Income Tax Amendment Act (No. 5) 1988
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Income Tax Amendment Act (No. 5) 1988
Public Act |
1988 No 225 |
|
Date of assent |
16 December 1988 |
|
Contents
An Act to amend the Income Tax Act 1976
BE IT ENACTED by the Parliament of New Zealand as follows:
1 Short Title
This Act may be cited as the Income Tax Amendment Act (No. 5) 1988, and shall be read together with and deemed part of the Income Tax Act 1976 (hereinafter referred to as the principal Act).
Part I Accruals
2 Application of this Part
Except as provided in section 7 of this Act, this Part of this Act shall apply with respect to the tax on income derived in the income year that commenced on the 1st day of April 1985 and in every subsequent year.
3 Interpretation
(1)
Section 64b(1) of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987 and amended by section 9 of the Income Tax Amendment Act (No. 2) 1987 and section 7 of the Income Tax Amendment Act 1988) is hereby amended by inserting, in their appropriate alphabetical order, the following definitions:
“‘Agreement for the sale and purchase of property’, in relation to a person, means a financial arrangement that is an agreement (whether conditional or unconditional) entered into by the person to purchase or otherwise acquire or sell or otherwise dispose of property; but does not include an option, specified option, or a futures contract; and for the purposes of this definition the term ‘property’ means—
“(a)
Any capital asset that is not foreign exchange or a financial arrangement:
“(b)
Trading stock (as defined in this section):
“(c)
Consumable aids:
“(d)
Property to be purchased or otherwise acquired or sold or otherwise disposed of for private or domestic purposes only:
“‘Amount of all consideration’, in relation to a person and to an agreement for the sale and purchase of property or a specified option, where all or part of the consideration provided to the holder is property (as defined in the definition of the term ‘agreement for the sale and purchase of property’), means the aggregate of the amount calculated in respect of that property in the manner provided in subparagraph (i) or subparagraph (ii) of item w in paragraph (c) of section 64ba(1) of this Act and any consideration provided to the holder in relation to the financial arrangement, other than the property provided to the holder:
“‘Forward contract’ includes, but is not limited to, a forward contract for—
“(a)
Foreign exchange:
“(b)
Commodities:
“(c)
Financial arrangements:
“(d)
Excepted financial arrangements;—
but does not include an agreement for the sale and purchase of property or a specified option:
“‘Private or domestic agreement for the sale and purchase of property’, in relation to any person, means an agreement for the sale and purchase of property or a specified option where—
“(a)
The agreement was entered into by that person or the specified option was granted to or by that person for private or domestic purposes; and
“(b)
The subject-matter of the agreement or specified option is—
“(i)
Real property, the purchase price of which is less than $750,000; or
“(ii)
Any other property, the purchase price of which is less than $250,000; and
“(c)
Settlement is required to take place within 365 days after the day on which the agreement was entered into or the specified option granted:
“‘Right in the specified property’ means—
“(a)
The right to possession of the property; or
“(b)
The right to any income or the right to control or influence the disposition of income derived from the property; or
“(c)
The right, directly or indirectly, to exercise, or to influence any other person in the exercise, of any decision-making in respect of the property; or
“(d)
Any other right of a substantially similar nature:
“Provided that the mere right to enforce any agreement for the sale and purchase of property or any specified option shall not of itself constitute a right in the specified property:
“‘Short term agreement for the sale and purchase of property’ means an agreement for the sale and purchase of property where—
“(a)
The property is real property and settlement is required to take place within 93 days of the day on which the agreement was entered into:
“(b)
The property is not real property and settlement is required to take place within 63 days of the day on which the agreement was entered into:
“‘Short term option’ means a specified option where—
“(a)
The subject-matter of the option is real property and settlement is required to take place within 93 days of the day on which the option was granted:
“(b)
The subject-matter of the option is not real property and settlement is required to take place within 63 days of the day on which the option was granted:
“‘Specified option’ means an option to purchase or otherwise acquire or sell or otherwise dispose of property (and the agreement for the sale and purchase of property (if any) entered into as a result of the exercise of the option shall be deemed to be part of the option) where the option is not related (directly or indirectly) to any other financial arrangement; and for the purposes of this definition the term ‘property’ has the same meaning as in the definition of the term ‘agreement for the sale and purchase of property’:
“‘Trading stock’ means—
“(a)
Any thing acquired for the purposes of manufacture, sale, or exchange:
“(b)
Livestock:
“(c)
Any other real or personal property where the business of the person by whom it is sold or disposed of comprises dealing in such property or the property was acquired by the person for the purpose of sale or other disposal:
“(d)
Any land, being land within the meaning of section 67 of this Act, any profit or gain from the sale or other disposal of which would be a profit or gain to which the said section applies:
“(e)
Anything in respect of which expenditure is incurred and which, if possession were taken, would fall within any of paragraphs (a) to (d) of this definition;—
but does not include any financial arrangement to which sections 64b to 64m of this Act apply:”.
(2)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby amended by repealing the definition of the term “acquisition price”
.
(3)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby further amended by adding to the definition of the term “excepted financial arangement”
the following paragraphs:
“(k)
A short term agreement for the sale and purchase of property:
“(l)
A short term option:
“(m)
A private or domestic agreement for the sale and purchase of property:”.
(4)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby further amended by repealing the definition of the term “holder”
, and substituting the following definition:
“‘Holder’ means—
“(a)
In relation to—
“(i)
An agreement for the sale and purchase of property; or
“(ii)
A forward contract or a futures contract,—
a person who is a vendor in relation to the financial arrangement:
“(b)
In relation to an option to purchase or otherwise acquire property, a person who is a grantor of the option;
“(c)
In relation to an option to sell or otherwise dispose of property, a person who is a grantee of the option;
“(d)
In relation to any other financial arrangement, a person who, if the amount or amounts payable under the financial arrangement were due and payable at that time, would be entitled to receive, or would receive a pecuniary benefit from, payment of the amount or amounts so payable or any part of them; and ‘hold’ has a corresponding meaning:”.
(5)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby further amended by inserting in the definition of the term “implementation date”
, after subparagraph (iv) of paragraph (a), the following subparagraph:
“(iva)
Agreement for the sale and purchase of property; and”.
(6)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby further amended by repealing the definition of the term “issuer”
, and substituting the following definition:
“‘Issuer’, in relation to a financial arrangement at any time, means a person who is a party to the financial arrangement and is not a holder in relation to the financial arrangement:”.
(7)
Section 64b(1) of the principal Act (as so inserted and amended) is hereby further amended by inserting in the definition of the term “money”
, after the words “money’s worth”
, the words “(whether or not convertible into money)”
.
(8)
The Income Tax Amendment Act (No. 2) 1987 is hereby consequentially amended by repealing section 9(1) and (2).
4 Meaning of terms “core acquisition price”
and “acquisition price”
The principal Act is hereby amended by inserting, after section 64b (as inserted by section 2 of the Income Tax Amendment Act 1987), the following section:
“64ba
“(1)
For the purposes of sections 64b to 64m of this Act the term ‘core acquisition price’, in relation to a financial arrangement, means,—
“(a)
Where section 64j of this Act applies, the amount determined pursuant to that section:
“(b)
Where the financial arrangement is a trade credit, an amount calculated in accordance with the following formula:
u + v
where—
u
is—
“(i)
The cash price of the goods or services to which the trade credit relates (hereinafter referred to as ‘the specified goods or services’), as determined by section 2(1) of the Credit Contracts Act 1981; or
“(ii)
If subparagraph (i) of this item is not applicable, the lowest price at which the specified goods or services could be purchased under a short term trade credit; or
“(iii)
If subparagraphs (i) and (ii) of this item are not applicable, the discounted value of the amounts payable for the specified goods or services, as determined pursuant to a determination made by the Commissioner under section 64e(1)(f) of this Act; and
v
is—
“(i)
In relation to a holder of the financial arrangement, the amount of all consideration provided by the holder in relation to the financial arrangement, other than the specified goods or services; or
“(ii)
In relation to an issuer of the financial arrangement, the amount of all consideration provided to the issuer in relation to the financial arrangement, other than the specified goods or services:
“(c)
Where the financial arrangement is an agreement for the sale and purchase of property (not being an agreement for the sale and purchase of property that has lapsed or otherwise does not proceed) or a specified option (not being a specified option that has lapsed or otherwise does not proceed), an amount calculated in accordance with the following formula:
w + x
where—
w
is—
“(i)
The lowest price that the parties would have agreed upon for the property that is the subject of the agreement for the sale and purchase of property or the specified option (hereinafter referred to as the specified property) at the time at which the agreement for the sale and purchase of property was entered into or the specified option was granted on the basis of payment in full at the time at which the first right in the specified property is to be transferred; or
“(ii)
If subparagraph (i) of this item is not applicable, the discounted value of the amounts payable for the specified property as determined pursuant to a determination made by the Commissioner under section 64e(1)(f) of this Act; and
x
is—
“(i)
In relation to the holder of the financial arrangement, the amount of all consideration provided by the holder in relation to the financial arrangement other than the specified property; or
“(ii)
In relation to an issuer of the financial arrangement, the amount of all consideration provided to the issuer in relation to the financial arrangement other than the specified property:
“(d)
Where none of the preceding paragraphs applies to a financial arrangement,—
“(i)
In relation to a holder of the financial arrangement, the value of all consideration provided by the holder in relation to the financial arrangement; or
“(ii)
In relation to an issuer of the financial arrangement, the value of all consideration provided to the issuer in relation to the financial arrangement.
“(2)
For the purposes of sections 64b to 64m of this Act the term ‘acquisition price’, in relation to a financial arrangement and a holder of the financial arrangement, means an amount calculated in accordance with the following formula:
y − z
where—
y
is the core acquisition price of the financial arrangement; and
z
is the smaller of—
“(i)
The amount of consideration provided in relation to the financial arrangement by the holder that is not contingent on the implementation of the financial arrangement:
“(ii)
An amount equal to 2 percent of the core acquisition price of the financial arrangement.
“(3)
For the purposes of sections 64b to 64m of this Act the term ‘acquisition price’, in relation to a financial arrangement and an issuer of the financial arrangement, means an amount calculated in accordance with the following formula:
y + z
where—
y
is the core acquisition price of the financial arrangement; and
z
is the smaller of—
“(i)
The amount of consideration provided in relation to the financial arrangement by the issuer that is not contingent on the implementation of the financial arrangement:
“(ii)
An amount equal to 2 percent of the core acquisition price of the financial arrangement.”
5 Accruals in relation to income and expenditure in respect of financial arrangements
Section 64c of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987 and amended by section 10 of the Income Tax Amendment Act (No. 2) 1987) is hereby amended by repealing subsection (1), and substituting the following subsection:
“(1)
For the purpose of calculating the amount that shall be deemed to be income or expenditure of any person pursuant to subsections (2), (3), and (4) of this section, regard shall be had to the amount of all consideration provided to the person and by the person in relation to a financial arrangement less the amount of item z in section 64ba(2) and (3) of this Act.”
6 Determinations
Section 64e(1) of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987 and amended by section 12 of the Income Tax Amendment Act (No. 2) 1987) is hereby amended by repealing paragraph (f), and substituting the following paragraph:
“(f)
The method for determining the discounted value of amounts payable for—
“(i)
Goods or services under trade credits; or
“(ii)
Property that is acquired or sold pursuant to agreements for the sale and purchase of property or specified options.”
7 Disclosure
(1)
Section 64h of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987 and amended by section 13 of the Income Tax Amendment Act (No. 2) 1987) is hereby amended by inserting, after subsection (1), the following subsection:
“(1a)
Subject to subsection (2) of this section, any person who is a party to an agreement for the sale and purchase of property or to a specified option where the property that is the subject of the agreement for the sale and purchase of property or the specified option is a capital asset shall, in the income year in which the agreement is entered into or acquired or the specified option is granted or acquired, disclose to the Commissioner in the prescribed form and with the person’s annual return—
“(a)
The basis upon which the amounts payable in respect of the agreement for the sale and purchase of property or specified option are calculated; and
“(b)
The acquisition price of the agreement for the sale and purchase of property or the specified option; and
“(c)
Such other information in relation to the financial arrangement as the Commissioner may require.”
(2)
Subsection (2) of the said section 64h is hereby amended by inserting, after the expression “subsection (1)”
, the expression “and subsection (1a)”
.
(3)
This section shall apply in relation to every financial arrangement to which a taxpayer is a party after the day on which the Commissioner first prescribes a form for the purpose.
(4)
The Commissioner shall cause a notice of the day on which a form is first prescribed for the purposes of section 64h(1a) of the principal Act to be published in the Gazette within 30 days of that day.
