 38 of the Tax Administration Act 1994, the LAQC may choose to treat the amount of the shareholder's tax loss as having been incurred on the first day of the next income year.”

• “(a) have a tax credit under subparts LC and LD (which relate to tax credits for natural persons and for certain gifts):”.

“Failure to meet other requirements

• “(2) An entity ceases under this section to be eligible to be a portfolio investment entity if it fails in either of the circumstances set out in subsection (3) and the entity's failure—

  • “(a) is significant and would not have occurred but for an event or circumstance within the control of the entity:

  • “(b) is repeated on the last day of the quarter following the quarter referred to in subsection (3)(a) and ending more than 3 months before the announcement referred to in subsection (3)(a)(ii) and (b)(ii).

“Particular circumstances

• “(3) The circumstances are that either—

  • “(a) the portfolio investor class of the entity fails to meet a requirement under section HL 6 or HL 9 on the last day of a quarter—

    • “(i) beginning 6 months or more after the date on which the portfolio investor class is formed; and

    • “(ii) ending more than 3 months before an announcement by the entity to its investors that the portfolio investor class is winding up within 12 months of the announcement; or

  • “(b) the entity fails to meet a requirement under section HL 10 on the last day of a quarter—

    • “(i) beginning 6 months or more after the date on which the entity becomes a portfolio investment entity; and

    • “(ii) ending more than 3 months before an announcement by the entity to its investors that the entity is winding up within 12 months of the announcement.”

• “(i) are an investment of the type listed in subsection (4); and”.

“Investment types

• “(4) For the purposes of subsection (3)(a)(i), the investment must be—

  • “(a) an investment in land:

  • “(b) an investment in a portfolio land company that is resident in New Zealand:

  • “(c) an investment in a non-resident portfolio land company in which the portfolio investor class has a voting interest of more than 20%.”

“HM 42B Part-year tax calculations for PIEs under the exit calculation option for the 2010–11 tax year

• “When this section applies

  “(1) This section applies to a PIE for the 2010–11 tax year if section HM 42 applies to the PIE for that year and the PIE chooses to apply this section by filing a return under section 57B(5) or (7) of the Tax Administration Act 1994 in accordance with this section.

  “Part-year tax calculations: description

  “(2) For calculating their income tax liability for the 2010–11 tax year, the PIE treats references to an income year or a tax year as if they are references to 2 separate tax years and corresponding income years within that tax year, divided by 1 October 2010 (for example: an amount of income attributed to a date before 1 October 2010 is included in the first part-year and taxed using the notified investor rate advised before 1 October 2010. A notified investor rate advised on or after 1 October 2010 is applied only to the amount of income attributed to the second part-year).

  “Part-year tax calculations: effect

  “(3) The part-year calculations may give rise to income and deductions for the income year and they do create part-year tax return obligations, except that the requirement for returns under section 57B(7)(a) of the Tax Administration Act 1994 and for notice in relation to investors or proxies under section 31C(4) of that Act can be met by sending returns or notices on a full-year or part-year basis. The 2 part-year calculations create 2 income tax liabilities for 2 part-years.

  “Foreign tax credits: special rule

  “(4) Despite subsections (2) and (3), tax credits under subpart LJ (Tax credits for foreign income tax) may be used in accordance with section HM 51 in either part-year, if they are attributable to the first part-year.

  “Defined in this Act: deduction, income, income tax liability, income year, notified investor rate, PIE, tax credit, tax year”.

“Exception

• “(3B) Subsection (3) does not apply if the PIE has made a voluntary payment of tax under section HM 45 that is intended to satisfy its income tax liability for the period in relation to the investor unless the rate last notified applies to the voluntary payment.”

• “(a) are an investment of the type listed in subsection (4); and”.

“Investment types

• “(4) For the purposes of subsection (3)(a), the investment must be—

  • “(a) an investment in land:

  • “(b) an investment in a land investment company that is resident in New Zealand:

  • “(c) an investment in a non-resident land investment company in which the investor class has a voting interest of more than 20%.”

