Taxation (International Investment and Remedial Matters) Act 2012

35 Branch equivalent method
  • (1) The heading to section EX 50 is replaced by Attributable FIF income method.

    (2) In section EX 50(1),—

    • (a) branch equivalent method is replaced by attributable FIF income method:

    • (b) in the formula, branch equivalent is replaced by net attributable FIF.

    (3) Section EX 50(3) is replaced by the following:

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

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

      • (b) subsections (5) and (6).

    (4) After section EX 50(4), the following is inserted:

    Modifications to method of calculating net attributable CFC income or loss
    • (4B) The net attributable FIF income or loss of a FIF is calculated as if—

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

      • (b) section EX 20B(5)(d) were omitted:

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

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

      • (e) section EX 21C(2)(a) required—

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

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

      • (f) section EX 21C(3)(a) required—

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

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

      • (g) section EX 21C(4)(a) required—

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

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

      • (h) section EX 21C(5)(a) required—

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

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

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

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

      • (k) section EX 21D(3)(b) were omitted:

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

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

      • (n) section EX 21E(2)(d) were omitted:

      • (o) section EX 21E(4)(c) were omitted:

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

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

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

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

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

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

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

    Requirements for foreign company making payments to FIF
    • (4C) A foreign company making payments to a FIF meets the requirements of this subsection if—

      • (a) the person uses the attributable FIF income method for the foreign company; and

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

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

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

    (5) In section EX 50(5)(a), branch equivalent income or loss is replaced by net attributable FIF income or loss.

    (6) After section EX 50(7), the following is inserted:

    Exception to subsection (6)
    • (7B) A person does not have additional FIF income or loss under subsection (6) from a FIF with an interest in a foreign company if—

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

        • (i) would be able to use the attributable FIF income method for the foreign company if the person held the FIF's interest in the foreign company:

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

      • (b) the FIF would meet the test for a non-attributing active CFC under section EX 21B(2)(b) if the following amounts relating to the interest in the foreign company reported in the accounts of the FIF, or in the consolidated accounts of the FIF's test group under section EX 21E, were included in the items added passive and reported revenue under section EX 21E(5), (8), and (10) for the FIF or the test group:

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

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

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

      • (c) the interest in the foreign company would be excluded by section EX 35 from being an attributing interest if the interest were held by the person.

    (7) In section EX 50(9)(d), branch equivalent method is replaced by attributable FIF income method.

    (8) In section EX 50, in the list of defined terms,—

    • (a) branch equivalent income and branch equivalent method are omitted:

    • (b) attributable FIF income method, net attributable CFC income, net attributable FIF income, non-attributing active CFC, NZIAS 28, NZIAS 31, NZIAS 39, taxed FIF relationship, and voting interest are inserted.

    (9) Subsections (1) to (7) apply for income years beginning on or after 1 July 2011.