8 Relationship with rest of Act
Section 64l of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987) is hereby amended by adding the following subsection:
“(2)
Where—
“(a)
Property is transferred pursuant to a financial arrangement; and
“(b)
The price at which the property is transferred pursuant to the financial arrangement includes an amount that is deemed to be income derived or expenditure incurred by a person in respect of the financial arrangement pursuant to sections 64b to 64m of this Act; and
“(c)
The property or the consideration given for the property is relevant under any other provision of this Act for the purpose of calculating the person’s assessable income—
the amount taken into account as the price or cost price or selling price of or capital expenditure incurred in respect of the property (or in any other way as the consideration given in exchange for the property) for the purpose of calculating the person’s assessable income pursuant to the other provision of this Act shall be—
“(d)
In the case of a holder,—
“(i)
Decreased by the amount of the income referred to in paragraph (b) of this subsection; and
“(ii)
Increased by the amount of the expenditure referred to in paragraph (b) of this subsection:
“(e)
In the case of an issuer,—
“(i)
Increased by the amount of the income referred to in paragraph (b) of this subsection; and
“(ii)
Decreased by the amount of the expenditure referred to in paragraph (b) of this subsection.”
Part II Taxation of Trusts
9 Application of this Part
This Part of this Act shall apply with respect to the tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year:
Provided that this Part of this Act, with the exception of the definition of the term “distribution”
in section 226 and the provisions of section 230 of the principal Act (as inserted by section 11 of this Act), shall not apply in respect of a distribution received from a trust where and to the extent to which that distribution consists of income, profits, and gains derived by the trustee of that trust in any income year commencing before the 1st day of April 1988 which was not also income derived by a beneficiary entitled in possession to the receipt thereof under the trust during the same income year, and where such distribution is made on or after the 1st day of April 1988, shall not be assessable for income tax.
10 Interpretation
Section 2 of the principal Act is hereby amended by repealing the definition of the term “trustee”
, and substituting the following definition:
“‘Trustee’ includes an executor and administrator; and also includes the Public Trustee and the Maori Trustee; and for the purposes of this Act, in relation to any trust, a reference in this Act to a trustee of that trust means that trustee only in the capacity as trustee of that trust and includes all trustees for the time being of that trust:”.
11 New sections relating to trusts substituted
(1)
The principal Act is hereby amended by repealing sections 226 to 233, and substituting the following sections:
“226 Interpretation
“(1)
For the purposes of this section and sections 227 to 233 of this Act—
“‘Arrangement’ means any contract, agreement, plan, or understanding (whether enforceable or unenforceable), including all steps and transactions by which it is carried into effect:
“‘Beneficiary income’, in relation to any person who is a beneficiary of a trust for any income year, means income derived during that income year by a trustee of the trust which—
“(a)
During that income year vests absolutely in interest in the beneficiary; or
“(b)
Is paid or applied by the trustee to or for the benefit of the beneficiary during, or within 6 months after the end of, that income year:
“‘Controlled foreign company’ has the meaning assigned to that term by section 245c of this Act:
“‘Charitable trust’ has the meaning assigned to that term by subsections (8) and (9) of this section:
“‘Corpus’, in relation to any trust, means an amount equal to the market value at the date of settlement of any property settled on the trust, not being—
“(a)
Property settled, whether directly or indirectly and whether by one transaction or a series of transactions, by a trustee of another trust to the extent to which, if that property were distributed at that time to a person and that person were at that time a beneficiary resident in New Zealand of that other trust, that distribution would have constituted beneficiary income of that beneficiary or a taxable distribution to that beneficiary:
“(b)
A disposition of property which, but for the disposition, would have constituted assessable income of the settlor, and which, by virtue of the disposition, does not constitute assessable income of the settlor:
“(c)
A disposition of property which the settlor is able to claim as a deduction in calculating the assessable income of the settlor for the purposes of New Zealand income tax:
“‘Disposition of property’ means any conveyance, transfer, assignment, settlement, delivery, payment, or other alienation of property, whether at law or in equity; and, without limiting the generality of the foregoing provisions of this definition, includes—
“(a)
The allotment of shares in a company:
“(b)
The creation of a trust:
“(c)
The grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property:
“(d)
The release, discharge, surrender, forfeiture, or abandonment of any debt, contract, or thing in action, or of any right, power, estate, or interest in or over any property; and for this purpose a debt, or any other right, estate, or interest, shall be deemed to have been released or surrendered when it has become irrecoverable or unenforceable by action or for any reason ceases to exist:
“(e)
The exercise of a general power of appointment in favour of any person other than the holder of the power,—
and includes any such disposition by will or by virtue of an intestacy; but does not include a disclaimer of an interest under a disposition made inter vivos or by will or of an interest under an intestacy:
“‘Distribution’, in relation to any trust and any beneficiary, means any property of the trust that (directly or indirectly and whether by one transaction or a series of transactions) vests absolutely in interest in that beneficiary or is paid to or applied for the benefit of that beneficiary, and includes—
“(a)
Where any property of the trust has been disposed of to or made available to the beneficiary for less than market value, the extent to which the property was disposed of or made available to the beneficiary for less than market value; and
“(b)
Where the trustee has provided any services to the beneficiary for less than market value, the extent to which the services were provided to the beneficiary for less than market value; and
“(c)
Where the beneficiary has disposed of any property to or made available any property to or provided any service to the trustee for greater than market value, the extent to which the beneficiary has disposed of any property to or made available any property to or provided any service to the trustee for greater than market value; and
“(d)
Where the trustee of that trust makes a settlement to or for the benefit of or on the terms of another trust, the extent to which, if the sums, amounts, or property that constitute the settlement were distributed at that time to a person and that person were at that time a beneficiary resident in New Zealand, those sums, amounts, or property would have constituted beneficiary income of that beneficiary or a taxable distribution to that beneficiary,—
and for the purposes of this definition the fact that the beneficiary is or will become a beneficiary under the terms of the trust will not constitute the giving or receiving of any value:
“‘Foreign trust’, in relation to any trust and any time at which a distribution is made from that trust, means any trust where at all times from the later of the 17th day of December 1987 or the date upon which a settlement was first made on the terms of that trust until the date of the distribution, no settlor of that trust was resident in New Zealand:
“‘General power of appointment’ includes any power or authority—
“(a)
Conferred by the will of any person; or
“(b)
Conferred by any settlement inter vivos; or
“(c)
Created in any other manner whatever,—
which enables the holder of the power or authority, or would enable the holder if the holder was of full capacity, to obtain or appoint or dispose of any property, or to charge any sum or money upon any property, as the holder thinks fit for the holder’s own benefit, whether exercisable orally or by instrument inter vivos or by will or otherwise howsoever; but does not include any power or authority exercisable by a person in a fiduciary capacity under a disposition not made by that person, or exercisable as mortgagee:
“‘Non-qualifying trust’, in relation to any trust and any time at which a distribution is made from that trust, means a trust which is neither a qualifying trust nor a foreign trust:
“‘Qualifying trust’, in relation to any trust and any income year in which a distribution is made from that trust, means any trust where all trustee income derived by the trustee of that trust in income years commencing with the income year in which a settlement was first made to or for the benefit of that trust or on the terms of that trust until the income year in which the distribution is made has been liable under this Act to New Zealand income tax (other than only as non-resident withholding income) or would have been so liable had it not been for—
“(a)
The fact that no income was derived in any relevant income year; or
“(b)
The application in any relevant income year of section 61 of this Act; or
“(c)
Deductions allowable under this Act exceeding income derived by the trustee in any relevant income year or losses carried forward pursuant to section 188 of this Act offsetting all of the income derived by the trustee in any relevant income year,—
and all the trustee’s obligations under this Act in respect of the trustee’s liability to New Zealand income tax have been satisfied:
“‘Taxable distribution’, in relation to any income year and any trust (being in that income year a non-qualifying trust or a foreign trust) and any person who is a beneficiary of that trust, means any distribution to that beneficiary in that income year, not being beneficiary income and not being a distribution of (or a payment or transaction which represents a distribution of)—
“(a)
Any part of the corpus of the trust; or
“(b)
In the case of a foreign trust, subject to subsection (11) of this section, profits derived in any income year by the trustee of the trust from realisation of a capital asset of the trust or any other capital profit or capital gain realised by the trustee in any income year, not being amounts required to be taken into account under this Act for the purpose of assessing income tax, less any capital loss incurred by the trustee of the trust from realisation of a capital asset of the trust or otherwise in the income year during which the profit or gain was realised:
“‘Trustee income’, in relation to any trust and any income year, means income derived in that income year by a trustee of that trust that is not beneficiary income for any beneficiary of that trust.
“(2)
For the purposes of this section and of sections 227 to 233 of this Act, the term ‘settlor’, in relation to any trust, means any person who, directly or indirectly and whether by one transaction or by a series of transactions,—
“(a)
Makes, or has made at any time, any disposition of property to or for the benefit of the trust or on the terms of the trust for less than market value; or
“(b)
Makes, continues to make, or has made at any time, any property available (including the provision of any financial assistance whether by way of a loan, guarantee, the provision of security, or otherwise) to or for the benefit of the trust for less than market value (and for the purposes of this paragraph, where financial assistance is provided to or for the benefit of the trust at below market rates or amounts payable in relation to the financial assistance are payable on demand and the right to demand payment is not exercised or is deferred the financial assistance shall be deemed to have been provided to or for the benefit of the trust for less than market value); or
“(c)
Provides, continues to provide, or has provided at any time, any service to or for the benefit of the trust for less than market value; or
“(d)
Acquires, or has at any time acquired, or obtains the use of, or continues to obtain the use of, or has at any time obtained the use of, any property of the trust or any service provided by the trustee of the trust for greater than market value,—
and includes any person who acts or abstains from acting or directly or indirectly enters into a transaction or a series of transactions with or in relation to the trust with the effect of defeating the intent and application of this definition:
“Provided that for the purposes of this subsection the fact that a person is or will become a beneficiary of the trust shall not constitute the giving or receiving of any value.
“(3)
For the purposes of this section where any person (hereafter in this subsection referred to as ‘the first person’) has made any settlement to or for the benefit of a trust or on the terms of a trust,—
“(a)
As a nominee for any other person; or
“(b)
Where such settlement is of a nominal amount made at the request of any other person,—
that other person shall, in relation to that settlement, be deemed to be the settlor and not the first person.
“(4)
For the purposes of this section and sections 227 to 233 of this Act, without limiting the situations in which a person is a settlor by reason of that person indirectly undertaking any of the transactions specified in subsection (2) of this section, where a company (being at the time of settlement a controlled foreign company as defined in section 245c(1) of this Act or which would have been at that time a controlled foreign company as defined in section 245c(1) of this Act had it been at that time a foreign company as defined in section 245a of this Act) settles a trust or is deemed by virtue of this section to be a settlor of a trust, in respect of that trust the term ‘settlor’ includes any person who at the time of the settlement of the trust held a control interest in any of the categories of control interest listed in section 245c(3) of this Act of 10 percent or more, calculated in accordance with section 245c of this Act or who would have at that time held such a control interest had that company been at that time a foreign company as defined in section 245a of this Act.
“(5)
For the purposes of this section and sections 227 to 233 of this Act, where a trustee of a trust (hereafter in this subsection called ‘the first trust’) settles a trust or makes any distribution to or on the terms of another trust (hereafter in this subsection called ‘the second trust’), the term ‘settlor’, in relation to the second trust includes any person who is a settlor of the first trust, and includes any person who is a settlor of the first trust by the operation of this subsection.
“(6)
For the purposes of this section and sections 227 to 233 of this Act, the term ‘settlement’ means any action or failure to act on the part of any person or any transaction or series of transactions entered into by any person which has the effect of making that person a settlor.
“(7)
For the purposes of this section and sections 227 to 233 of this Act, where any person has, directly or indirectly, acquired any rights or powers in relation to a trustee or settlor of an existing trust, and that acquisition has the purpose or effect of enabling the person to require the trustee of the trust to treat the person or any other person nominated by that person as a beneficiary of that trust, the person shall be deemed to be a settlor of that trust.
“(8)
Subject to subsection (9) of this section, for the purposes of this section and sections 227 to 233 of this Act, a trust shall be a charitable trust in any income year if the income derived by the trustees of that trust in that income year and any income derived by the trustee of that trust in prior income years and not previously distributed is held in trust solely for charitable purposes.