• “(5) After the end of the period of 3 years referred to in subsection (1), any residual formation loss may be allocated to an attribution period when a calculation is made under section HM 35(5) of the taxable amount for an investor class.”

“HR 9B Bankruptcy-remote property during application of section HR 9

• Despite section HR 9, property that a financial institution holds because of the application of section HR 9 cannot be attached, charged, disposed of, or otherwise used in the payment of its tax debt, except to the extent that––

  • “(a) such tax debt—

    • “(i) does not relate to income tax or provisional tax; and

    • “(ii) would have been the relevant financial institution special purpose vehicle's tax debt in the absence of section HR 9:

  • “(b) such property could have been attached, charged, disposed of, or otherwise used in payment of the tax debt in the absence of section HR 9.

  “Defined in this Act: dispose, financial institution, financial institution special purpose vehicle, income tax, provisional tax, tax”.

• “(4) In this section, unwind means a process, ignoring section HR 9, by which—

  • “(a) guarantees and residential mortgage backed securities, as the case may be, described in the definition of financial institution special purpose vehicle, paragraph (d) are cancelled; and

  • “(b) interests described in the definition of financial institution special purpose vehicle, paragraph (b) are transferred to the financial institution; and

  • “(c) the vehicle is terminated, by liquidation or otherwise.”

• “(2) The general rules do not apply in relation to a loss-attributing qualifying company (LAQC) to an amount that would have been a loss balance carried forward under section IA 3(4) if section HA 21 (Loss balances not carried forward) did not exist. The provisions that deal generally with these losses are sections HA 24 to HA 27. But this subsection does not apply to a pre-LAQC loss balance dealt with under section HA 24(5) to (5C) (Treatment of tax losses other than certain foreign losses).”

“Measuring common voting interests

• “(3) In subsection (1)(a), a person's common voting interest in the relevant companies at a particular time is the percentage of their voting interests under section YC 2 (Voting interests) in each of the companies at the time.

“Measuring common market value interests

• “(4) In subsection (1)(b), a person's common market value interest in the relevant companies at a particular time is the percentage of their market value interests under section YC 3 (Market value interests) in each of the companies at the time.

“Common interest percentages

• “(5) For the purposes of this section, in measuring a person's common voting interest or common market value interest in 2 or more companies at a particular time,—

  • “(a) for percentages that are the same in relation to each company, the person's percentage interest at the time:

  • “(b) for percentages that differ as between the companies, the lowest percentage interest in each company at the time.”

• “(1) This section applies to companies that are part of a group of companies in a tax year when—

  • “(a) a company (company C) in the group has in the tax year a deduction—

    • “(i) under section DB 31 (Bad debts) for a loan to another company in the group:

    • “(ii) for a decline in the value of shares in another company in the group; and

  • “(b) a company (company A) in the group, other than company C, has a tax loss for the tax year that includes a tax loss component arising from a deduction—

    • “(i) for expenditure funded by the loan referred to in paragraph (a)(i) or by the issue to company A of the shares referred to in paragraph (a)(ii); and

    • “(ii) taken into account in calculating company A's tax loss for the 1993–94 tax year or a later tax year.”

“Limitation on loss grouping

• “(2) The amount of company A's tax loss cannot be made available to another company in the group to use except to the extent to which the amount of the tax loss is more than the total amount of the deductions referred to in subsection (1)(a). To that extent, company A may choose to make the excess amount available to a group company to use under section IA 3(2) and IA 5 (which relate to using and carrying forward tax losses) if the requirements for grouping tax losses are met.”

• “(a) the amount of company A's loss balance carried forward to the tax year in which the breach occurred is not more than the amount of—

  • “(i) company B's net income for the common span, if no company in the group other than company B has net income for the common span of more than zero; or

  • “(ii) the total of the amounts of net income for the common span of companies in the group; and”.

	company's income	−	total credits + supplementary dividends
			tax rate.

