Hon Peter Dunne, in Committee, to move the following amendments:
Clause 2
New subclause (15B): to insert, after subclause (15) (after line 17 on page 32), the following:
(15B) Sections 542B, 549B, 550B, 568B, 568C, 568D, 578B, 578C, 578D, 578E, 578F, 580B, and 613(4B), (4C), (4D), (6B), (13B), (13C), and (13D) come into force on 25 February 2008.
Subclause (17): to insert in their appropriate place in the alphanumerical sequence (line 19 on page 32 to line 8 on page 33), references to sections 12(1)(b), 55B, 67B, 115B, 115C, 127B, 151B(1), 163(1) and (3), 166(2B) and (4B), 203B, and 408(29B), (40B), (49)(a), (80B), (115B), (132)(a), and (136B).
Subclause (19): to omit “147, ”
(line 16 on page 33) and substitute “147, 151B(2),”
.
Subclause (19): to omit “163”
(line 18 on page 33) and substitute “163(2) and (4)”
.
Subclause (19): to omit “(49)”
(line 31 on page 33) and substitute “(49)(b)”
.
Subclause (19): to omit “(132)”
(line 32 on page 33) and substitute “(132)(b)”
.
Subclause (22): to omit “12”
(line 5 on page 34) and substitute “12(1)(a)”
.
Clause 12
To omit clause 12 (lines 1 to 6 on page 39) and substitute the following:
12 Returns of capital: off-market share cancellations
(1) In section CD 22(9),—
(2) Subsection (1)(a) applies for the 2009–10 and later income years.
New clause 55B
To insert, after clause 55 (after line 15 on page 63), the following:
55B New section DB 10B inserted
After section DB 10, the following is inserted:
“DB 10B Interest or expenditure connected to stapled debt security
“No deduction
“(1) A company issuing a stapled debt security is denied a deduction for—
“Relationship with sections DB 5 to DB 8
“(2) This section overrides sections DB 5 to DB 8.
“Link with subpart DA
“(3) This section overrides the general permission.
“Defined in this Act: deduction, general permission, interest, pay, stapled debt security”.
New clause 67B
To insert, after clause 67 (after line 18 on page 68), the following:
67B Forestry business on land bought from the Crown, Maori owners, or holding company: no deduction
(1) In the heading to section DP 8(3), “section FA 2”
is replaced by “sections FA 2 and FA 2B”
.
(2) In section DP 8(3), “, does”
is replaced by “and section FA 2B (Stapled debt securities) do”
.
New clauses 115B and 115C
To insert, after clause 115 (after line 22 on page 93), the following:
115B Direct control interests
In section EX 5(5)(c), “debentures)”
is replaced by “debentures), FA 2B (Stapled debt securities),”
.
115C Direct income interests
In section EX 9(6)(c), “debentures)”
is replaced by “debentures), FA 2B (Stapled debt securities),”
.
New clause 127B
To insert, after clause 127 (after line 34 on page 126), the following:
127B Direct income interests in FIFs
In section EX 30(6)(c), “debentures)”
is replaced by “debentures) or FA 2B (Stapled debt securities)”
.
Clause 151
Clause 151(2): section FA 2(4)(b)(iii): to omit “date).”
(line 3 on page 170) and substitute “date):”
, and add (after line 3 on page 170), as new section FA 2(4)(c), the following:
Clause 151(3): section FA 2(5)(c): to omit “note.”
(line 25 on page 170) and substitute “note:”
, and add (after line 25 on page 170), as new section FA 2(5)(d), the following:
New clause 151B
To insert, after clause 151 (after line 31 on page 170), the following:
151B New section FA 2B
(1) After section FA 2, the following is inserted:
“FA 2B Stapled debt securities
“When subsection (2) applies
“(1) Subsection (2) applies when—
“Stapled debt treated as equity
“(2) The stapled debt security is treated as a share issued by the company and—
“Stapled securities aggregated
“(3) A stapled debt security and a share to which it is stapled are treated as a single share for the purposes of applying—
“Meaning of debt security
“(4) In this section, debt security means a financial arrangement if—
“Meaning of stapled
“(5) In this section, a debt security is stapled to a share if—
“Exclusion: stapled before 25 February 2008
“(6) This section does not apply if the debt security was stapled to the share before 25 February 2008.