“(9)
For the purposes of this section and sections 227 to 233 of this Act, no trust shall be a charitable trust in relation to any income year if, in that income year, a business is carried on by or on behalf of the trustees of that trust and, in the carrying on of the said business, any benefit or advantage, whether or not in money or money’s worth, or any income of any of the kinds referred to in section 65(2) of this Act is able to be afforded to, or received, gained, achieved, or derived by any person—
“(a)
Who is a settlor or trustee of the trust by which the business is carried on; or
“(b)
Who is a shareholder or director of the company by which the business is carried on; or
“(c)
Who is a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
“(d)
Where that person and that settlor or trustee or shareholder or director referred to in any of the foregoing paragraphs of this subsection are associated persons by virtue of any of the provisions of section 8 or section 245b of this Act,—
and that person is, in the opinion of the Commissioner, able, by virtue of that capacity as settlor or trustee or shareholder or director or associated person, in any way (whether directly or indirectly) to determine, or to materially influence in any way the determination of, the nature or the amount of that benefit or advantage or that income or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived and for the purposes of this subsection—
“(e)
A person shall, in relation to a trust, be deemed to be a settlor of the trust and to gain a benefit or advantage in the carrying on of a business of the trust, in any case where that person has disposed of or disposes of, to the trust, any asset that is used by the trust in the carrying on of that business, and where that person retains or reserves an interest in that asset or where that asset will revert to that person:
“(f)
The deriving by any trustee of any rents, fines, premiums, or other revenues from any asset shall, in any case where any person, being a person of any of the kinds referred to in paragraphs (a) to (d) of this subsection, has disposed of or disposes of, to the trust, any asset that is used by the trustee in the deriving of those rents, fines, premiums, or other revenues, and where that person retains or reserves an interest in that asset or that asset will revert to that person, be deemed to be the carrying on of any business by the trustee:
“(g)
Income shall be deemed not to be derived by any person of any of the classes referred to in paragraphs (a) to (d) of this subsection in any case where the income consists of interest on money lent that, in the opinion of the Commissioner, is payable at not more than current commercial rates, having regard to the nature and term of the loan:
“(h)
A person shall not, by reason only that the person renders professional services to any trust or company by which a business is carried on, be considered to be able to determine, or to materially influence the determination of, the nature or the amount of any benefit or advantage or income afforded to, or received, gained, achieved, or derived by that person or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived, in any case where that ability to so determine or to so materially influence results from the rendering by that person, in the course of and as part of the carrying on as a business of a professional public practice by that person, of professional services to the trust or company by which the business first mentioned in this paragraph is carried on; and, for the purposes of this paragraph, the Public Trustee, the Maori Trustee, and any trustee company within the meaning of the Trustee Companies Act 1967, shall each be deemed to be a person carrying on as a business a professional public practice.
“(10)
The other provisons of this section and sections 227 to 233 of this Act shall not apply to any trust that is a unit trust, superannuation fund, or superannuation category 3 scheme.
“(11)
For the purposes of the definition of the term ‘taxable distribution’ in subsection (1) of this section, any capital profit or capital gain realised by the trustee of a foreign trust, whether by one transaction or by a series of transactions between the trustee and any person associated with the trustee, shall be treated as income derived by the trustee (not being beneficiary income) and not as capital profits or gains, and for this purpose a person shall be treated as associated with the trustee if that person would be treated as so associated by virtue of any of the provisions of section 8 or section 245b of this Act.
“(12)
For the purposes of this section and sections 227 to 233 of this Act, where any person resident in New Zealand makes a settlement as an employer for the benefit of one or more employees on the terms of a trust established or created principally for the purpose of providing retirement benefits to beneficiaries who are natural persons, which trust is neither a foreign superannuation scheme (as that term is defined in section 245r(1) of this Act) nor a superannuation fund, that person shall, in relation to that settlement, be deemed not to be a settlor of that trust.
“226a Trusts settled by persons before becoming resident
“(1)
Where, after the 17th day of December 1987, any settlor of a trust (being a natural person) becomes resident in New Zealand and had a distribution been made from that trust on the day immediately preceding the day on which the settlor became resident in New Zealand that trust would have been in relation to that distribution a foreign trust, any settlor, trustee, or beneficiary of the trust may, within 12 months of the day on which the settlor first became resident in New Zealand, elect pursuant to section 228(7) of this Act to pay income tax on the trustee income derived by the trustee of the trust.
“(2)
Where an election has been made in accordance with subsection (1) of this section, for the purposes of the definition of the term ‘taxable distribution’ in section 226(1) of this Act—
“(a)
The trust shall be deemed to be a foreign trust to the extent to which any distribution from that trust consists of income, profits, and gains derived by the trustee of the trust before the date on which the election was made; and
“(b)
The trust shall be deemed to be a qualifying trust to the extent to which any distribution from the trust consists of income, profits, and gains derived by the trustee of the trust after the date on which the election was made if the trustee’s obligations under this Act in respect of the trustee’s liability to income tax in respect of the trustee income derived by the trustee have been satisfied, and, if in the income year in which the election was made or any subsequent income year, the trustee’s obligations are not satisfied, the trust shall be deemed to be a non-qualifying trust with respect to any distributions made in that income year and succeeding income years (not being distributions to which paragraph (a) of this subsection applies).
“(3)
Where an election has not been made in accordance with subsection (1) of this section, for the purposes of the definition of the term ‘taxable distribution’ in section 226(1) of this Act—
“(a)
The trust shall be deemed to be a foreign trust to the extent to which any distribution from that trust consists of income, profits, and gains derived by the trustee of the trust before the date on which expires 12 months from the day on which the settlor first became resident in New Zealand (which date is hereafter referred to in this section as the ‘election expiry date’); and
“(b)
The trust shall be deemed to be a non qualifying trust to the extent to which any distribution from the trust consists of income, profits, and gains derived by the trustee of the trust after the election expiry date.
“(4)
For the purposes of subsections (2) and (3) of this section, the income, profits, and gains derived in the part of the income year before the election to pay tax was made or before the election expiry date, as the case may be, shall be calculated at the option of any trustee, settlor, or beneficiary of the trust who is liable to pay tax on the trustee income of the trust as—
“(a)
The amount calculated in accordance with the following formula:
_eqn01.JPG)
where—
a
is the income, profits, and gains derived by the trustee of the trust during the income year in which the election is made or in which the election expiry date falls; and
b
is the number of days in the income year which fall before the day on which the election is made or before the election expiry date; or
“(b)
The income, profits, and gains derived by the trustee of the trust in the part of the income year which falls before the day on which the election is made or before the election expiry date.
“227 Income assessable to beneficiaries
“(1)
The assessable income of any person in any income year includes any beneficiary income and any taxable distribution derived by that person in that income year.
“(2)
Where any beneficiary derives in any income year beneficiary income or a taxable distribution the trustee shall in respect of that income be liable to income tax as agent of the beneficiary.
“(3)
Notwithstanding any other provision of this Act, where any person resident in New Zealand ceases to be resident in New Zealand and, within a period of not more than 5 years from the day upon which that person ceased to be resident, that person again becomes resident in New Zealand, for the purposes of this section that person shall be deemed to derive, on the day on which that person again becomes resident in New Zealand, any amount which would have been assessable to the person, if the person had during that period remained in New Zealand, as beneficiary income from a foreign trust or a non-qualifying trust or taxable distributions derived by that person during the period commencing with the day on which that person ceased to be resident in New Zealand and ending on the day on which that person again became resident in New Zealand:
“Provided that this subsection shall not apply to beneficiary income or taxable distributions derived by that person prior to the date upon which the Income Tax Amendment Act (No. 5) 1988 received the Royal assent.
“(4)
Where any person derives in any income year any taxable distribution from a trust which is, in relation to that distribution, a non qualifying trust, that taxable distribution shall not be included in the assessable income of the person and the person shall be liable for tax by way of an income tax in respect of that taxable distribution at the rate specified in the First Schedule to this Act:
“Provided that where in that income year the person has any loss or loss carried forward to which relief would be given under section 188 of this Act, that person shall be entitled to claim, as a deduction from that taxable distribution, an amount calculated in accordance with the following formula:
_eqn02.JPG)
where—
a
is such part of the loss or loss carried forward as the person claims shall be taken into account by virtue of this proviso; and
b
is the minimum rate specified in the First Schedule to this Act for income tax on income derived by trustees of trusts expressed as a decimal; and
c
is the rate specified in the First Schedule to this Act first mentioned in this subsection expressed as a decimal,—
and to the extent to which any loss or loss carried forward is taken into account by virtue of this proviso, the loss may not be deducted or carried forward by the person.
“(5)
Where, in relation to any trust and any beneficiary, any arrangement has been entered into pursuant to which property is transferred, or services or other benefits are provided by the trustee to a person other than that beneficiary, which arrangement has the effect in relation to that beneficiary of defeating the intent and application of this section, that property and those services or benefits shall be deemed for the purposes of this section to be received or enjoyed by that beneficiary.
“(6)
Notwithstanding any other provision of this Act, distributions (not being beneficiary income) derived by any beneficiary in that beneficiary’s capacity as beneficiary in any income year from any trust that is in relation to that distribution a qualifying trust shall not be assessable for income tax.
“(7)
Where a trustee furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, and any income derived by the trustee in that accounting year is also beneficiary income under the trust during the same accounting year, the beneficiary shall, for the purposes of this Act, be deemed to have derived that beneficiary income under the trust during the same income year as that during which the trustee is, under section 15 of this Act, deemed to have derived that income.
“227a Trusts that may become qualifying trusts
Where a settlement was first made on the terms of a trust on or before the 17th day of December 1987 (whether or not any further settlements were made to or for the benefit of the trust or on the terms of the trust after the 17th day of December 1987), and any settlor, trustee, or beneficiary of that trust has made an election under section 228(7) of this Act on or before the 31st day of March 1989 to pay income tax on trustee income derived in income years commencing on or after the 1st day of April 1988, for the purposes of determining the liability of any person for income tax on any distribution from that trust, all trustee income of that trust derived from outside New Zealand in income years commencing before the 1st day of April 1988 during any period during which there was no trustee of that trust resident in New Zealand shall be deemed to have been liable under this Act to New Zealand income tax (other than only as non-resident withholding income) and all the trustee’s obligations under this Act in relation to the trustee’s liability to New Zealand income tax in respect of such trustee income shall be deemed to have been satisfied.
“228 Trustee income
“(1)
Subject to this section, a trustee is assessable and liable for income tax on trustee income as if the trustee were an individual beneficially entitled thereto, except that—
“(a)
The rate of tax is calculated by reference to that income alone; and
“(b)
The trustee is not entitled to any rebate of income tax or to any deduction by way of special exemption; and
“(c)
The trustee is not entitled to be a cash basis holder pursuant to section 64d of this Act.
“(2)
A trustee is liable to income tax on all trustee income the trustee derives from New Zealand.
“(3)
A trustee is liable to income tax (and, if the trustee is not a resident of New Zealand, as if the trustee were resident in New Zealand) on trustee income derived from outside New Zealand in any income year—
“(a)
During which any settlor of the trust is resident at any time in New Zealand; or
“(b)
During which any trustee of the trust was at any time during that income year resident in New Zealand and the trust is a testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that income year or otherwise,—
but a trustee is not otherwise assessable to income tax on trustee income derived from outside New Zealand.
“(4)
Subject to subsection (5) of this section, where, in relation to any trust (not being a charitable trust), and any income year a trustee of the trust derives trustee income, and a settlement was made to or for the benefit of the trust or on the terms of the trust by any person after the 17th day of December 1987 (whether or not that person or any other person may have also made a settlement on the terms of that trust on or before the 17th day of December 1987), any settlor of the trust who is resident in New Zealand at any time during that income year shall, in respect of that income, be assessable and liable to income tax as agent of the trustee and, if there is more than one such settlor, those settlors shall, in respect of that income, be jointly and severally so assessable and liable.
“(5)
Subsection (4) of this section shall not apply to—
“(a)
Any settlor of a trust in any income year where at all times during that income year (or, where a settlement is first made to or for the benefit of that trust or on the terms of that trust during that income year, at all times from the day of that settlement until the end of that income year) a trustee of that trust is resident in New Zealand; or
“(b)
Any settlor of a trust (being a natural person) who was at the time of any settlement by that settlor on the trust not resident in New Zealand and who had not at the time of any settlement previously (at any time after the 17th day of December 1987) been resident in New Zealand, unless the settlor elects to pay income tax on trustee income pursuant to subsection (7) of this section; or
“(c)
Any settlor of a trust to the extent to which that settlor can establish to the satisfaction of the Commissioner by making full disclosure of all relevant facts that the liability of that settlor to income tax on trustee income exceeds the liability which that settlor should bear by comparison to other persons who have made a settlement to or for the benefit of the trust or on the terms of that trust having regard to the respective settlements made by that settlor and those other persons; or
“(d)
Any settlor of a trust to the extent to which the trustee income is derived by virtue of the application of sections 64b to 64M of this Act to any amounts remitted by the settlor under any financial arrangement where section 64F or section 64FA of this Act applies:
“Provided that paragraph (c) of this subsection shall not apply in determining the nature and extent of the obligations of the trustee of the trust and whether those obligations have been satisfied for the purposes of the definition of the term ‘qualifying trust’ in section 226(1) of this Act and the application of that definition.
“(6)
Where in any income year a trustee would be liable to income tax pursuant to subsection (3) of this section if not for the application of this subsection, and
“(a)
Either—
“(i)
No settlement was made to or for the benefit of the trust or on the terms of the trust after the 17th day of December 1987 and, where any election has been made under section 227a of this Act to pay income tax on trustee income, that election has not been made by the trustee; or
“(ii)
The only settlements made to or for the benefit of the trust or on the terms of the trust have been made by settlors who, at the time of the settlement, were not resident in New Zealand nor had previously (at any time after the 17th day of December 1987) been resident in New Zealand and, where an election has been made under section 227a of this Act to pay income tax on trustee income, that election has not been made by the trustee; and
“(b)
The trustee is at all times during that income year resident outside New Zealand—
the trustee shall in that income year not be liable to income tax on trustee income pursuant to subsection (3) of this section:
“Provided that this subsection shall not affect the liability for income tax of any settlor of a trust under this section and sections 226 to 233 of this Act:
“Provided also that for the purpose of determining whether a trust is or remains a qualifying trust or is deemed to be a qualifying trust, as defined in section 226(1) of this Act, and for the purpose of the application of that definition, the trustee income of the trust shall remain liable under this Act to New Zealand income tax and this subsection shall not apply in determining whether the trustee’s obligations in relation to that liability have been satisfied.