• “(1) An ICA company has an imputation credit for an amount representing an entitlement to funds held in a tax pooling account if the intermediary transfers the entitlement from another person to the company.”

• “(3) The credit date is,—

  • “(a) for an entitlement to funds that are transferred by the intermediary from the tax pooling account to the company's tax account with the Commissioner, the credit date under section RP 19 (Transfers from tax pooling accounts) for the amount transferred; or

  • “(b) for an entitlement to funds that are refunded by the intermediary from the tax pooling account to the company, the date of the refund; or

  • “(c) for an entitlement that is transferred by the intermediary from the company to another person, the date of the transfer.”

• “(1) This section applies for an ICA company when—

  • “(a) the company has an entitlement to an amount in a tax pooling account and has an imputation credit for the entitlement under—

    • “(i) section OB 5 (table O1: imputation credits, row 3 (deposit in tax pooling account)); or

    • “(ii) section OB 6 (table O1: imputation credits, row 4 (transfer from tax pooling account)); and

  • “(b) the intermediary refunds the amount from the tax pooling account to the company.”

• “(1) This section applies for an ICA company when—

  • “(a) the company has an entitlement to an amount in a tax pooling account and has an imputation credit for the entitlement under—

    • “(i) section OB 5 (table O1: imputation credits, row 3 (deposit in tax pooling account)); or

    • “(ii) section OB 6 (table O1: imputation credits, row 4 (transfer from tax pooling account)); and

  • “(b) the intermediary transfers the entitlement from the company to another person.”

“Sources of liability

• “(1B) Company A is liable for imputation additional tax under—

  • “(a) subsection (2), if the company has a debit balance in the imputation credit account when the ultimate owner of the company changes:

  • “(b) subsection (4), if the company has an amount of excess entitlement under subsection (5) when the ultimate owner of the company changes.”

“Liability arising from excess entitlement

• “(4) Company A is liable for an amount of imputation additional tax equal to the amount of the excess entitlement described in subsection (5) reduced, to no less than zero, by the amount of any payment that Company A—

  • “(a) made as provisional tax or income tax; and

  • “(b) chooses to treat as having been paid by company B.”

• “(5) The company is liable for an amount of imputation additional tax, equal to the excess entitlement determined under subsection (6), if a group of people hold common voting interests in the new group that exceed by 67% or more the common voting interests in the former group that are held by the same people immediately before the company joins the new group.

“Possible liability under section OB 72B

• “(5B) The company is liable for an amount of imputation additional tax given by section OB 72B(8) if the requirements of that provision are met.”

• “(a) zero, if the credit balance of the company's imputation credit account at the time is equal to or more than the amount (the total refundable amount) that is the total of the following:

  • “(i) the amount in the tax pooling account provided by or for the benefit of the company that is more than the company's liability to pay income tax or provisional tax at the time:

  • “(ii) the amount of the refund to which the company is entitled under sections RM 2 and RM 4 to RM 6 (which relate to refunds of excess tax), other than an amount affected by a restriction under section OB 72B(5); or

• “(b) the total refundable amount, if there is no credit balance in the company's imputation credit account at the time; or

• “(c) the excess of the total refundable amount over the credit balance in the company's imputation credit account at the time, if paragraph (b) does not apply.”

“OB 72B Limit on using entitlement to refund after joining wholly-owned group

• “When this section applies

  “(1) This section applies when—

  • “(a) an ICA company joins a wholly-owned group of companies (the new group) from another wholly-owned group of companies (the former group); and

  • “(b) the ICA company is not liable for imputation additional tax under section OB 72(5).

  “Restricted refund amount for company and new group

  “(2) Subsections (3) to (8) apply to an amount (the restricted refund amount) for the ICA company and the new group that is greater than zero and calculated using the formula—

  refund amount

  –

  ICA credit balance.

