Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017

288 Section YA 1 amended (Definitions)

(1)

This section amends section YA 1.

(2)

Insert, in appropriate alphabetical order:

aircraft engine means—

(a)

for an aircraft that is not a helicopter, an engine used for the propulsion of the aircraft:

(b)

for a helicopter,—

(i)

an engine used for the propulsion of, and generation of lift for, the helicopter:

(ii)

the main transmission system:

(iii)

the main rotor system:

(iv)

the swash plate assembly:

(v)

the anti-torque system:

(vi)

the hydraulic system:

(vii)

an assemblage consisting of 2 or more items referred to in subparagraphs (i) to (vi)

aircraft engine overhaul

(a)

for an aircraft that is not a helicopter, means a process that involves removing, if necessary, an aircraft engine from the aircraft, dismantling the aircraft engine and testing pieces, replacing or restoring pieces on the basis of test results or use of the aircraft engine since installation of the piece, restoring the aircraft engine to a condition in which it meets its performance specifications for the scheduled overhaul period before the overhaul, reassembling the aircraft engine, fitting the aircraft engine to the aircraft, and testing the aircraft engine:

(b)

for a helicopter, means a process that involves the application of the process described in paragraph (a) to—

(i)

an engine:

(ii)

the main transmission system:

(iii)

the main rotor system:

(iv)

the swash plate assembly:

(v)

the anti-torque system:

(vi)

the hydraulic system:

(vii)

an assemblage consisting of 2 or more items referred to in subparagraphs (i) to (vi)

(3)

In the definition of ancillary tax, repeal paragraphs (e), (f), and (g).

(4)

Repeal the definition of annual FDPA return.

(5)

Repeal the definition of annual PCA return.

(6)

Replace the definition of asset base with:

asset base, for a class of life insurance policy, means a segregated or identifiable group, or proportion of a group, of assets attributable to the class

(7)

Repeal the definition of associated internal software developer.

(8)

In the definition of balance date, replace “for the purposes of section RC 10” with “for the purposes of sections FG 3 (Notional interest) and RC 10”.

(9)

In the definition of close company, repeal paragraph (b).

(10)

Replace the definition of close relative with:

close relative,—

(a)

is defined in section FC 1(2) (Disposals to which this subpart applies) for the purposes of subpart FC (Distribution, transmission, and gifts of property):

(b)

in section HA 6 (Corporate requirements), means, for a person—

(i)

a spouse, civil union partner, or de facto partner of the person:

(ii)

another person who is within the second degree of relationship to the person

(11)

Repeal the definition of combined imputation and FDP ratio.

(12)

In the definition of common market value interest, paragraph (a), replace “section IC 4” with “sections CD 5 and IC 4”.

(13)

In the definition of common voting interest, paragraph (a), replace “section IC 4” with “sections CD 5 and IC 4”.

(14)

In the definition of consideration, paragraph (a), replace “EE 48 to EE 52” with “EE 48 to EE 51”.

(15)

Repeal the definition of consolidated FDP group.

(16)

In the definition of continuity provisions, repeal paragraph (h).

(17)

Repeal the definition of convertible credit.

(18)

Replace the definition of credit account continuity provisions with:

credit account continuity provisions means section OB 41 (ICA debit for loss of shareholder continuity)

(19)

Insert, in appropriate alphabetical order:

distant workplace is defined in section CW 16B(5) (Accommodation expenditure: out-of-town secondments and projects) for the purposes of that section, and sections CW 16C, CW 16E, CW 16F, CW 17CB, CZ 29, and CZ 30 (which relate to time limits for accommodation expenditure and the application of the rules to new employees)

(20)

Repeal the definition of distant workplace inserted by subsection (19).

(21)

In the definition of distant workplace, delete the words after “projects)”.

(22)

In the definition of dividend, repeal paragraph (c)(i).

(23)

In the definition of dividend, in paragraph (e), delete “subpart OJ (Policyholder credit accounts (PCA)),”.

(24)

In the definition of dividend, replace paragraph (e) with:

(e)

in section GB 38 (When sections GB 35 to GB 37 apply to consolidated groups), subpart OE (Branch equivalent tax accounts (BETA)), the imputation rules, and the definitions of benchmark dividend, company dividend statement, imputation credit, imputation ratio, pay, and shareholder dividend statement, does not include any amount treated as a dividend under section CB 34(5), GB 23, or GB 25 (which relate to mutual associations, family-owned businesses, and close companies):

(25)

In the definition of dividend, in paragraph (f), delete “subpart OJ (Policyholder credit accounts (PCA)),”.