“Defined in this Act: amount, company, debt security, deduction, financial arrangement, fixed-rate share, non-contingent fee, share, stapled
(2) Section FA 2B(3)(b) is repealed.
(3) Subsection (1) applies if a debt security is stapled to a share on or after 25 February 2008.
(4) Subsection (2) applies for the 2009–10 and later income years.
Clause 163
To omit clause 163 (line 24 on page 177 to line 11 on page 178) and substitute the following:
163 Total group debt
(1) Section FE 15(1)(b) is replaced by the following:
(2) Section FE 15(1) and (2) are replaced by the following:
“Meaning
“Exchange rate fluctuations
(3) In section FE 15, in the list of defined terms, “proportional-stapling company”
, “resident in New Zealand”
, “stapled”
, and “stapled debt security”
are inserted.
(4) In section FE 15, in the list of defined terms, “fixed-rate foreign equity”
is inserted.
(5) Subsections (2) and (4) apply for the 2009–10 and later income years.
Clause 166
New subclause (2B): to insert, after clause 166(2) (after line 21 on page 180), the following:
New subclause (4B): to insert, after clause 166(4) (after line 5 on page 181), the following:
(4B) In section FE 21, in the list of defined terms, “proportional-stapling company”
, “stapled”
, and “stapled debt security”
are inserted.
New clause 203B
To insert, after clause 203 (after line 8 on page 197), the following:
203B Companies issuing debentures
(1) Section HD 14(2)(a) is replaced by the following:
(2) In section HD 14, in the list of defined terms, “stapled debt security”
is inserted.
Clause 408
New subclause (29B): to insert, after subclause (29) (after line 14 on page 323), the following:
Subclause (30): to omit “debenture holder”
(line 15 on page 323) and substitute “debt security”
.
New subclause (40B): to insert, after subclause (40) (after line 22 on page 325), the following:
Subclause (49): to omit subclause (49) (lines 19 to 21 on page 327), and substitute the following:
New subclause (80B): to insert, after subclause (80) (after line 22 on page 331), the following:
New subclause (115B): to insert, after subclause (115) (after line 19 on page 337), the following:
Subclause (132): to omit subclause (132) (lines 1 to 3 on page 340), and substitute the following:
New subclause (136B): to insert, after subclause (136) (after line 11 on page 341), the following:
New clause 542B
To insert, after clause 542 (after line 19 on page 405), the following:
542B Returns of capital: off-market share cancellations
In section CD 14(9), in the definition of non-participating redeemable share, paragraph (b)(iii), “; or”
is replaced by “or section FC 2B(2) (Stapled debt securities); or”
.
New clause 549B
To insert, after clause 549 (after line 10 on page 410), the following:
549B New section DB 8B inserted
After section DB 8, the following is inserted:
“DB 8B Interest or expenditure connected to stapled debt security
“No deduction
“(1) A company issuing a stapled debt security is denied a deduction for—
“Relationship with sections DB 5 to DB 8
“(2) This section overrides sections DB 5 to DB 8.
“Link with subpart DA
“(3) This section overrides the general permission.
“Defined in this Act: deduction, general permission, interest, pay, stapled debt security”.
New clause 550B
To insert, after clause 550 (after line 19 on page 410), the following:
550B Forestry business on land bought from the Crown, Maori owners, or holding company: no deduction
(1) In the heading to section DP 7(3), “and FZ 2”
is replaced by “, FC 2B, and FZ 2”
.
(2) In section DP 7(3), “do”
is replaced by “and section FC 2B (Stapled debt securities) do”
.