“(7)
Where, in relation to any trust and any income year, any trustee, settlor, or beneficiary of that trust would not otherwise be liable to tax on trustee income by virtue of this section, that trustee, settlor, or beneficiary may furnish to the Commissioner within the prescribed period for furnishing an annual return of income for that income year, or within such other period as may be specified in sections 226a and 227a of this Act, an election to pay income tax on trustee income for that income year or from the date of the election and, if an election is so made, the trustee, settlor, or beneficiary shall be assessable and liable to income tax on that trustee income, and that election shall apply in respect of that income year or from the date of the election, and in respect of all succeeding income years.
“228a Existing trusts become subject to tax
“(1)
Subject to subsection (2) of this section, where, in relation to any trust and any income year, the trustee income of that trust becomes liable at any date to New Zealand income tax, and immediately before that date the trustee income of that trust was not liable to New Zealand income tax (other than only as non-resident withholding income),—
“(a)
The cost for the purposes of this Act at that date of the premises, plant, machinery, equipment, and trading stock of that trust shall be deemed to be, at the option of any person who is liable to pay income tax on trustee income under this Act, either—
“(i)
The historical cost of the asset, less accumulated depreciation (if any), or other value at that date used for the purposes of income tax calculations in any country or territory in which the trustee income of the trust has been liable to income tax (being a value not higher than the market value at that date); or
“(ii)
The value which would be used for the purposes of this Act at that date calculated as if the trustee income of that trust had at all times been liable to income tax under this Act (other than only as non-resident withholding income):
“(b)
The acquisition price for the purposes of this Act of any financial arrangement at that date shall be, at the option of any person who is liable to pay income tax on trustee income under this Act, either—
“(i)
The market value of the financial arrangement at that date; or
“(ii)
The adjusted base price, being in the case of the issuer of a financial arrangement, the acquisition price of that financial arrangement together with all accrued expenditure incurred by the issuer, less consideration paid by the issuer in relation to that financial arrangement prior to that date, and in the case of the holder of a financial arrangement, the acquisition price of that financial arrangement together with all accrued income derived by the holder, less consideration received by the holder in respect of that financial arrangement prior to that date.
“(2)
Subsection (1) of this section shall not apply where the trustee income of a trust was not liable to New Zealand income tax immediately before the date first mentioned in subsection (1) of this section solely for the reason that—
“(a)
The trustee of that trust derived no income in the relevant period immediately preceding that date; or
“(b)
Deductions allowable under this Act exceeded income derived by the trustee in the relevant period immediately preceding that date or losses carried forward pursuant to section 188 of this Act offset all of the income derived by the trustee in the relevant period immediately preceding that date.
“229 Rents, royalties, or interest derived by Maori Trustee and not distributed
If and so far as the income derived by the Maori Trustee (being income that consists of rents, royalties, or interest and derived by the Maori Trustee in the Maori Trustee’s capacity as collecting and distribution agent for such income) is not also beneficiary income, the Maori Trustee shall be assessable and liable for income tax on that income as if the Maori Trustee were beneficially entitled thereto, except that the Maori Trustee shall not be entitled to any rebate of income tax under any of the provisions of sections 50a to 55 of this Act or to any deduction by way of special exemption.
“230 Distributions from trusts
“(1)
Subject to subsection (2) of this section, where in any income year any distribution from a trust is made to a beneficiary by any trustee, that distribution shall, for the purposes of sections 226 to 233 of this Act, be deemed to consist of—
“(a)
The income derived by the trustee in that income year (whether beneficiary income when derived or not), not being income deemed pursuant to this section to have constituted part of any earlier or contemporaneous distribution from that trust in that income year; and
“(b)
To the extent to which the distribution exceeds the amount specified in paragraph (a) of this subsection, income derived by the trustee in preceding income years (not being beneficiary income) during which the trust was in existence, not being amounts deemed pursuant to this section to have constituted part of any earlier or contemporaneous distribution from that trust; and
“(c)
To the extent to which the distribution exceeds the amounts specified in paragraphs (a) and (b) of this subsection, profits derived during that income year by the trustee of the trust from realisation of a capital asset of the trust or any other capital profit or capital gain realised during that income year by the trustee (not being amounts required to be taken into account under this Act for the purpose of assessing income tax) less any capital loss suffered by the trust in that income year (not being a loss required to be taken into account under this Act for the purpose of assessing income tax), not being profits or gains deemed pursuant to this section to have constituted part of any earlier or contemporaneous distribution from that trust in that income year; and
“(d)
To the extent to which the distribution exceeds the amounts specified in paragraphs (a), (b), and (c) of this subsection, the distribution shall be deemed to be out of the amount specified in paragraph (c) of this subsection for preceding income years during which the trust was in existence, not being amounts deemed pursuant to this section to have constituted part of any earlier or contemporaneous distribution from that trust; and
“(e)
To the extent to which the distribution exceeds the amounts specified above, corpus of the trust.
“(2)
Subsection (1) of this section shall not apply—
“(a)
To any distribution from a trust which is a qualifying trust (other than a qualifying trust in relation to which an election to pay income tax on trustee income has been made for the purposes of section 227a of this Act); or
“(b)
To any distribution from a trust—
“(i)
Created by will or codicil or by an order of Court varying or modifying the provisions of any will or codicil; or
“(ii)
Created on any intestacy or partial intestacy; or
“(iii)
On which no settlement was made after the 17th day of December 1987,—
and the trustee has no discretion as to the source nature and amount of distributions to beneficiaries, including but not limited to the classification of trust property as capital or income; or
“(c)
To any distribution which would not be deemed to be a distribution but for the application of paragraphs (a) and (b) of the definition of the term ‘distribution’ in section 226(1) of this Act; or
“(d)
To any distribution from a trust which is one to which section 226a(2) of this Act applies (except where the trust is deemed to be a non-qualifying trust pursuant to paragraph (b) of that subsection)—
and in such case except in the case of a distribution specified in paragraph (c) of this subsection the distribution shall be deemed to consist of such amounts as reflect the terms of the trust or the terms of the exercise of the discretion of the trustee, as the case may be, and, in the case of a distribution specified in paragraph (c) of this subsection, the distribution shall be a taxable distribution.
“(3)
Subject to subsection (2) of this section, where and to the extent to which in relation to any distribution the records maintained in relation to any trust do not permit subsection (1) of this section to be applied accurately to determine the constituent elements of any distribution, the distribution made shall be a taxable distribution.
“(4)
For the purposes of this section, in determining in relation to any trust and to any beneficiary the constituent elements of any distribution, no amount of income or capital profits or gains derived by the trustee of the trust shall be treated as having been distributed to any other beneficiary of that trust if the effect is that any part or all of the distribution in question would be treated as not being a taxable distribution, unless that amount distributed to that other beneficiary was distributed in a bona fide transaction which placed the whole of that amount beyond the possession and control of the trustee in the trustee’s capacity as trustee of that trust and which transaction did not itself constitute a settlement.
“231 Disclosure
“(1)
Where—
“(a)
Any person has made a settlement on the terms of a trust on or before the 31st day of March 1989; and
“(b)
The trust is still in existence as at the 31st day of March 1989; and
“(c)
If a distribution were made from that trust as at the 31st day of March 1989, the trust would be a non qualifying trust in relation to that distribution (or would have been a non qualifying trust were it not for the application of section 227a of this Act),—
that person shall disclose to the Commissioner in the prescribed form by the 31st day of March 1989 the existence of that trust, the name and address of the trustee and the beneficiary of the trust, and such further details as may be required by the Commissioner in relation to that trust.
“(2)
Where any person resident in New Zealand at the time of settlement makes a settlement on or after the 17th day of December 1987 to or for the benefit of a trust or on the terms of a trust and—
“(a)
At the time of the settlement there was no trustee of that trust resident in New Zealand; or
“(b)
If at the time of the settlement there was a trustee of the trust resident in New Zealand, on any date thereafter there is no trustee of the trust resident in New Zealand,—
that person shall disclose to the Commissioner in the prescribed form and within 3 months of the date of settlement or of the date on which there is no trustee of the trust resident in New Zealand (or, if later, by the 31st day of March 1989) the fact of that settlement, the name and address of the trustee and the beneficiary of the trust, and such further details as may be required by the Commissioner.
“(3)
Where any person resident in New Zealand at the time of settlement would be treated as having made a settlement to or for the benefit of a trust or on the terms of a trust on or after the 17th day of December 1987 but for the application of section 226(3) of this Act, and where at the time of settlement there was no trustee of that trust resident in New Zealand, that person shall disclose to the Commissioner in the prescribed form within 3 months of the date of settlement (or, if later, by the 31st day of March 1989) the fact of that settlement, the name and address of the person who is deemed to be the settlor of the trust pursuant to section 226(3) of this Act, and such further details as may be required by the Commissioner.
“(4)
Where any person—
“(a)
Has failed to disclose for any income year in accordance with this section a trust of which that person is a settlor or any of the further details required by the Commissioner; or
“(b)
Has failed to disclose any information requested by the Commissioner pursuant to section 17 of the Inland Revenue Department Act 1974 in relation to that trust; or
“(c)
Is unable to obtain sufficient information to calculate the trustee income of that trust for any income year,—
the Commissioner may determine the amount of trustee income for the income year in such manner as the Commissioner considers fair and reasonable.
“(5)
The trustee of every trust shall in every case make a return of the whole income derived by the trustee as trustee of that trust, and each such return shall be separate and distinct from any return of income derived by the trustee under any other trust or in the trustee’s own right.
“232 Income received by trustee after death of deceased person
Any amount received in any income year by the trustee of the estate of a deceased person shall be deemed to be assessable income derived by the trustee in that year if it does not represent assessable income derived by the deceased person during that person’s lifetime, but would have been included in that person’s assessable income if that person had been alive when it was received.
“233 Deduction from estate income of irrecoverable book debts
Where the amount of any debt owing to any person at the date of the person’s death has been included in the assessable income of the person or of the trustee of the person’s estate for any income year, and the debt or any part of it is proved to the satisfaction of the Commissioner to be irrecoverable and to have actually been written off by the trustee as a bad debt, the amount so written off shall be deemed to be a loss incurred by the trustee in the income year in which the amount was written off, and shall be allowable as a deduction, first against any income derived by the trustee as trustee income, and then, as to any balance, against any income derived in that year by or in trust for a beneficiary who has a vested interest in the capital of the estate to the extent that the loss is chargeable against the capital of that beneficiary; and any balance not allowed as a deduction in that year shall, so far as it extends, be allowable as a deduction in that same manner against income derived in the next income year and so on.”
(2)
The Income Tax Amendment Act (No. 2) 1977 is hereby consequentially amended by repealing so much of the Third Schedule as relates to section 232 of the principal Act.
12 Amendments consequential upon section 11 of this Act
(1)
Section 2 of the principal Act is hereby amended by repealing the definition of the term “specified trust”
.
(2)
Section 49a(2) of the principal Act (as inserted by section 8 of the Income Tax Amendment Act (No. 2) 1977) is hereby amended by omitting the words “section 227 or section 228 or section 229 or section 230 or section 231”
, and substituting the expression “sections 227 to 230”
.
(3)
Section 56a(2) of the principal Act (as inserted by section 9(1) of the Income Tax Amendment Act (No. 2) 1977) is hereby amended by omitting the words “section 227 or section 228 or section 229 or section 230 or section 231”
, and substituting the expression “sections 227 to 230”
.
(4)
Section 61(13) of the principal Act (as substituted by section 12(1) of the Income Tax Amendment Act 1979) is hereby amended by omitting from the second proviso the expression “231”
, and substituting the expression “230”
.
(5)
Section 61(27) of the principal Act is hereby amended by omitting from the second proviso the words “the trustees shall be assessable and liable for income tax on that income as if they were beneficially entitled thereto, and every person other than the trustees shall, in relation to that income, be deemed not to be beneficially entitled in possession to the receipt thereof and section 230 of this Act shall apply accordingly”
, and substituting the words “the income shall be trustee income as defined in section 226 of this Act and the trustees of the trust shall be assessable and liable for income tax on the income in accordance with section 228 of this Act”
.
(6)
Section 61(52) of the principal Act (as inserted by section 11(2) of the Income Tax Amendment Act (No. 2) 1977 is hereby amended by omitting the words “section 227 or section 228 or section 229 or section 230 or section 231”
, and substituting the expression “sections 227 to 230”
.
(7)
Section 64d(6) of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987) is hereby amended by omitting from paragraph (a) the words “trustees’ or beneficiaries’ income”
, and substituting the words “trustee income or beneficiary income”
.
(8)
Section 95(2) of the principal Act (as amended by section 9(1) of the Income Tax Amendment Act (No. 4) 1986) is hereby amended by omitting the words “section 227 or section 228 or section 230 or section 231”
, and substituting the expression “sections 227 to 230”
.