(26)

In the definition of dividend, replace paragraph (f) with:

(f)

in section GB 38 (When sections GB 35 to GB 37 apply to consolidated groups), subpart OE (Branch equivalent tax accounts (BETA)), the imputation rules, and the definitions of benchmark dividend, company dividend statement, imputation credit, imputation ratio, pay, and shareholder dividend statement, does not include an amount treated as a dividend under section GB 1(3) (Arrangements involving dividend stripping)

(27)

In the definition of dividend treated as interest, replace paragraph (d) with:

(d)

a company that, in New Zealand, is engaged solely in the business of life insurance referred to in section EY 8(2)(c) (Meaning of life insurance)

(28)

Repeal the definition of excess credit amount.

(29)

In the definition of excluded ancillary tax, repeal paragraph (b).

(30)

Insert, in appropriate alphabetical order:

exiting partner, for a partnership, means a person who disposes of interests in the partnership held by the person as a partner

(31)

In the definition of expenditure, after paragraph (b), insert:

(c)

is defined in section RF 12D(3) (Determining amount of non-resident financial arrangement income) for the purposes of that section and sections RF 2B, RF 2C, RF 12E to RF 12J, and RZ 13 (which relate to the calculation of non-resident financial arrangement income)

(32)

Repeal the definition of FDP.

(33)

Repeal the definition of FDP account.

(34)

Repeal the definition of FDP credit.

(35)

Repeal the definition of FDP debit.

(36)

Repeal the definition of FDP penalty tax.

(37)

Repeal the definition of FDP ratio.

(38)

Repeal the definition of FDP reference period.

(39)

Repeal the definition of FDP rules.

(40)

Repeal the definition of FDPA.

(41)

Repeal the definition of FDPA company.

(42)

In the definition of fixed-rate share, paragraph (a), before subparagraph (i), delete “or FDP credits”.

(43)

Insert, in appropriate alphabetical order:

foreign bank is defined in section FG 1(2) (When this subpart applies) for the purposes of subpart FG (Treatment of notional loans to New Zealand branches of foreign banks)

(44)

Insert, in appropriate alphabetical order:

foreign LTC holder means—

(a)

a non-resident:

(b)

a trustee of a trust, if the trust has a non-resident settlor, but only to the extent of the proportion of the trust’s ownership interests that is equal to the proportion of settlements, by value, made by non-resident settlors, ignoring settlements arising from services provided for less than market value

(45)

Repeal the definition of foreign tax.

(46)

In the definition of fully imputed,—

(a)

in paragraph (a), replace “CB 26” with “CB 26, CB 32C, CD 39,”:

(b)

in paragraph (b), replace “companies),” with “companies), and RE 2 (Resident passive income)”.

(47)

In the definition of fully imputed, paragraph (a), delete “or fully credited”.

(48)

Repeal the definition of further FDP.

(49)

Insert, in appropriate alphabetical order:

grandparented charity means, for an entity, a charity that, before 3 May 2016,—

(a)

is an owner of the entity:

(b)

has entered into an arrangement to become an owner of the entity

(50)

Insert, in appropriate alphabetical order:

grandparented Maori authority means, for an entity, a Maori authority that, before 3 May 2016,—

(a)

is an owner of the entity:

(b)

has entered into an arrangement to become an owner of the entity:

(c)

is a beneficiary of a trust that is an owner of the entity

(51)

In the definition of imputation additional tax, replace “on leaving wholly-owned group” with “on leaving group of companies”.

(52)

In the definition of income interest, paragraph (b), delete “the FDP rules and”.

(53)

In the definition of interest, after paragraph (b), insert:

(bb)

for the NRWT rules and a related-party debt,—

(i)

includes an amount that is taken into account under section EW 15 (What is included when spreading methods used) and paid by a person in relation to money lent to the person; and

(ii)

excludes a repayment of the money lent:

(54)

In the definition of interest, after paragraph (c), insert:

(cb)

in relation to an amount made available by a foreign bank, includes interest arising under subpart FG (Treatment of notional loans to New Zealand branches of foreign banks):

(55)

Repeal the definition of internal software development.