  “Definition of items in formula

  “(3) In the formula,—

  • “(a) refund amount is the total of the following amounts, determined immediately before the ICA company joins the new group:

    • “(i) the amount in the tax pooling account provided by or for the benefit of the ICA company that is more than the company's liability to pay income tax or provisional tax at the time:

    • “(ii) the amount of the refund to which the ICA company is entitled under sections RM 2 and RM 4 to RM 6 (which relate to refunds of excess tax) other than an amount affected by a restriction under subsection (5) for the company and another group:

  • “(b) ICA credit balance is the credit balance of the ICA company's imputation credit account immediately before the company joins the new group.

  “Payment to Commissioner

  “(4) If the restricted refund amount is greater than the amount referred to in subsection (3)(a)(ii), the ICA company must pay to the Commissioner an amount equal to the excess and the Commissioner must hold the amount with the balance of the restricted refund amount as if the excess were a refund to which the company were entitled under section RM 2 (Refunds for overpaid tax).

  “Use of restricted refund amount

  “(5) The Commissioner must hold the restricted refund amount for the ICA company and the new group subject to the restriction that the amount—

  • “(a) may be refunded for an imputation credit only if the ICA company satisfies the Commissioner that the credit—

    • “(i) arises from taxation paid by the ICA company or by a company that is in the same wholly-owned group as the ICA company and was in the former group immediately before the ICA company joined the new group:

    • “(ii) is attached to a dividend received in relation to a shareholding by the ICA company or by a company that is in the same wholly-owned group as the ICA company and was in the former group immediately before the ICA company joined the new group and had the shareholding then; and

  • “(b) may be used to satisfy a tax liability of—

    • “(i) the ICA company:

    • “(ii) a company that is in the same wholly-owned group as the ICA company (the member), if the ICA company satisfies the Commissioner that the member was in the former group immediately before the ICA company joined the new group.

  “Restriction additional to other requirements

  “(6) The restriction imposed by subsection (5) on the use of a restricted refund amount is in addition to the requirements under other provisions of the Act for a refund or the satisfaction of a tax liability from an amount to which the ICA company is entitled under sections RM 2 and RM 4 to RM 6.

  “Reducing restricted refund amount

  “(7) The restricted refund amount for the ICA company and a group is reduced by the amount of—

  • “(a) a refund permitted under subsection (5)(a) relating to the restricted refund amount:

  • “(b) a satisfaction of a tax liability permitted by subsection (5)(b) relating to the restricted refund amount:

  • “(c) a payment of imputation additional tax under subsection (8) relating to the restricted refund amount:

  • “(d) a payment of imputation additional tax under section OB 71(4) relating to the restricted refund amount.

  “Liability for imputation additional tax

  “(8) The ICA company is liable for an amount of imputation additional tax equal to the restricted refund amount for the company and a wholly-owned group of companies (the old group) determined immediately after a change in the holding of voting interests in the ICA company if, immediately after the change, a group of people hold common voting interests in the ICA company that exceed, by 67% or more, the common voting interests—

  • “(a) in the wholly-owned group of companies to which the company belonged immediately before the company joined the old group; and

  • “(b) that were held by the same people immediately before the company joined the old group.

  “Defined in this Act: Commissioner, common voting interest, company, dividend, ICA company, imputation additional tax, imputation credit, income tax, provisional tax, tax pooling account, wholly-owned group of companies”.

“Treatment of debits from conduit relief

“OE 11B Company with debit balance, including debits from conduit relief, in some income years

• “When this section applies

  “(1) This section applies when a BETA company, in an income year beginning on or after 1 July 2009 (an affected year), has a debit balance—

  • “(a) in its branch equivalent tax account; and

  • “(b) that includes an amount (the CTR-relief amount) equal to the total of amounts that—

    • “(i) relate to branch equivalent tax debits in the branch equivalent tax account that each arose under section OE 12 in relation to a foreign dividend; and

    • “(ii) equal, for each branch equivalent tax debit, the reduction under section RG 7 (Reduction of payments for conduit tax relief) of the company's liability to pay FDP to the Commissioner for the foreign dividend.