New clauses 568B to 568D
To insert, after clause 568 (after line 19 on page 423), the following:
568B Direct control interests
In section EX 5(5)(c), “shares)”
is replaced by “shares) or FC 2B (Stapled debt securities)”
.
568C Direct income interests
In section EX 9(6)(c), “shares)”
is replaced by “shares) or FC 2B (Stapled debt securities)”
.
568D Direct income interests in FIFs
In section EX 31(6)(c), “shares)”
is replaced by “shares) or FC 2B (Stapled debt securities)”
.
New clauses 578B to 578F
To insert, after clause 578 (after line 35 on page 426), the following:
578B Floating rate of interest on debentures
After section FC 1(3), the following is added:
578C Interest on debentures issued in substitution for shares
After section FC 2(4), the following is inserted:
578D New section FC 2B
(1) After section FC 2, the following is inserted:
“FC 2B Stapled debt securities
“(1) Subsection (2) applies when—
“(2) The stapled debt security is treated as a share issued by the company and—
“(3) A stapled debt security and a share to which it is stapled are treated as a single share for the purposes of applying—
“(4) In this section, debt security means a financial arrangement if—
“(5) In this section, a debt security is stapled to a share if—
“(6) This section does not apply if the debt security was stapled to the share before 25 February 2008.
(2) Subsection (1) applies if a debt security is stapled to a share on or after 25 February 2008.
578E Rules for calculating New Zealand group debt percentage
Section FG 4(2)(b) is replaced by the following:
578F New Zealand net equity of New Zealand banking group
(1) In section FG 8G(1), in the formula, “FRS”
is replaced by “FRS – SDS”
.
(2) In section FG 8G(1), after the item FRS, the following is inserted:
“SDS is the financial value for the measurement day of stapled debt securities, each of which is—
New clause 580B
To insert, after clause 580 (after line 13 on page 427), the following:
580B Modification of agency provisions in respect of income from company debentures
In section HK 13(1), “debentures issued”
is replaced by “debentures that are a stapled debt security to which section FC 2B (Stapled debt securities) applies, or to debentures issued”
.
Clause 613
New subclauses (4B) to (4D): to insert, after subclause (4) (after line 21 on page 434), the following:
(4D) In the definition of fixed rate share, paragraph (e), “section LF 2(3)”
is replaced by “section LF 2(3):”
, and the following is added:
“(f) in section FC 2B (Stapled debt securities), this paragraph, and the definition of proportional–stapling company, means—
“(ii) a share that would be a share described in paragraph (a) but for any variation in the rate of dividend that may occur, reflecting generally accepted market practice, to compensate the shareholder for transaction expenditure, such as brokerage, expected to be incurred by the shareholder due to conversion of the share into another share that is not a fixed rate share:
New subclause (6B): to insert, after subclause (6) (after line 33 on page 434), the following:
New subclauses (13B) to (13D): to insert, after subclause (13) (after line 24 on page 435), the following:
Explanatory note
This Supplementary Order Paper amends the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill.
The amendments provide for new rules relating to stapled debt securities' tax treatment. They do not apply to debt securities that are stapled before 25 February 2008. The amendments have the following effects:
they define the concept of a stapled debt security, being a financial arrangement that provides funds to a company, that would otherwise give rise to deductions and that can ordinarily only be disposed of together with a share (not being a fixed-rate share) in the issuing company or in another company:
they provide that a security that is a stapled debt security is treated as a share and the issuing company is denied a deduction for expenditure or loss incurred under the security:
they provide that the stapled debt security and the share to which it is stapled are treated as a single share for the purposes of various provisions that define and apply specific treatments to shares bearing a fixed rate of dividend or having an equivalent consequence:
they provide that, despite the stapled security being treated as a share, the stapled debt is treated as debt for thin capitalisation purposes unless the debt is stapled in proportion to all shares other than fixed-rate shares:
they provide that stapled debt securities are to be treated in the same manner as debentures to which section FA 2 of the Income Tax Act 2007 applies, or to which section FC 1 or FC 2 of the Income Tax Act 2004 applies.