(56)

Repeal the definition of internal software development controller.

(57)

Repeal the definition of internal software development group.

(58)

In the definition of large business AIM-capable system, replace “section 45C” with “section 15Y”.

(59)

In the definition of look-through company, after paragraph (e), insert:

(eb)

for which an owner that is a trustee of a trust does not make a distribution to a company that is directly or indirectly a beneficiary of the trust; and

(ec)

for which no owner is a tax charity, unless the tax charity is a grandparented charity for the entity; and

(ed)

for which an owner that is a trustee of a trust does not make a distribution of income to a tax charity that is a beneficiary of the trust, unless the tax charity has no control or influence in relation to the operation of the entity and no control or influence in relation to the distributions of the trust; and

(ee)

for which no owner is a Maori authority, unless the Maori authority is a grandparented Maori authority for the entity; and

(ef)

for which an owner that is a trustee of a trust does not make a distribution to a Maori authority that is directly or indirectly a beneficiary of the trust, unless the Maori authority is a grandparented Maori authority for the entity; and

(60)

In the definition of look-through company, after paragraph (ef), insert:

(eg)

that, treating the entity as a company for the purposes of this definition, in the case where more than 50% of the total ownership interests in the entity are held by foreign LTC holders, the entity has a foreign-sourced amount for the income year that is not more than—

(i)

$10,000; or

(ii)

if 20% of the entity’s gross income for the year (the 20% gross amount) is greater than $10,000, the 20% gross amount; and

(61)

In the definition of look-through counted owner, after paragraph (b), insert:

(bb)

is a natural person who,—

(i)

on or after the first day of the 2017–18 income year, receives a distribution (the distribution) from a trust, other than a distribution sourced from income derived by the trust before the 2017–18 income year; and

(ii)

the distribution is received in the current income year, or 1 of the last 3 income years if the relevant year is after the 2016–17 income year; and

(iii)

the trust has a direct or indirect beneficial interest in a look-through interest for the entity in the current income year, or 1 of the last 3 income years if the relevant year is after the 2016–17 income year:

(62)

In the definition of look-through counted owner, replace paragraph (c) with:

(c)

is a trustee of a trust that—

(i)

has a look-through interest for the entity or has a direct or indirect beneficial interest in a look-through interest for the entity, treating co-trustees as 1 person; and

(ii)

has no beneficiary that is a look-through counted owner:

(63)

In the definition of look-through interest, repeal paragraph (a).

(64)

In the definition of look-through interest, replace paragraph (b) with:

(b)

every other shareholder has the same rights, proportionally, as the person in relation to a distribution by the entity or LTC; and

(65)

Repeal the definition of maximum deficit debit.

(66)

In the definition of maximum permitted ratio, delete “, an FDP credit,”.

(67)

Insert, in appropriate alphabetical order:

minimum QC interest is defined in section HA 6(5) (Corporate requirements) for the purposes of that section

(68)

In the definition of money lent, after paragraph (d), insert:

(e)

for the purposes of the NRWT rules and a related-party debt, when paragraphs (a) to (d) do not apply, an amount that is taken into account under section EW 15 (What is included when spreading methods used) that provides funding to a person

(69)

Insert, in appropriate alphabetical order:

nominal share is defined in section EW 46C (Consideration when debt forgiven within economic group) for the purposes of that section

(70)

In the definition of non-filing taxpayer, replace paragraph (c) with:

(c)

a person who, in the relevant tax year, derives only non-resident passive income referred to in section RF 2(3) (Non-resident passive income)

(71)

In the definition of non-refundable tax credit, paragraph (f), delete “or policyholder credit account”.