  “Use of CTR-relief amount

  “(2) The BETA company may not choose under section OE 7 to apply the CTR-relief amount to satisfy an income tax liability except by an election—

  • “(a) relating to attributed CFC income that the company allocates to an income year beginning before 1 July 2009; and

  • “(b) made before the earlier of—

    • “(i) the first election under section OE 7 relating to attributed CFC income that the company allocates to an affected year:

    • “(ii) the end of the first affected year.

  “Determination of CTR-relief amount

  “(3) The CTR-relief amount in a branch equivalent tax account is found by—

  • “(a) treating a branch equivalent tax debit that arises partly from a reduction of FDP under section RG 7 and partly from a payment of FDP as being 2 debits, one equal to the reduction of FDP and the other equal to the amount of the payment of FDP; and

  • “(b) if a branch equivalent tax credit arises before the first affected year other than from an election relating to attributed CFC income allocated to an affected year or arises in an affected year from an election meeting the requirements of the exception to subsection (2), treating the credit as—

    • “(i) reducing branch equivalent tax debits in the order in which the debits arise; and

    • “(ii) for branch equivalent tax debits arising at the same time and not reduced to zero by the credit, reducing each debit in proportion to the contribution of the debit to the total of the debits; and

  • “(c) if the treatment of a branch equivalent tax credit is not given by paragraph (b), treating the credit as—

    • “(i) reducing branch equivalent tax debits arising from the payment of FDP in the order in which the debits arise; and

    • “(ii) after all branch equivalent tax debits arising from the payment of FDP are reduced to zero, reducing debits arising from a reduction of FDP under section RG 7 in the order in which the debits arise; and

    • “(iii) for branch equivalent tax debits subject to the same subparagraph and arising at the same time and not reduced to zero by the credit, reducing each debit in proportion to the contribution of the debit to the total of the debits; and

  • “(d) counting an amount of a branch equivalent tax credit only once in the reduction of some or all of a branch equivalent tax debit.

  “Defined in this Act: attributed CFC income, BETA company, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, Commissioner, company, FDP, foreign dividend, income tax liability, income year”.

• “(1) A consolidated imputation group has an imputation credit for an amount representing an entitlement to funds held in a tax pooling account if the intermediary transfers the entitlement from another person to the group.”

• “(3) The credit date is,—

  • “(a) for an entitlement to funds that are transferred by the intermediary from the tax pooling account to the group's tax account with the Commissioner, the credit date under section RP 19 (Transfers from tax pooling accounts) for the amount transferred; or

  • “(b) for an entitlement to funds that are refunded by the intermediary from the tax pooling account to the group, the date of the refund; or

  • “(c) for an entitlement that is transferred by the intermediary from the group to another person, the date of the transfer.”

• “(1) This section applies for a consolidated imputation group when—

  • “(a) the group has an entitlement to an amount in a tax pooling account and has an imputation credit for the entitlement under sections OP 8 and OP 9; and

  • “(b) the intermediary refunds the amount from the tax pooling account to the group.”

• “(1) This section applies for a consolidated imputation group when—

  • “(a) the group has an entitlement to an amount in a tax pooling account and has an imputation credit for the entitlement under sections OP 8 and OP 9; and

  • “(b) the intermediary transfers the entitlement from the group to another person.”

“Treatment by consolidated BETA groups of BETA debits from conduit relief

“OP 104B Consolidated BETA group with debit balance, including debits from conduit relief, in certain income years

• “When this section applies

  “(1) This section applies when a consolidated BETA group, in an income year beginning on or after 1 July 2009 (an affected year), has a debit balance—

  • “(a) in its branch equivalent tax account; and

  • “(b) that includes an amount (the CTR-relief amount) equal to the total of amounts that—

    • “(i) relate to branch equivalent tax debits in the branch equivalent tax account that each arose under section OP 105 in relation to a foreign dividend; and

    • “(ii) equal, for each branch equivalent tax debit, the reduction under section RG 7 (Reduction of payments for conduit tax relief) of a company's liability to pay FDP to the Commissioner for the foreign dividend.