(9)
Section 211a(1) of the principal Act (as inserted by section 33(1) of the Income Tax Amendment Act (No. 3) 1983) is hereby amended by repealing paragraph (a) of the definition of the expression “designated sources”
, and substituting the following paragraph:
“(a)
Any trust, other than the trust under which the group investment fund is established, being a trust—
“(i)
That is created—
“(A)
By will or codicil or by order of Court varying or modifying the provisions of any will or codicil; or
“(B)
On any intestacy (including any partial intestacy), or by order of Court varying or modifying, in relation to any estate, the application of the law relating to the distribution of intestate estates; or
“(C)
By order of Court; or
“(D)
By any enactment; or
“(E)
For the purpose of administering any funds, being compensation or other money arising from the death of, or injury to, any person; or
“(F)
In order to vary the terms of a will or codicil or, in relation to any estate, to vary the application of the law relating to the distribution of intestate estates, in either case for the sole purpose of effecting a settlement out of Court of an application made or proposed to be made under the Family Protection Act 1955 or a claim or proposed claim to be made under the Law Reform (Testamentary Promises) Act 1949, where the Commissioner is of the opinion that the terms are substantially the same as those likely to have been ordered by the Court; or
“(ii)
That is not carried on for the private pecuniary profit of any individual and the funds of which are, in the opinion of the Commissioner, applied, wholly or principally, for benevolent, philanthropic, cultural, or public purposes within New Zealand,—
where the trustee of the group investment fund is a trustee of the trust first referred to in this paragraph; or”.
(10)
Section 211a(3) of the principal Act (as so inserted) is hereby amended by omitting the expression “231”
, and substituting the expression “230”
.
(11)
Section 225(4) of the principal Act (as substituted by section 39(1) of the Income Tax Amendment Act (No. 2) 1982) is hereby amended by omitting from paragraph(e) the expression “231”
, and substituting the expression “230”
.
(12)
Section 235 of this Act is hereby amended by omitting the words “or section 230 or section 231”
.
(13)
Section 237(2) of this Act is hereby amended by omitting the words “as a beneficiary entitled in possession to the receipt thereof under the trust during the same income year within the meaning of section 227(1) of this Act”
, and substituting the words “as beneficiary income (as defined in section 226 of this Act) and section 227 of this Act shall apply accordingly.
(14)
Section 398a(1) of the principal Act (as inserted by section 19 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by repealing the definition of the expression “trustee income”
, and substituting the following definition:
“‘Trustee income’ has the meaning assigned to that term by section 226 of this Act.”
(15)
Section 413a(1) of the principal Act (as inserted by section 20 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by repealing the definition of the expression “trustee income”
, and substituting the following definition:
“‘Trustee income’ has the meaning assigned to that term by section 226 of this Act”.
13 Credits in respect of tax paid in a country or territory outside New Zealand
(1)
Section 293(1) of the principal Act is hereby amended—
(a)
By inserting in paragraph (a) of the definition of the term “income tax”
, after the words “any tax”
, the words “(whether imposed by a central, state, or local government)”
; and
(b)
By inserting in that paragraph, after the words “Part IV of this Act”
, the words “or as non-resident withholding tax imposed under Part IX of this Act”
.
(2)
Section 293 of the principal Act is hereby further amended by inserting, after subsection (2a) (as inserted by section 26 of the Income Tax Amendment Act 1979), the following subsection:
“(2b)
Where in any income year any beneficiary of a trust who is resident in New Zealand derives a taxable distribution (as defined in section 226 of this Act)—
“(a)
A credit against income tax payable in New Zealand in respect of that taxable distribution shall be allowed only in respect of any tax paid on the taxable distribution which tax is substantially of the same nature as non-resident withholding tax imposed under Part IX of this Act; and
“(b)
The amount of the credit against income tax payable in New Zealand in respect of the taxable distribution shall be calculated in accordance with the following formula:
_eqn03.JPG)
where—
a
is the tax which qualifies for a credit pursuant to paragraph (a) of this subsection; and
b
is the amount of the taxable distribution, including the tax which qualifies for a credit pursuant to paragraph (a) of this subsection derived by the beneficiary; and
c
is the total amount of the distribution (as defined in section 226 of this Act), including the tax which qualifies for a credit pursuant to paragraph (a) of this subsection derived by the beneficiary.”
14 First Schedule
(1)
The First Schedule to the principal Act is hereby amended by omitting from clause 9 of Part A the words “where such income is not included within any of the provisions of clauses 6, 9a, 9b, and 9c of this Part of this Schedule (as inserted by section 25(1) of thxe Income Tax Amendment Act (No. 3) 1988), and substituting the words “where such income is not included within any of the provisions of clauses 6, 9a, 9b, 9c, and 9d of this Part of this Schedule”
.
(2)
The First Schedule to the principal Act is hereby further amended by inserting in Part A, after clause 9c (as inserted by section 33(4) of the Income Tax Amendment Act (No. 3) 1983), the following clause:
“9d Taxable distributions from non-qualifying trusts
On all taxable distributions from non-qualifying trusts the rate of income tax for every $1 of the taxable distribution shall be 45c.”
(3)
The First Schedule to the principal Act is hereby further amended by omitting from clause 10 of Part A the expression “clauses 2 to 9c”
(as substituted by section 25(2) of the Income Tax Amendment Act (No. 3) 1988), and substituting the expression “clauses 2 to 9d”
.
(4)
The Income Tax Amendment Act (No. 3) 1988 is hereby consequentially amended by repealing section 25(1) and (2).
Part III International Tax
15 Application of this Part
Except where this Part of this Act otherwise provides, this Part of this Act shall be deemed to have come into force on the 1st day of April 1988 and shall apply with respect to the income derived on or after that date:
Provided that sections 26, 27, and 28 of this Act shall come into force on the date on which this Act receives the Royal assent.
16 Interpretation
(1)
Section 2 of the principal Act is hereby amended by inserting, in their appropriate alphabetical order, the following definitions:
“‘Attributed foreign income’ has the meaning assigned to that term by section 245c of this Act:
“‘Director’ means—
“(a)
A person occupying the position of director by whatever name called:
“(b)
A person in accordance with whose directions or instructions the persons occupying the position of directors of a company are accustomed to act:
“(c)
Any person deemed to be a director by any other provision of this Act:
“(d)
In the case of an entity deemed or assumed to be a company by virtue of any provision of this Act, which entity does not have directors as such, any trustee, manager, or other person who acts in relation to that entity in the same or a similar fashion as a director would act were that entity a company incorporated in New Zealand pursuant to the Companies Act 1955:
“‘Foreign investment fund income’ has the meaning assigned to that term by section 245r of this Act:”.
(2)
Section 2 of the principal Act is hereby further amended by repealing the definition of the term “company”
, and substituting the following definition:
“‘Company’ means any body corporate or other entity which has a legal personality or existence distinct from those of its members, whether that body corporate or other entity is incorporated or created in New Zealand or elsewhere; and includes anything deemed to be a company for the purposes of this Act by any provision of this Act; but does not include a local authority or a public authority or a Maori authority:”.
17 Commissioner to make assessments, determinations of loss, and other determinations
Section 19(5) of the principal Act is hereby amended—
(a)
By inserting, after the words “subsection (4) of this section”
, the words “ , or a determination of excess credit carried forward made under section 245k(7) of this Act, or a determination of attributed foreign loss made under section 245m(5) of this Act, or a determination of foreign investment fund loss made under section 245r(9) of this Act as if”
:
(b)
By omitting from paragraphs (b) and (e) the words “or the credit of tax”
, and substituting in each case the words “the credit of tax, the excess credit carried forward, the attributed foreign loss, or the foreign investment fund loss,”
.
18 Powers of Taxation Review Authority on determination of objection or case stated
Section 32(1a) of the principal Act (as inserted by section 2 of the Income Tax Amendment Act 1987) is hereby amended—
(a)
By inserting, after the expression “section 64e(1)”
, the expression “or section 245s”
:
(b)
By inserting, after the expression “section 64e(6)”
, the words “or, as the case may be, section 245s”
.
19 When objection may be referred in first instance to High Court
Section 33(11a) of the principal Act (as inserted by section 4 of the Income Tax Amendment Act 1987 and amended by section 6(1) of the Income Tax Amendment Act (No. 2) 1987) is hereby amended—
(a)
By inserting, after the expression “section 64e(1)”
, the expression “or section 245s”
:
(b)
By inserting, after the expression “section 64e(6)”
, the words “or, as the case may be, section 245s”
.
20 Items included in assessable income
Section 65(2) of the principal Act is hereby amended by inserting, after paragraph (e), the following paragraphs:
“(ea)
All attributed foreign income:
“(eb)
All foreign investment fund income:”.
21 Companies included in group of companies
(1)
Section 191 of the principal Act (as substituted by section 41(1) of the Income Tax Amendment Act 1980) is hereby amended by inserting, after subsection (7e) (as inserted by section 31(2) of the Income Tax Amendment Act (No. 2) 1987), the following subsection:
“(7f)
If in any income year a company which incurs a loss is not a dual resident company, and is not incorporated in New Zealand,—
“(a)
A loss or part of a loss incurred by the company in that income year shall not be deductible under subsection (5) of this section in any income year:
“(b)
Any payment made by a company (hereinafter called the ‘paying company’) to the first-mentioned company to which subsection (7) of this section would otherwise apply in respect of a loss or part of a loss incurred by the first-mentioned company in that income year (whether or not that loss or that part of a loss has been carried forward by the first-mentioned company pursuant to section 188 of this Act)—
“(i)
Shall not be deductible by the paying company; and
“(ii)
Shall be deemed not to be assessable income derived by the first-mentioned company:
“Provided that this subsection shall not apply to any company carrying on business in New Zealand through a fixed establishment in New Zealand to the extent to which, if a profit had been made from the transaction in which the loss was incurred, the amount of the profit would have been assessable income derived by the company in respect of that business carried on through a fixed establishment in New Zealand.”
(2)
This section shall apply with respect to the tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
22 Unit trusts
(1)
Section 211(1) of the principal Act is hereby amended—
(a)
By omitting the words “subscribers or purchasers”
in the definition of the term “unit trust”
, and substituting the words “subscribers, purchasers, or contributors”
; and
(b)
By omitting the words “the legal owner of an”
in the definition of the term “unit holder”
, and substituting the words “any person who holds a beneficial”
.
(2)
Section 211(2) of the principal Act is hereby amended by inserting, after paragraph (e), the following paragraph:
“(ea)
The trustees of a unit trust shall be assessable and liable to income tax as agent of the unit trust; and”.
23 Determination of place of residence
(1)
The principal Act is hereby amended by repealing section 241 (as amended by section 10 of the Income Tax Amendment Act 1980), and substituting the following section:
“241
“(1)
Notwithstanding any other provision of this section, a person other than a company is resident in New Zealand within the meaning of this Act if that person has a permanent place of abode in New Zealand, whether or not that person also has a permanent place of abode outside New Zealand.
“(2)
Where a person other than a company is personally present in New Zealand for a period or periods exceeding in the aggregate 183 days in any period of 12 months, that person shall be deemed to be resident in New Zealand from the first day within that period of 12 months on which that person was personally present in New Zealand.
“(3)
Where a person other than a company is resident in New Zealand and is personally absent from New Zealand for a period or periods exceeding in aggregate 325 days in any period of 12 months, that person shall be deemed not to be resident in New Zealand from the first day within that period of 12 months on which that person was personally absent from New Zealand and, subject to this section, thereafter.
“(4)
For the purposes of this section, where a person, other than a company, is personally present in New Zealand for part of a day, that person shall be deemed to be personally present in New Zealand for the whole of that day and not to be personally absent from New Zealand for any part of that day.
“(5)
Notwithstanding any other provision of this section a person, other than a company, who is personally absent from New Zealand in the service in any capacity of the Government of New Zealand shall be deemed to be resident in New Zealand during that absence.
“(6)
A company is resident in New Zealand within the meaning of this Act if—
“(a)
It is incorporated in New Zealand; or
“(b)
It has its head office in New Zealand; or
“(c)
It has its centre of management in New Zealand; or
“(d)
Control of the company by its directors, acting in their capacity as directors, is exercised in New Zealand, whether or not decision making by directors is confined to New Zealand.”
(2)
The principal Act is hereby further amended by omitting from section 60(3) the expression “section 241(1b)”
, and substituting the expression “section 241(2)”
.
(3)
The Income Tax Amendment Act 1980 is hereby consequentially amended by repealing section 10.