(72)

Insert, in appropriate alphabetical order:

non-resident financial arrangement income is defined in section RF 2C(2) (Meaning of non-resident financial arrangement income) for the purposes of the NRWT rules

(73)

Replace the definition of non-resident owning body with:

non-resident owning body, for a company and an income year, means a group consisting of 2 or more members who are each a non-resident and who each hold ownership interests in the company or have a linked trustee holding ownership interests in the company such that—

(a)

if the company, for each member of the group, owes money to the member (the member debt), or to the member’s linked trustee (the trustee debt), or to a company (the subsidiary) in which the member or a linked trustee has ownership interests (the subsidiary debt),—

(i)

the member debt for a member, expressed as a fraction of the total member debt for the company, corresponds to the ownership interests or direct ownership interests held by the member, expressed as a fraction of the ownership interests or direct ownership interests held by the members of the group:

(ii)

the requirements of subparagraph (i) would be met if each or 1 or more members of the group were treated as holding the ownership interests in the company held by the member, and by linked trustees, and were treated as being owed the member debt, the trustee debt, and an amount for subsidiary debt equal to the product of the subsidiary debt and the ownership interest held in the subsidiary:

(b)

the company is not a widely-held company and the company is funded for the income year under an arrangement between the members of the group concerning debt (the member-linked funding) under financial arrangements meeting the requirements of section FE 18(3B)(b)(i) to (iii) (Measurement of debts and assets of worldwide group) for the members:

(c)

the company has member-linked funding provided in a way recommended to, or implemented for, the members as a group by a person

(74)

Repeal the definition of novelty.

(75)

Insert, in appropriate alphabetical order:

NRFAI due date is defined in section RF 2C(7) (Meaning of non-resident financial arrangement income) for the purposes of sections RF 2C(5)(a)(ii) and RF 12F(3)(b)(ii)

(76)

Insert, in appropriate alphabetical order:

out-of-town secondment is defined in section CW 16B(5) (Accommodation expenditure: out-of-town secondments and projects) for the purposes of that section and sections CW 16C, CW 16E, CZ 29, and CZ 30 (which relate to time limits for accommodation expenditure and the application of the rules to new employees)

(77)

Repeal the definition of out-of-town secondment inserted by subsection (76).

(78)

In the definition of out-of-town secondment, delete the words after “projects)”.

(79)

In the definition of pay, after paragraph (c), insert:

(d)

has the meaning set out in section RF 12E (When non-resident financial arrangement income treated as paid) for the purposes of the NRWT rules

(80)

Repeal the definition of PCA.

(81)

Repeal the definition of PCA company.

(82)

Repeal the definition of PCA person.

(83)

Insert, in appropriate alphabetical order:

period of continuous work

(a)

is defined in section CW 16B(5) (Accommodation expenditure: out-of-town secondments and projects) for the purposes of that section and sections CW 16C, CW 16D, CZ 29, and CZ 30 (which relate to time limits for accommodation expenditure and the application of the rules to new employees); and

(b)

is given an extended meaning in section CW 16D(4) (Accommodation expenditure: conferences and overnight stays) for the purposes of that section

(84)

Repeal the definition of period of continuous work inserted by subsection (83).

(85)

In the definition of period of continuous work, paragraph (a), delete the words after “projects)”.

(86)

In the definition of profit participation policy, replace paragraph (a) with:

(a)

means a class of life insurance policy—

(i)

that has an asset base; and

(ii)

in which each policy provides that the policyholder’s entitlement is to an actuarially determined share of the profits of the life insurer’s business, relating to the class, that are available to the life insurer for allotment to shareholders or policyholders; and

(iii)

in which each policy provides for the transfer from the available profits, for the benefit of the life insurer’s shareholders, of an amount equal to a proportion, calculated using a formula, of the policyholder’s entitlement to the profits referred to in subparagraph (ii):

(87)

Insert, in appropriate alphabetical order:

project of limited duration is defined in section CW 16B(5) (Accommodation expenditure: out-of-town secondments and projects) for the purposes of that section and sections CW 16C, CZ 29, and CZ 30 (which relate to time limits for accommodation expenditure and the application of the rules to new employees)

(88)

Repeal the definition of project of limited duration inserted by subsection (87).

(89)

In the definition of project of limited duration, delete the words after “projects)”.

(90)

Insert, in appropriate alphabetical order:

proportional debt ratio is defined in section EW 46C (Consideration when debt forgiven within economic group) for the purposes of that section

(91)

Insert, in appropriate alphabetical order:

proportional ownership ratio is defined in section EW 46C (Consideration when debt forgiven within economic group) for the purposes of that section

(92)

Insert, in appropriate alphabetical order:

QC continuity period is defined in section HA 6(5) (Corporate requirements) for the purposes of that section

(93)

Repeal the definition of reduced deficit debit.

(94)

In the definition of refundable tax credit, repeal paragraph (b).