  “Use of CTR-relief amount

  “(2) The consolidated BETA group may not choose under section OP 101 to apply the CTR-relief amount to satisfy an income tax liability except by an election—

  • “(a) relating to attributed CFC income that the consolidated BETA group allocates to an income year beginning before 1 July 2009; and

  • “(b) made before the earlier of—

    • “(i) the first election under section OP 101 relating to attributed CFC income that the group allocates to an affected year:

    • “(ii) the end of the first affected year.

  “Determination of CTR-relief amount

  “(3) The CTR-relief amount in a branch equivalent tax account is found by—

  • “(a) treating a branch equivalent tax debit that arises partly from a reduction of FDP under section RG 7 and partly from a payment of FDP as being 2 debits, one equal to the reduction of FDP and the other equal to the amount of the payment of FDP; and

  • “(b) if a branch equivalent tax credit arises before the first affected year other than from an election relating to attributed CFC income allocated to an affected year or arises in an affected year from an election meeting the requirements of the exception to subsection (2), treating the credit as—

    • “(i) reducing branch equivalent tax debits in the order in which the debits arise; and

    • “(ii) for branch equivalent tax debits arising at the same time and not reduced to zero by the credit, reducing each debit in proportion to the contribution of the debit to the total of the debits; and

  • “(c) if the treatment of a branch equivalent tax credit is not given by paragraph (b), treating the credit as—

    • “(i) reducing branch equivalent tax debits arising from the payment of FDP in the order in which the debits arise; and

    • “(ii) after all branch equivalent tax debits arising from the payment of FDP are reduced to zero, reducing debits arising from a reduction of FDP under section RG 7 in the order in which the debits arise; and

    • “(iii) for branch equivalent tax debits subject to the same subparagraph and arising at the same time and not reduced to zero by the credit, reducing each debit in proportion to the contribution of the debit to the total of the debits; and

  • “(d) counting an amount of a branch equivalent tax credit only once in the reduction of some or all of a branch equivalent tax debit.

  “Defined in this Act: attributed CFC income, branch equivalent tax account, branch equivalent tax credit, branch equivalent tax debit, Commissioner, company, consolidated BETA group, FDP, foreign dividend, income tax liability, income year”.

• “(a) the payment of resident passive income that consists of interest is made in the 2010–11 tax year to—

  • “(i) a portfolio investment entity; or

  • “(ii) a company that is not a trustee or a Maori authority; and”.

“Australian complying superannuation scheme means an entity that is a complying superannuation fund for the purposes of Part 5, Division 2 of the Superannuation Industry (Supervision) Act 1993 (Aust) and that is regulated by the Australian Prudential Regulation Authority”.

“financial institution means a registered bank or an entity subject to the Deposit Takers (Credit Ratings) Regulations 2009 that must use IFRSs to prepare financial statements and to which section 15 of the Financial Reporting Act 1993 applies

“financial institution special purpose vehicle means a company or a trustee of a trust that, ignoring section HR 9,––

• “(a) derives no exempt income; and

• “(b) has all of its financial arrangements that are its assets treated as a financial institution's financial arrangements for financial reporting purposes, but ignoring any current account balance that is incidental to the company's or trustees' sole purpose described in paragraph (e); and

• “(c) receives only funds that are–––

  • “(i) in respect of financial arrangements described in paragraph (b):

  • “(ii) incidental to the company's or trustees' sole purpose described in paragraph (e); and

• “(d) either––

  • “(i) operates to guarantee liabilities of the financial institution or of a company, incorporated in and resident in New Zealand, that is a member of a wholly-owned group of companies which includes the financial institution; or

  • “(ii) operates in respect of the company's or trustees' issue of residential mortgage backed securities; and

• “(e) has interests in financial arrangements only for the sole purpose of carrying out the company's or trustees' operations described in paragraph (d)(i) or (ii); and

• “(f) has financial statements that are prepared using IFRSs and are audited”.