(4)
This section shall apply—
(a)
For the purposes of determining the place of residence of a company, with respect to tax on income derived in the income year that commenced on the 1st day of April 1989 and in every subsequent year:
Provided that for the purposes only of section 245q of the principal Act (as inserted by section 24 of this Act) this section shall apply with respect to tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year; and
(b)
For the purposes of determining the place of residence of a person, other than a company,—
(i)
Where that person is, by virtue of the application of section 241 of the principal Act prior to its amendment by this section, resident in New Zealand on the 6th day of December 1988, with effect from the 6th day of December 1988 and thereafter; and
(ii)
In any other case, with respect to tax on income derived in the income year that commences on the 1st day of April 1989 and in every subsequent income year:
Provided that, except where the person otherwise elects, where any person other than a company is personally absent from New Zealand for a period or periods (which period commences or periods commence after the 6th day of December 1988) exceeding in aggregate 325 days in any period of 12 months, that person shall, with respect only to tax on income derived in the income year that commenced on the 1st day of April 1988 or that commences on the 1st day of April 1989, be deemed not to be resident in New Zealand from the first day within that period in which that person was personally absent from New Zealand and, subject to section 241 of the principal Act (as amended by this section) thereafter, notwithstanding that the person may have a permanent place of abode in New Zealand during that period.
24 New Part IVa inserted
The principal Act is hereby amended by inserting, after Part IV, the following Part:
“PART IVa “Attributed Foreign Income and Losses and Foreign Investment Fund Income and Losses
“Interpretation
“245a Interpretation
“(1)
For the purposes of this Part of this Act and Part III of the Income Tax Amendment Act (No. 5) 1988,—
“‘Accounting period’, in relation to any foreign company, means its accounting year or, where by virtue of—
“(a)
The formation or winding up of the foreign company (or similar circumstances); or
“(b)
The foreign company changing its residence; or
“(c)
The adoption, pursuant to section 245i of this Act, of a new accounting year,—
the branch equivalent income or loss of the foreign company is, pursuant to this Act, permitted or required to be calculated on the basis of a period of other than 12 months, that other period:
“‘Arrangement’ means any contract, agreement, plan, or understanding (whether enforceable or unenforceable), including all steps and transactions by which it is carried into effect:
“‘Attributed foreign income’ has the meaning assigned to that term by section 245g of this Act:
“‘Attributed foreign loss’ has the meaning assigned to that term by section 245g of this Act:
“‘Branch equivalent income or loss’, in relation to any controlled foreign company and any accounting period, means the income or loss calculated with respect to that accounting period in accordance with section 245j of this Act:
“‘Close of trading spot exchange rate’, in respect of any foreign currency on any day, means—
“(a)
An average of the spot rates of exchange for the purchase of New Zealand dollars using the foreign currency quoted as at 3.00 pm New Zealand time on that day and if no such rates are quoted on that day then the rates quoted on the immediately preceding day upon which such rates were quoted, by foreign exchange dealers authorised under the Reserve Bank of New Zealand Act 1964, on a market approved by the Commissioner in any determination G6 (or any determination issued in substitution therefor) made under section 64e of this Act; or
“(b)
If, in relation to any foreign currency, no spot rates of exchange are quoted in respect of New Zealand dollars on such an approved market, the cross rate determined as at 3.00 pm New Zealand time on that day by applying the method outlined in paragraph (3)(c) of the said determination G6 (or in any corresponding paragraph of any determination issued in substitution therefor); or
“(c)
If, in relation to any foreign currency, paragraphs (a) and (b) of this definition do not apply, the rate determined by applying the method specified in paragraph 6(3) of determination G9 (or any determination issued in substitution therefor) made under section 64e of this Act:
“‘Control interest’, in respect of a foreign company, has the meaning assigned to that term by section 245c of this Act:
“‘Controlled foreign company’ has the meaning assigned to that term by section 245c of this Act:
“‘Foreign company’ means—
“(a)
Any non-resident company; or
“(b)
Any company resident in New Zealand but not subject to tax in respect of part or all of its income pursuant to a provision of arrangements to which effect is given by an Order in Council made under section 294 of this Act, where that company is, for the purposes of the arrangements, treated as not being a resident of New Zealand:
“‘Foreign investment fund’ has the meaning assigned to that term by section 245r of this Act:
“‘Foreign investment fund income’ has the meaning assigned to that term by section 245r of this Act:
“‘Foreign investment fund loss’ has the meaning assigned to that term by section 245r of this Act:
“‘Group of persons’ includes one person:
“‘Income interest’, in respect of a controlled foreign company, has the meaning assigned to that term by section 245d of this Act:
“‘Income interest of 10 percent or greater’ means—
“(a)
An income interest calculated under section 245d of this Act which is equal to or greater than 10 percent; or
“(b)
An income interest equal to or greater than 10 percent after the application of section 245f(2) of this Act; or
“(c)
An income interest in respect of which a person is required to calculate attributed foreign income or attributed foreign loss by virtue of the application of section 245h(2) of this Act:
“‘Income tax’ has the meaning assigned to that term by section 293(1) of this Act:
“‘Interest in a foreign investment fund’ has the meaning assigned to that term by section 245r of this Act:
“‘Measurement day’, in relation to any calendar year, means each of the 31st day of March, 30th day of June, 30th day of September, and 31st day of December (but shall not include any day before the 30th day of June 1988):
“‘Nominees’, in relation to any person (hereafter in this definition referred to as ‘the first person’) and in respect of any rights or powers, means any other person where (whether pursuant to any arrangement made between the first person and any other person or otherwise),—
“(a)
That other person possesses those rights or powers on behalf of the first person; or
“(b)
That other person may be required to exercise or refrain from exercising those rights or powers at the direction of the first person,—
but does not include a trustee other than a bare trustee:
“‘Non-resident company’ has the meaning assigned to that term by section 245q of this Act:
“‘Relative’, in relation to any person, means any other person connected with the first-mentioned person by blood relationship, marriage, or adoption; and includes a nominee for a relative; and, for the purposes of this definition,—
“(a)
Persons are connected by blood relationship if within the second degree of relationship; and
“(b)
Persons are connected by marriage if one is married to the other or to a person who is connected by blood relationship to the other; and
“(c)
Persons are connected by adoption if one has been adopted as the child of the other or as a child of a person who is within the first degree of relationship to the other:
“‘Series of transactions’ means any number of transactions, whether related, connected or otherwise:
“‘Settlor’ has the meaning assigned to that term by section 226 of this Act.
“(2)
For the purposes of this Part of this Act,—
“(a)
A person shall be deemed—
“(i)
To hold anything which any nominee of that person holds on behalf of that person; and
“(ii)
To be entitled to acquire anything which any nominee of that person is entitled to acquire on behalf of that person; and
“(iii)
To exercise anything which any nominee of that person exercises on behalf of that person,—
and the nominee shall be deemed not to hold, be entitled to acquire, or exercise that thing:
“(b)
A person shall be deemed to be entitled to acquire anything which the person is entitled to acquire (or of which the person is entitled to require the cancellation or extinguishment, whether by way of acquisition by the issuer or otherwise) absolutely or contingently, and whether pursuant to the constitution of any company or by virtue of the exercise of any options or conversion of any convertible notes (as defined in section 196(1) of this Act) or by virtue of any arrangement whether of a substantially similar nature or otherwise:
“Provided that a person shall not be deemed to be entitled to acquire anything where the rights or powers of that person in relation to that thing arise solely by virtue of that person being the holder of a security arrangement within the meaning of section 64b(1) of this Act, which security arrangement has been acquired by that person in a transaction entered into on an arms-length basis and the terms of which security arrangement are in accordance with generally accepted commercial practice:
“(c)
In determining whether or not there exist any rights to distributions, interest payable on debentures to which section 192 or section 195 of this Act would apply shall be treated as a distribution of income:
“(d)
Where any persons resident in New Zealand hold control interests or income interests in any foreign company (hereafter in this paragraph referred to as ‘the stapled company’) which control interests or income interests may or may ordinarily be disposed of only in conjunction with the disposal of interests in another company, such other company being either resident in New Zealand or a controlled foreign company, those control interests or income interests in the stapled company shall be deemed to be held by that other company and not by those persons:
“(e)
Subject to section 245e of this Act, where, in relation to any foreign company and any measurement day,—
“(i)
Any person has a control interest or an income interest in that foreign company on that measurement day, that person shall be deemed to hold that same control interest or income interest, as the case may be, in that foreign company at all times from but excluding the immediately preceding measurement day (or from, but excluding, the 31st day of March 1988, in the case of the measurement day being the 30th day of June 1988) until and including that measurement day; and
“(ii)
Any person does not hold a control interest or an income interest in that foreign company on that measurement day, that person shall be deemed not to hold any control interest or income interest in that foreign company at any time from but excluding the immediately preceding measurement day (or from, but excluding, the 31st day of March 1988, in the case of the measurement day being the 30th day of June 1988) until and including that measurement day:
“Provided that any person who has an income interest or a control interest in that foreign company may elect, in the manner prescribed by the Commissioner, for the purposes of that person’s liability to income tax in income years commencing with the income year during which such election is made that this paragraph shall not apply, in relation to such income interest or control interest in that foreign company and thereafter such election shall be irrevocable and section 245e of this Act shall not apply to that income interest or control interest:
“(f)
Except where the context otherwise requires, every reference in this Part of this Act to an income year shall, where the person furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case, this Part shall, with any necessary modifications, apply accordingly.
“(3)
For the purposes of section 245d of this Act, a person shall be deemed—
“(a)
To hold in proportion to that person’s interest in a partnership, any thing held by any partnership of which that person is a partner:
“(b)
To be entitled to acquire, in proportion to that person’s interest in a partnership, any thing entitled to be acquired by any partnership of which that person is a partner:
“(c)
To exercise, in proportion to that person’s interest in a partnership, any thing which may be exercised by any partnership of which that person is a partner.
“245b Definition of term ‘associated persons’
For the purposes of this Part of this Act, associated persons or persons associated with each other are—
“(a)
Any 2 companies where—
“(i)
Those 2 companies consist substantially of the same shareholders; or
“(ii)
Those 2 companies are under the control of the same person or persons; or
“(iii)
Any group of persons holds income interests in each of those companies totalling in aggregate 50 percent or more, and for this purpose section 245d shall apply as if the words ‘controlled foreign’ and ‘foreign’ were omitted from each place where they appear in that section and as if section 245d(4) and (6) were omitted:
“Provided that 2 companies shall not be deemed to be associated by virtue of this paragraph where one of those companies is not resident in New Zealand; or
“(b)
Any company and any person (other than a company) who holds an income interest of 50 percent or more in that company, and for this purpose section 245d shall apply as if the words ‘controlled foreign’ and ‘foreign’ were omitted from each place where they appear in that section and as if section 245d(4) and (6) were omitted; or
“(c)
Any company and any person where the person is by virtue of any of the provisions of this section associated with another person who is by virtue of any of the provisions of this section associated with the company; or
“(d)
Any 2 persons who are relatives; or
“(e)
A partnership and any person where that person is a partner in the partnership; or
“(f)
A partnership and any person, where that person and any partner in that partnership are, by virtue of any of the provisions of this section, associated persons; or
“(g)
Any 2 persons where—
“(i)
One person is the trustee of a trust under which the other person has benefited, or will benefit, either directly or indirectly; or
“(ii)
One person is the trustee of a trust under which the other person (where the other person is, by virtue of any of the provisions of this section or section 8 of this Act, deemed to be associated with any settlor of the trust) may benefit either directly or indirectly:
“Provided that this paragraph shall not apply where the trust is only for the benefit of the employees of an employer and neither the other person nor any person associated (by virtue of any of the provisions of this section) with that other person directly or indirectly manages or controls the affairs of the trust; or
“(h)
Any 2 persons where each person is the trustee of a trust in relation to which trusts there is at least one settlor in common:
“Provided that this paragraph shall not apply where—
“(i)
The other person (not being a company) settles or had settled property on the terms of the trust for the benefit of the employees of that other person only, and neither that other person nor any person associated (by virtue of any of the provisions of this subsection) with that other person directly or indirectly manages or controls the affairs of the trust; or
“(ii)
The other person (being a company) settles or had settled property on the terms of the trust for the benefit of its employees only, and that other person, any person associated (by virtue of any of the provisions of this section) with that other person, any executive of that other person, any director of that other person, or any person holding 25 percent or more of the paid-up capital of that other person does not, directly or indirectly, manage or control the affairs of the trust; or
“(i)
Any 2 persons where one person is the trustee of a trust of which the other person is or was a settlor:
“Provided that this paragraph shall not apply where—
“(i)
The other person (not being a company) settles or had settled property on the terms of the trust for the benefit of the employees of that other person only and neither that other person nor any person associated (by virtue of any of the provisions of this section) with that other person directly or indirectly manages or controls the affairs of the trust; or
“(ii)
The other person (being a company) settles or had settled property on the terms of the trust for the benefit of its employees only, and that other person, any person associated (by virtue of any of the provisions of this section) with that other person, any executive of that other person, any director of that other person, or any person holding 25 percent or more of the paid-up capital of that other person does not, directly or indirectly, manage or control the affairs of the trust; or
“(j)
Any 2 persons who habitually act in concert with respect to the holding or exercise of any of the things listed in paragraphs (a) to (e) of section 245c(4) of this Act:
“Provided that the persons shall only be associated persons in respect of the thing or things in relation to which they act in concert.
