Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012

42 Net attributable CFC income or loss
  • (1) In section EX 20C(2), the formula is replaced by:

    attributable CFC – apportioned funding income
    – apportioned funding costs – other deductions.

    (2) Section EX 20C(3) to (11) are replaced by:

    Definition of items in formula
    • (3) In the formula in subsection (2),—

      • (a) attributable CFC is the CFC's attributable CFC amount for the accounting period:

      • (b) apportioned funding income is,—

        • (i) if the CFC is an entity carrying on a business of banking or insurance or is directly or indirectly controlled by such an entity, zero:

        • (ii) if subparagraph (i) does not apply, the amount calculated using the formula—

        funding income × funding fraction × (1 – asset fraction):
      • (c) apportioned funding costs is the amount calculated using the formula—

        funding costs × funding fraction × cost fraction:
      • (d) other deductions is the amount of expenditure and loss incurred in the accounting period by the CFC to the extent to which the expenditure and loss meets the requirements of subsection (13).

    Definition of items in formula
    • (4) The items in the formulas in subsection (3)(b)(ii) and (c) are defined in subsections (5), (6), (8), (10), and (11).

    Funding income
    • (5) Funding income is the total of the amounts in the accounting period that are included in the item attributable CFC and relate to a financial arrangement—

      • (a) that provides funds for the CFC; and

      • (b) for which there is no reasonable expectation, when the CFC enters the financial arrangement or when the terms of the financial arrangement are changed, that the CFC will have from the financial arrangement amounts that would be income for the CFC exceeding in total the amounts that would be deductions for the CFC, during—

        • (i) the period that the CFC is a party to the financial arrangement:

        • (ii) a period predictable in advance during which the CFC is a party to the financial arrangement.

    Funding fraction
    • (6) Funding fraction is equal to,—

      • (a) if the item funding in subsection (7)(a) is zero, 1; or

      • (b) if the item is being used to calculate the item apportioned funding costs and the interest holder chooses to rely on this paragraph, 1; or

      • (c) if neither of paragraphs (a) and (b) apply, the amount calculated using the formula—

        funding – group funding
        funding.
    Definition of items in formula
    • (7) In the formula in subsection (6),—

      • (a) funding is the total of amounts, each of which is the outstanding balance for—

        • (i) a financial arrangement to which the CFC is a party and which provides funds for the CFC:

        • (ii) a fixed rate foreign equity, or share giving a right to a deductible foreign equity distribution, issued by the CFC and held by a company that is a New Zealand resident or CFC:

      • (b) group funding is the lesser of the item funding and the total of amounts, each of which is the outstanding balance for a financial arrangement—

        • (i) under which the CFC provides funds to another CFC associated with the CFC under section YB 2 (Two companies); and

        • (ii) that produces for the CFC an amount included in the item arrangement under section EX 20B(4).

    Asset fraction
    • (8) Asset fraction is the amount calculated using the formula—

    attributable CFC's assets – group funding
    total CFC's assets – group funding.
    Definition of items in formula
    • (9) In the formula in subsection (8),—

      • (a) attributable CFC's assets is the total of amounts for the CFC's assets, each of which is the value of an asset to the extent to which the asset is used for the purpose of deriving an attributable CFC amount and not used for the purpose of deriving an amount that is not an attributable CFC amount:

      • (b) group funding is—

        • (i) zero, if subparagraph (ii) does not apply; or

        • (ii) the amount of the item group funding referred to in subsection (7)(b), if subsection (6)(c) applies for the interest holder and the CFC:

      • (c) total CFC's assets is the total value of the CFC's assets.

    Funding costs
    • (10) Funding costs is the total of amounts in the accounting period, each of which—

      • (a) would be a deduction of the CFC relating to a financial arrangement to which the CFC is a party and which provides funds for the CFC:

      • (b) is a distribution relating to fixed-rate foreign equity or a deductible foreign equity distribution of the CFC and is paid by the CFC to a company resident in New Zealand or to a CFC.

    Cost fraction
    • (11) Cost fraction is,—

      • (a) if the CFC is not excessively debt funded under section EX 20D, the amount of the item asset fraction referred to in subsection (8); or

      • (b) if the CFC is excessively debt funded under section EX 20D, the lesser of—

        • (i) the amount of the item asset fraction referred to in subsection (8):

        • (ii) the amount calculated under section EX 20D.

    (3) In section EX 20C(7)(a)(ii), resident or CFC is replaced by resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method.

    (4) In section EX 20C(7)(b)(i), companies) is replaced by companies) or to a FIF for which the interest holder uses the attributable FIF income method and that is associated with the CFC under section YB 2.

    (5) In section EX 20C(10)(b), New Zealand or to a CFC is replaced by New Zealand, to another CFC, or to a FIF for which the interest holder uses the attributable FIF income method.

    (6) In section EX 20C(12), subsection (11) is replaced by subsection (9).

    (7) After section EX 20C(12), the following is added:

    Requirements for item other deductions
    • (13) Amounts of expenditure or loss contribute to the item other deductions to the extent to which—

      • (a) the amounts do not relate to a financial arrangement or share and—

        • (i) are incurred for the purpose of deriving an attributable CFC amount; and

        • (ii) are not incurred for the purpose of deriving an amount that is not an attributable CFC amount; and

        • (iii) are deductions of the CFC:

      • (b) the amounts relate to financial arrangements or shares referred to in the definition of the item funding in subsection (7)(a) and exceed in total the amount given by multiplying the items funding costs and funding fraction, used in calculating the item apportioned funding costs under subsection (3)(c):

      • (c) the amounts—

        • (i) do not relate to financial arrangements that provide funds for the CFC; and

        • (ii) relate to financial arrangements referred to in section EX 20B(4).

    (8) Subsections (1), (2), (6), and (7) apply for income years beginning on or after 1 July 2009.

    (9) Subsections (3), (4), and (5) apply for income years beginning on or after 1 July 2011.