“fishing quota emissions unit means an emissions unit—

• “(a) transferred, under an allocation plan made under section 74 of the Climate Change Response Act 2002, to a person as an owner of individual transferable quota as defined in section 2 of the Fisheries Act 1996; and

• “(b) held continuously by the person since the issue”.

• “(c) not FIF income calculated under the fair dividend rate method”.

“forest land emissions unit means a pre-1990 forest land emissions unit, a post-1989 forest land emissions unit, or a forest sink emissions unit

“forest sink emissions unit means an emissions unit issued to a person in relation to a forest sink covenant under section 67Y of the Forests Act 1949 entered by the person”.

“large budget film grant means a payment that—

• “(a) is in the nature of a large budget screen production grant or post-production digital and visual effects grant; and

• “(b) is made in relation to a film or television production; and

• “(c) is authorised by the New Zealand Film Commission in relation to a company that—

  • “(i) is resident in New Zealand:

  • “(ii) has a permanent establishment in New Zealand”.

“limited non-transaction shares is defined in section CD 34B (Distributions to members of co-operative companies)”.

• “(iv) a superannuation contribution that was transferred from an Australian complying superannuation scheme and contributed to a KiwiSaver scheme:”.

“post-1989 forest land emissions unit, for a person, means an emissions unit transferred under section 64 of the Climate Change Response Act 2002 for growing trees on post-1989 forest land—

• “(a) to the person and held continuously by the person from the transfer:

• “(b) to another person (the recipient), who at the time of the transfer is a party to a forestry rights agreement as defined in the Forestry Rights Registration Act 1983 with the person, and—

  • “(i) transferred by the recipient to the person, under a provision of the forestry rights agreement relating to the allocation of income or emissions units between the recipient and the person; and

  • “(ii) held continuously by the person from the transfer by the recipient”.

“pre-1990 forest land emissions unit, for a person, means an emissions unit transferred under Part 4, subpart 2 of the Climate Change Response Act 2002 in relation to pre-1990 forest land—

• “(a) to the person and held continuously by the person from the transfer:

• “(b) to another person (the appointee), as a person appointed under section 73 of that Act, and—

  • “(i) transferred by the appointee to the person, as a future owner of the pre-1990 forest land at the time of the transfer to the appointee; and

  • “(ii) held continuously by the person from the transfer by the appointee:

• “(c) to another person (the recipient), who at the time of the transfer is a party to a forestry rights agreement as defined in the Forestry Rights Registration Act 1983 with the person, and—

  • “(i) transferred by the recipient to the person, under a provision of the forestry rights agreement relating to the allocation of income or emissions units between the recipient and the person; and

  • “(ii) held continuously by the person from the transfer by the recipient”.

“projected transactions shareholding is defined in section CD 34B (Distributions to members of co-operative companies)”.

“trading transactions is defined in section CD 34B (Distributions to members of co-operative companies)

“transaction shares is defined in section CD 34B (Distributions to members of co-operative companies)”.

“General conversion rates and calculation methods approved by Commissioner

• “(5) Despite subsection (2), the amount may be converted into New Zealand currency by applying a rate—

  • “(a) set by the Commissioner for general use for the purposes of this section:

  • “(b) calculated using a method approved by the Commissioner for general use for the purposes of this section.

“Specific conversion rates and calculation methods approved by Commissioner

• “(6) Despite subsection (2), a person may convert the amount into New Zealand currency by applying a rate—

  • “(a) approved by the Commissioner for use in the circumstances of the person:

  • “(b) calculated using a method approved by the Commissioner for use in the circumstances of the person.”