(95)

In the definition of refundable tax credit, repeal paragraph (bb).

(96)

Insert, in appropriate alphabetical order:

related-party debt is defined in section RF 12H (Meaning of related-party debt) for the purposes of the NRWT rules

(97)

Repeal the definition of research and development activities.

(98)

In the definition of residual income tax, repeal paragraph (b)(v).

(99)

In the definition of residual income tax, repeal paragraph (b)(vb).

(100)

In the definition of residual income tax, repeal paragraph (e).

(101)

Insert, in appropriate alphabetical order:

scheduled overhaul period, for an aircraft engine and an aircraft and an operator of the aircraft, means the maximum permitted interval between successive aircraft engine overhauls of the aircraft engine that the operator is required to perform

(102)

Repeal the definition of scientific or technological uncertainty.

(103)

Insert, in appropriate alphabetical order:

self-remission means, for a person,—

(a)

for the purposes of section EW 31(11) (Base price adjustment formula), a remission amount for a financial arrangement under which, and to the extent to which, because of the operation of section HB 1 or HG 2 (which relate to LTCs and partnerships), the person is also liable as debtor in their capacity of owner or partner:

(b)

for the purposes of section EW 39(4) (Consideration affected by unfavourable factors), the amount by which the consideration for the disposal of a financial arrangement is affected by a factor described in section EW 39(1)(d), to the extent to which:

(i)

the disposal occurs under section HB 4(3) or (6) or HG 4 (which relate to cessation of an LTC and dissolution of a partnership); and

(ii)

immediately before the disposal, the person is also liable as debtor in their capacity of owner or partner because of the operation of section HB 1 or HG 2

(104)

In the definition of shareholder, paragraph (c), delete “and OJ (Policyholder credit accounts (PCA))”.

(105)

In the definition of shareholder, paragraph (c), delete “, in the FDP rules”.

(106)

In the definition of shareholder-employee,—

(a)

in paragraph (a), after “employee)”, insert “, and in the FBT rules and section 177A of the Tax Administration Act 1994,”:

(b)

repeal paragraphs (b) and (c).

(107)

Repeal the definition of shareholder FDP ratio.

(108)

Repeal the definition of systematic, investigative, and experimental activities.

(109)

In the definition of tax advantage, repeal paragraphs (b), (c), and (f).

(110)

In the definition of tax-base property, replace “What this subpart does” with “Disposals to which this subpart applies”.

(111)

In the definition of tax position, replace “sections HZ 4B and HZ 4D (which relate to the transition of a qualifying company into a partnership or sole tradership)” with “sections HZ 4B, HZ 4D, and HZ 4E (which relate to transitions)”.

(112)

Repeal the definition of technology.

(113)

In the definition of trading stock, paragraph (a), replace “paragraphs (b) and (d)” with “paragraphs (ab), (b), and (d)”.

(114)

In the definition of trading stock, after paragraph (a), insert:

(ab)

in sections CB 2, CD 48, FE 16, and FO 10 (which apply to livestock), means property that is—

(i)

trading stock under section EB 2:

(ii)

livestock:

(115)

In the definition of trading stock, paragraph (ab), delete “CD 48,”.

(116)

In the definition of trust rules, after paragraph (g), insert:

(gb)

the definitions of look-through company and look-through counted owner:

(117)

Insert, in appropriate alphabetical order:

unpriced aircraft engine, for a person and an aircraft, means an aircraft engine that the person acquires with the aircraft and that does not have, for the person, a price identified separately from the rest of the aircraft

(118)

Subsections (2), (101), and (117) apply for the 2017–18 and later income years.

(119)

Subsections (6) and (86) apply for the income year including 1 July 2010 and later income years.

(120)

Subsections (44) and (60) apply for income years beginning on or after 1 April 2017.

(121)

Subsections (49), (50), (59), (61), (62), (63), (64), (67), (92), and (116) apply for the 2017–18 and later income years.

(122)

Subsections (69), (90), and (91) apply for the 2008–09 and later income years.

(123)

Subsections (113) and (114) apply for the 2008–09 and later income years, except in relation to a tax position taken by a person before 5 December 2014 that is inconsistent with the amendment made by subsection (114).

(124)

Subsection (115) applies for income years beginning on or after 1 July 2009.