“Attributed Foreign Income and Losses
“245c Calculation of control interest
“(1)
Where, in relation to any accounting period of a foreign company, if at any time during that accounting period there is a group of 5 or fewer persons resident in New Zealand whose control interest (or the aggregate of whose control interests) in that foreign company in any one of the categories of control interest listed in subsection (4) of this section is equal to or greater than 50 percent, that foreign company shall be a controlled foreign company:
“Provided that in the case of any accounting period of a foreign company commencing before the 1st day of April 1988, the foreign company shall be a controlled foreign company only if it is so controlled at any time within that part of that accounting period that falls on or after the 1st day of April 1988.
“(2)
Where, in relation to any accounting period of a foreign company, a foreign company is not a controlled foreign company pursuant to subsection (1) of this section, if at any time during that accounting period there is a group of New Zealand resident directors of the foreign company whose control interest (or the aggregate of whose control interests) in that foreign company in any one of the categories of control interest listed in subsection (4) of this section is equal to or greater than 50 percent, the New Zealand resident directors shall be deemed to be a group of 5 or fewer persons, and the foreign company shall be deemed to be a controlled foreign company.
“(3)
Subject to section 245a(2)(e) and section 245e of this Act, the control interest of any person resident in New Zealand at any time in any foreign company in each of the categories of control interest listed in subsection (4) of this section shall be calculated by aggregating at that time, with respect to that category,—
“(a)
Any direct control interest held by that person in that foreign company; and
“(b)
Any direct control interest or interests held in that foreign company by persons associated with that person, whether those associated persons are resident in New Zealand or not; and
“(c)
Any indirect control interest or interests held by that person in that foreign company; and
“(d)
Any indirect control interest or interests held in that foreign company by persons associated with that person, whether those associated persons are resident in New Zealand or not.
“(4)
A person shall at any time hold direct control interests in a foreign company equal to each percentage of the following things which that person at that time holds or is entitled to acquire:
“(a)
The percentage of the total paid-up capital of the foreign company:
“(b)
The percentage of the total nominal capital of the foreign company:
“(c)
The percentage of the total rights to vote or participate in any decision making concerning—
“(i)
The distributions to be made by the foreign company (not being decision making undertaken by directors acting only in their capacity as directors); or
“(ii)
The constitution of the foreign company; or
“(iii)
Any variation in the capital of the foreign company; or
“(iv)
The appointment or election of directors of the foreign company,—
and, if the percentage of the total rights to vote or participate differs as between the differing types of decisions, whichever percentage is the highest:
“(d)
The percentage of the income of the foreign company for the accounting period in which that time falls that the person would be entitled to receive or to have dealt with in that person’s interest or on that person’s behalf, if that income were distributed on the last day of that accounting period and the entitlement of that person to receive income or have income dealt with were the same at all other times during that accounting period:
“(e)
The percentage of the value of the net assets of the foreign company (or the proceeds of the disposition thereof) at that time which the person would be entitled to receive or to have dealt with in that person’s interest or on that person’s behalf in the event of distribution of all the assets of the company at that time (whether on its winding up or otherwise).
“(5)
The indirect control interests held in a foreign company at any time by any person shall be calculated as follows:
“(a)
Where any controlled foreign company (hereafter in this section referred to as the ‘first tier controlled foreign company’) has at that time qualified control interests (as defined in subsection (6) of this section) in another foreign company (hereafter in this section referred to as the ‘underlying foreign company’) in any of the categories of control interest listed in subsection (4) of this section, those qualified control interests shall be deemed to be held at that time,—
“(i)
If there is only one group of 5 or fewer persons resident in New Zealand whose control interest (or the aggregate of whose control interests) in that first tier controlled foreign company is equal to or greater than 50 percent, by that group; and
“(ii)
If there is more than one such group of persons, by the group of persons which is smallest in number; and
“(iii)
If there is more than one such group each being equal in number, by the group whose control interest (or the aggregate of those control interests) in that first tier controlled foreign company is highest; and
“(iv)
If there is more than one such group each being equal in number and each having an equal control interest (or equal control interests in aggregate) in the first tier controlled foreign company, the qualified control interests shall be allocated in full to each of the groups:
“Provided that in determining at any time in relation to any group of 5 or fewer persons resident in New Zealand whether the control interest (or the aggregate of the control interests) of that group in a foreign company in any one of the categories of control interest listed in subsection (4) of this section is equal to or greater than 50 percent, where the application of this subparagraph would result in any direct control interest (or any part thereof) being counted more than once in relation to that group, that direct control interest (or that part of that control interest, as the case may be) shall be counted only once,—
and, if in any one or more of such groups there is more than one person, held by the persons in each such group pro rata to those persons’ respective income interests in the first tier controlled foreign company:
“(b)
Where any underlying foreign company is at that time a controlled foreign company and that underlying foreign company has at that time qualified control interests in another foreign company, paragraph (a) of this subsection shall then be applied on the basis of the underlying foreign company being the first tier controlled foreign company mentioned in that paragraph, and so on down any chain of controlled foreign companies.
“(6)
For the purposes of subsection (5) of this section, the qualified control interests at any time of a first tier controlled foreign company in an underlying foreign company shall comprise—
“(a)
Any direct control interests held at that time by the first tier controlled foreign company in that underlying foreign company; and
“(b)
Any direct control interests held at that time by persons associated with the first tier controlled foreign company in that underlying foreign company.
“(7)
For the purposes of this section, in determining at any time in relation to any group of 5 or fewer persons resident in New Zealand whether the control interest (or the aggregate of the control interests) of that group in a foreign company in any one of the categories of control interest listed in subsection (4) of this section is equal to or greater than 50 percent, where the application of section 245b of this Act would result in any direct control interest (or any part thereof) or any indirect control interest (or any part thereof) being counted more than once in relation to that group, that direct control interest or indirect control interest or, as the case may be, that part of the direct control interest or indirect control interest shall be counted only once.
“(8)
For the purposes of this section in determining at any time in relation to any group of 5 or fewer persons resident in New Zealand whether the control interest (or the aggregate of the control interests) of that group in a foreign company in any one of the categories of control interest listed in subsection (4) of this section is equal to or greater than 50 percent, where and to the extent to which by virtue of any person holding any of the things fisted in subsection (4) of this section and any other person being entitled to acquire that thing, that thing would be counted more than once in relation to that group, that thing shall be counted only once.
“(9)
Where in relation to any foreign company any 2 or more persons resident in New Zealand have entered into any arrangement whereby any control interests in that foreign company are held by any other person or persons, which arrangement has the purpose or a purpose of preventing the foreign company from being a controlled foreign company, those control interests shall be deemed to be held by those persons resident in New Zealand divided equally among them.
“245d Calculation of income interest
“(1)
Subject to section 245a(2)(e) and section 245e of this Act, the income interest of any person at any time in any controlled foreign company shall be calculated by aggregating at that time—
“(a)
Any direct income interest held by that person in that controlled foreign company; and
“(b)
Any indirect income interest or interests held by that person in that controlled foreign company.
“(2)
A person shall at any time have a direct income interest in a controlled foreign company equal to the highest percentage of the following things which that person holds at that time:
“(a)
The percentage of the total paid-up capital of the controlled foreign company:
“(b)
The percentage of the total nominal capital of the controlled foreign company:
“(c)
The percentage of the total rights to vote or participate in any decision making concerning—
“(i)
The distributions to be made by that controlled foreign company (not being decision making undertaken by directors acting only in their capacity as directors); or
“(ii)
The constitution of that controlled foreign company; or
“(iii)
Any variation in the capital of the controlled foreign company; or
“(iv)
The appointment or election of directors of the controlled foreign company,—
and, if the percentage of the total rights to vote or participate differs as between the differing types of decision making, whichever percentage is the highest:
“(d)
The percentage of the income of the controlled foreign company for the accounting period in which that time falls which the person would be entitled to receive or to have dealt with in that person’s interest or on that person’s behalf if that income were distributed on the last day of that accounting period and the entitlement of the person to receive income or have income dealt with were the same at all other times during that accounting period:
“(e)
The percentage of the value of the net assets of the controlled foreign company (or the proceeds of the disposition thereof) which the person would be entitled to receive or to have dealt with in that person’s interest or on that person’s behalf in the event of distribution of all the assets of the controlled foreign company at that time (whether on its winding up or otherwise).
“(3)
Where a person has at any time a direct income interest in a controlled foreign company and that controlled foreign company (hereafter in this subsection referred to as the ‘first tier controlled foreign company’) has at that time a direct income interest in another foreign company which is at that time a controlled foreign company (hereafter in this subsection referred to as the ‘underlying controlled foreign company’) the person shall have at that time an indirect income interest in the underlying controlled foreign company calculated by multiplying the income interest of the person in the first tier controlled foreign company by the income interest of the first tier controlled foreign company in the underlying controlled foreign company, and where there are at that time 2 or more controlled foreign companies interposed between the person and the underlying controlled foreign company the indirect income interest or interests of the person in the underlying controlled foreign company shall be calculated by multiplying the direct income interests of each interposed controlled foreign company in each chain of controlled foreign companies in like manner.
“(4)
Where, at any time in relation to any controlled foreign company, the income interest of a person resident in New Zealand (hereafter in this subsection referred to as ‘the taxpayer’) in that controlled foreign company would be greater if any person (whether the taxpayer or another person and hereafter in this subsection referred to as ‘the option holder’) were deemed to hold any of the percentage of the things listed in paragraphs (a) to (e) of subsection (2) of this section, which the option holder was entitled to acquire but did not hold at that time and which at that time was held either by a person neither resident in New Zealand nor a controlled foreign company or by a person resident in New Zealand but whose income interest in the controlled foreign company for the accounting period during which that time falls is less than 10 percent, and—
“(a)
Having regard to the economic or financial gain the taxpayer derives as a result of the controlled foreign company deriving income in the accounting period during which that time falls, the effect of the option holder being at that time entitled to acquire but not holding that percentage of that thing is to defeat in relation to the taxpayer the intent and application of this Part of the Act; or
“(b)
The consideration in money or money’s worth payable by the option holder in order to exercise the option holder’s entitlement to acquire that percentage of that thing is less than the market value of that percentage of that thing on any date upon which the option holder may exercise that entitlement; or
“(c)
The option holder or any person associated with the option holder directly or indirectly and whether by one or by a series of transactions has provided financial assistance (whether by means of a loan, guarantee, the provision of security, or otherwise) to the holder of that percentage of that thing for the purpose of or in connection with the acquisition or holdingof that percentage of that thing,—
for the purposes of calculating the income interest of the taxpayer in the controlled foreign company at that time, the option holder shall be deemed at that time to hold that percentage of that thing.
“(5)
Subject to section 245a(2)(e) of this Act, where the income interest of any person in any controlled foreign company varies during any accounting period of the controlled foreign company, the income interest of that person in respect of that controlled foreign company for that accounting period shall be calculated by aggregating the amounts calculated, in respect of that accounting period and in respect of any period falling within that accounting period during which the income interest of the person has remained unvaried, in accordance with the following formula:
_eqn04.JPG)
where—
a
is the income interest (expressed as a percentage) of the person in the foreign company for that period; and
b
is the number of days from but excluding the first day of that period (being a day not earlier than the last day of the preceding income year) to and including the last day of that period (being a day not later than the last day of that income year); and
c
is the number of days in that accounting period.
“(6)
Where at any time after the 1st day of April 1988 any person holding an income interest in a controlled foreign company becomes or ceases to be a resident in New Zealand, for the purposes of calculating any attributed foreign income or attributed foreign loss of that person, that person shall not be treated as holding that income interest on any measurement day on which that person was not resident in New Zealand.
“245e Variations in control or income interests
“(1)
For the purposes of this section—
“‘Acquisition of control or income interests’ means an acquisition directly or indirectly and whether by one transaction or a series of transactions, by a person of any percentage of any of the things, or an entitlement to acquire any percentage of any of the things listed in section 245c(4) or section 245d(2) of this Act:
“‘Disposal of control or income interests’ means a disposal directly or indirectly and whether by one transaction or a series of transactions, by a person of any percentage of any of the things, or an entitlement to acquire any percentage of any of the things listed in section 245c(4) or section 245d(2) of this Act:
“‘Foreign company aggregates’, in relation to any foreign company, means the total of each of—
“(a)
The paid-up capital of that foreign company; or
“(b)
The nominal capital of that foreign company; or
“(c)
The rights to vote or participate in any decision making concerning the distributions to be made by that foreign company (not being decision making undertaken by directors acting only in their capacity as directors), the constitution of that foreign company, any variation in the issued capital of the foreign company, or the appointment or election of directors of the foreign company; or
“(d)
The rights to receive or have dealt with the income of the foreign company, if distributed; or
“(e)
The rights to receive or have dealt with the net assets of the foreign company, if distributed:
“‘Person’ includes any person, whether resident in New Zealand or otherwise, and also includes a foreign company:
“‘Variation in control or income interests’, in relation to any person, means any increase or reduction in the control interest or income interest of such person in a foreign company, whether by one transaction or a series of transactions, that is attributable to—
“(a)
An acquisition of control or income interests; or
“(b)
A disposal of control or income interests; or
“(c)
A reduction in any of the foreign company aggregates; or
“(d)
An increase in any of the foreign company aggregates.