“YF 2 Other rules for currency conversion: approved alternatives

• “When this section applies

  “(1) This section applies when—

  • “(a) a provision other than section YF 1 provides a rate or method for currency conversion; and

  • “(b) for the purposes of the provision, a person is required to convert an amount expressed in a currency other than New Zealand currency.

  “Representative rates

  “(2) The Commissioner may set a representative conversion rate that the person may use, instead of the rate or method referred to in subsection (1)(a), in converting the amount into New Zealand currency.

  “Defined in this Act: amount, Commissioner, New Zealand”.

“4 Interest: most companies

• The payment rate for a payment of resident passive income that consists of interest is set out in table 3 if the recipient of the payment is a company that is not a trustee or a Maori authority. However, this restriction does not apply if the trustee is a portfolio investment entity.”

• “1B A payment has a 0.33 rate of tax for each dollar of the payment, if it is for work or services performed by––

  • “(a) a local government elected representative:

  • “(b) an official of a community organisation, society, or club:

  • “(c) a chair or member of a committee, board, or council:

  • “(d) an official, chair, or member of a body or organisation similar to one described in paragraph (b) or (c).”

“cultivation contract work—

• “(a) means work or services provided under a contract or arrangement—

  • “(i) for the supply of labour, or substantially for the supply of labour; and

  • “(ii) on or in connection with land that is used or intended to be used for the cultivation of fruit crops, vegetables, orchards, or vineyards:

• “(b) excludes work or services provided by—

  • “(i) a post-harvest facility:

  • “(ii) a management entity under a formal management agreement under which the entity is responsible for payment for the work or services provided”.

• “9 A community trust.”

“Commissioner's official opinion—

• “(a) means, for a taxpayer,––

  • “(i) an opinion of the Commissioner concerning the tax affairs of the taxpayer, given by the Commissioner, either orally or in writing, after all information relevant to forming the opinion has been provided to the Commissioner, if that information is correct:

  • “(ii) a finalised official statement of the Commissioner, in writing, if it specifically applies to the taxpayer's situation:

• “(b) does not include a private binding ruling”.

“government screen production payment means a payment that—

• “(a) is in the nature of a large budget screen production grant, post-production digital and visual effects grant, or New Zealand screen production incentive; and

• “(b) is authorised by the New Zealand Film Commission in relation to a company that—

  • “(i) is resident in New Zealand:

  • “(ii) has a permanent establishment in New Zealand”.

“promoter is defined in section 141EC”.

“proscribed question means—

• “(a) whether a fact is correct or exists:

• “(b) what is a person’s purpose or intention, for the purpose of any provision of the Income Tax Act 2007 that expressly refers to a person's purpose or intention:

• “(c) what is the value of a thing:

• “(d) what is commercially acceptable practice, for the purposes of any provision of that Act that expressly refers to commercially acceptable practice”.

“RWT rate, for a person and resident passive income, means the basic rate for RWT given by the Income Tax Act 2007, in schedule 1, part D, for the person and the resident passive income”.

• “(5) A person must not alter an exemption certificate.

• “(6) A person must not use an exemption certificate that is not in force, or has been altered, to cause a person to refrain from withholding an amount of tax from a schedular payment.”

• “(5) A person must not alter a special tax rate certificate.

• “(6) A person must not use a special tax rate certificate that is not in force, or has been altered, to cause a person to refrain from withholding an amount of tax from a schedular payment.”

• “(1) This section applies when the Commissioner considers that a person who receives a payment of resident passive income consisting of interest has had tax withheld at an RWT rate that is inconsistent with their marginal tax rate.”

• “(d) the rate for the resident passive income—

  • “(i) found by dividing the total amount of RWT withheld by the amount of resident passive income:

  • “(ii) at which RWT would have been withheld if the resident passive income had been paid or derived at the end of the relevant tax year:

  • “(iii) at which RWT was withheld during the relevant tax year, together with, if more than 1 RWT rate applied for the resident passive income, the amount to which each rate applied and the amount withheld at each rate.”