“(2)
Where before a measurement day there is, in relation to any person and any foreign company, a variation in control or income interests that is attributable to an acquisition of control or income interests or a disposal of control or income interests by the person (the variation), and within a period of 183 days after that variation there is a further variation in control or income interests that is attributable to a disposal of control or income interests or an acquisition of control or income interests by the person (the subsequent variation), then if—
“(a)
The variation reduces the person’s control interest or income interest in the foreign company and the subsequent variation increases that person’s control interest or income interest in the foreign company; or
“(b)
The variation increases the person’s control interest or income interest in the foreign company and the subsequent variation reduces that person’s control interest or income interest in the foreign company,—
and, if it were not for the application of this subsection the effect of the variation would be that a greater amount of attributed foreign loss or a lesser amount of attributed foreign income would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company then if the variation and the subsequent variation are part of an arrangement the effect, or one of the effects, of which is to defeat the intent and application of this Part of this Act, the variation, to the extent it was reversed by the subsequent variation, shall be deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company on the measurement day.
“(3)
Where before a measurement day there is, in relation to any person and any foreign company, a variation in control or income interests that is attributable to a reduction or increase in any of the foreign company aggregates (the variation) and within a period of 365 days after the variation there is a further variation in control or income interests which is attributable to an increase or reduction in any of the foreign company aggregates (the subsequent variation), then if—
“(a)
The variation reduces the person’s control interest or income interest in the foreign company and the subsequent variation increases that person’s control interest or income interest in the foreign company; or
“(b)
The variation increases the person’s control interest or income interest in the foreign company and the subsequent variation reduces that person’s control interest or income interest in the foreign company,—
and if it were not for the application of this subsection the effect of the variation would be that a greater amount of attributed foreign loss or a lesser amount of attributed foreign income would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company then if the variation and the subsequent variation are part of an arrangement the effect, or one of the effects, of which is to defeat the intent and application of this Part of this Act, the variation, to the extent it was reversed by the subsequent variation, shall be deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company on the measurement day.
“(4)
Where before a measurement day there is, in relation to any person and any foreign company, a variation in control or income interests (hereafter in this subsection referred to as the ‘variation’) that is attributable to—
“(a)
An acquisition of control or income interests or a disposal of control or income interests by the person; or
“(b)
A reduction in any of the foreign company aggregates or an increase in any of the foreign company aggregates,—
and within a period of 365 days after the variation there is a further variation in control or income interests (hereafter in this subsection referred to as the ‘subsequent variation’) which is attributable,—
“(c)
In any case where the variation was of the type specified in paragraph (a) of this subsection, to an increase in the foreign company aggregates or a reduction in the foreign company aggregates; or
“(d)
In any case where the variation was of the type specified in paragraph (b) of this subsection, to an acquisition of control or income interests or a disposal of control or income interests by the person—
and, if it were not for the application of this subsection, the effect of the variation would be that a greater amount of attributed foreign loss or a lesser amount of attributed foreign income would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company then if the variation and the subsequent variation are part of an arrangement the effect, or one of the effects, of which is to defeat the intent and application of this Part of this Act, the variation, to the extent it was reversed by the subsequent variation, shall be deemed not to have occurred when calculating that person’s control interest or income interest in the foreign company on the measurement day.
“(5)
Subsections (2) and (4) of this section shall not apply where the person first mentioned in each of these subsections acquired a control interest or an income interest in a controlled foreign company from, or disposes of a control interest or income interest in a controlled foreign company to, a person who—
“(a)
Is at the time of the acquisition or disposal resident in New Zealand; and
“(b)
Is liable to income tax on any attributed foreign income which that person might derive; and
“(c)
Has immediately prior to the acquisition or immediately after the disposition (as the case may be) an income interest of 10 percent or greater in that controlled foreign company.
“(6)
Nothing in this section shall be construed as limiting the circumstances in which a person is regarded as being entitled to acquire anything pursuant to section 245a(2)(b) of this Act.
“(7)
For the purposes of this Part of this Act, where a company resident in New Zealand becomes a foreign company and subsequently within 183 days becomes a company resident in New Zealand, that company shall be deemed to have been resident in New Zealand at all times during that period.
“245f Persons not required to calculate attributed foreign income and loss
“(1)
No person shall be required to calculate attributed foreign income or attributed foreign loss pursuant to section 245g of this Act in respect of an income interest in a foreign company for any accounting period where—
“(a)
That person is at all times in that accounting period (or, in the case of an accounting period commencing before the 1st day of April 1988, at all times in that part of that accounting period that falls on or after the 1st day of April 1988) resident outside New Zealand; or
“(b)
That income interest for that accounting period is not an income interest of 10 percent or greater.
“(2)
For the purposes of this Act, in determining whether the income interest of any person in a controlled foreign company for any accounting period is an income interest of 10 percent or greater (but not for any other purpose), that person shall be deemed to hold all the income interests for that accounting period which any persons (not being controlled foreign companies) associated with that person hold.
“245g Attribution of income and losses using branch equivalent method
“(1)
Subject to section 245f of this Act, the attributed foreign income or attributed foreign loss of any person for any income year in respect of any income interest in a controlled foreign company shall include such amount as is calculated pursuant to this section in respect of that interest for any accounting period the last day in which falls within the income year of that person.
“(2)
Subject to this section and section 245h of this Act, the attributed foreign income or attributed foreign loss of any person in respect of any income interest in a controlled foreign company shall be calculated in relation to any accounting period in accordance with the following formula:
a × b
where—
a
is the income interest (expressed as a percentage) of the person in the controlled foreign company for that accounting period; and
b
is the branch equivalent income or loss of the controlled foreign company calculated in relation to that person pursuant to section 245j of this Act for that accounting period.
“(3)
Where any accounting period of a controlled foreign company commences before the 1st day of April 1988, for the purposes of this section the income interests of persons in relation to that controlled foreign company shall be calculated on the basis of that part of the accounting period which falls on or after the 1st day of April 1988 as if that part were a separate accounting period and the branch equivalent income or loss of the controlled foreign company for that accounting period shall be deemed to be, at the option of the person holding an income interest of 10 percent or greater in the controlled foreign company in relation to which attributed foreign income or attributed foreign loss is to be calculated,—
“(a)
The amount calculated in accordance with the following formula:
_eqn05.JPG)
where—
a
is the branch equivalent income or loss calculated in relation to that controlled foreign company and that accounting period without regard being had to this subsection; and
b
is the number of days in that accounting period which fall on or after the 1st day of April 1988; and
c
is the total number of days in that accounting period; or
“(b)
The branch equivalent income or loss calculated in relation to that controlled foreign company for that part of the accounting period which falls on or after the 1st day of April 1988.
“(4)
Notwithstanding the foregoing provisions of this section, where and to the extent to which in relation to any controlled foreign company and any accounting period of that controlled foreign company—
“(a)
Any person has an attributed foreign loss and that person suffers no, or substantially no, economic or financial loss, due to any factor or factors, including any right of the person or any other person to sell any thing, or any right of any other person to require that person or any other person to sell any thing; or
“(b)
Any person would, before the application of this subsection, have an attributed foreign loss in excess of the economic or financial loss suffered by the person due to any factor including the nature of the things taken into account in calculating the person’s income interest pursuant to section 245d of this Act,—
that person shall, for the purposes of this Act, be deemed to have no attributed foreign loss.
“(5)
Where pursuant to section 245j(24) of this Act any taxable distribution is not taken into account in calculating the branch equivalent income or loss of any person in relation to a controlled foreign company,—
“(a)
The attributed foreign income of that person in respect of that taxable distribution shall be separately calculated in accordance with the following formula:
a × b
where—
a
is the income interest (expressed as a percentage) of the person in the controlled foreign company for the accounting period of the controlled foreign company during which the taxable distribution was received; and
b
is the taxable distribution; and
“(b)
The person shall be liable for income tax on the amount calculated pursuant to paragraph (a) of this subsection at the rate which would apply by virtue of section 227(4) of this Act if the person had received the taxable distribution as a beneficiary of the trust from which the taxable distribution was made.
“(6)
Where pursuant to section 245j(25) of this Act any foreign investment fund income or foreign investment fund loss is not taken into account in calculating the branch equivalent income or loss of any person in relation to a controlled foreign company,—
“(a)
The foreign investment fund income or foreign investment fund loss shall be attributed to the person in accordance with the following formula:
a × b
where—
a
is the income interest (expressed as a percentage) of the person in the controlled foreign company for the accounting period of the controlled foreign company during which the foreign investment fund income was derived or the foreign investment fund loss was incurred; and
b
is the foreign investment fund income or the foreign investment fund loss; and
“(b)
The amount attributed to the person pursuant to paragraph (a) of this subsection shall be deemed to be foreign investment fund income derived or foreign investment fund loss incurred by the person, and the provisions of sections 245r and 245t of this Act shall apply accordingly.
“(7)
Where pursuant to section 245d(6) of this Act any person is treated as not holding an income interest on any measurement day on which that person was not resident in New Zealand, the attributed foreign income or attributed foreign loss of that person calculated under subsection (2) of this section shall be deemed to be derived by the person when resident in New Zealand.
“245h Cases where aggregate income interests are greater than 100 percent
“(1)
Where, before the application of this section, the aggregate income interests used to calculate attributed foreign income or attributed foreign loss pursuant to section 245g(2) of this Act of persons resident in New Zealand with respect to any controlled foreign company for any accounting period would exceed 100 percent, for the purposes of calculating the attributed foreign income or attributed foreign loss of each person in respect of that person’s income interest in the controlled foreign company and that accounting period, the income interest of that person shall be that percentage calculated in accordance with the following formula:
_eqn06.JPG)
where—
a
is the income interest of that person calculated before applying this section; and
b
is the aggregate of the income interests calculated before applying this section of all those persons resident in New Zealand required to calculate attributable foreign income or attributed foreign loss pursuant to section 245g(2) of this Act.
“(2)
Where as a result of subsection (1) of this section the income interest of any person resident in New Zealand is reduced below 10 percent, section 245f(1)(b) of this Act shall not apply.
“245i Change of controlled foreign company’s accounting date
“(1)
Any person may elect, with the approval of the Commissioner, to determine whether a foreign company is a controlled foreign company and to calculate the attributed foreign income or loss in respect of income interests held in that foreign company on the basis of an accounting year of the controlled foreign company (hereafter in this section referred to as the ‘new accounting year’) different from that previously used (hereafter in this section referred to as the ‘old accounting year’) and, if the election is approved, an accounting period in relation to that controlled foreign company shall be deemed to commence on the day immediately succeeding the last day of the preceding old accounting year and to end with the last day of the new accounting year and the preceding old accounting year shall be deemed to have ended:
“Provided that if the new accounting year ends on a date later than that previously used and attributed foreign income is derived by any person in relation to that foreign company and that accounting period, for the purpose only of section 245g(1) of this Act, in determining in which income year the attributed foreign income is derived, the accounting period in which the change has occurred shall be deemed to end on the date on which the old accounting year would have ended had not the change occurred.
“(2)
Without limiting the factors to which the Commissioner may have regard, the Commissioner may, in determining whether to approve an election made pursuant to subsection (1) of this section, have regard to—
“(a)
Whether the election results from a change in ownership of the foreign company:
“(b)
Whether the election results from the requirements of the taxation or other law of any country or territory in which the foreign company is resident or carries on business:
“(c)
Whether the election results from the requirement to have consistency in the accounting year balance dates of a group of companies:
“(d)
Whether the election, if approved, would result, in any income year, in a postponement of liability to income tax on attributed foreign income for any person holding an income interest of 10 percent or greater in the controlled foreign company.
“245j Branch equivalent income calculation
“(1)
For the purposes of this Part of this Act, the branch equivalent income or loss of any controlled foreign company for any accounting period shall be that amount as is equal to the assessable income or loss which would be calculated in accordance with the provisions of this Act (applied in accordance with the succeeding subsections of this section) in relation to that foreign company were that foreign company at all times in that accounting period a company resident in New Zealand subject to the said provisions of this Act (as so applied).
“(2)
For the purposes of this section but not for any other purpose the provisions of this Act shall apply subject to the succeeding subsections of this section.
“(3)
The income or loss of the controlled foreign company for that period shall be calculated in the currency in which it prepares its financial accounts, or, if it does not prepare such accounts, in the currency of the country in which the foreign company is resident, and converted into New Zealand currency at the average of the close of trading spot exchange rates for the 15th day of each complete month falling within that period:
“Provided that that person may elect to calculate such income or loss in New Zealand currency for that period in which case the foregoing provisions of this subsection shall not apply.
“(4)
The cost for the purposes of this Act at the beginning of that period of premises, plant, machinery, equipment, and trading stock shall be assumed to be—
“(a)
Where that person has any attributed foreign income or attributed foreign loss in respect of the period immediately preceding that period in respect of an income interest in that controlled foreign company, the value at the end of that immediately preceding period of the premises, plant, machinery, equipment, or trading stock used for the purposes of calculating that attributed foreign income or attributed foreign loss in respect of that immediately preceding period; or
“(b)
Where that person did not have any attributed foreign income or attributed foreign loss in respect of the period immediately preceding that period in respect of any income interest in that controlled foreign company, at the option of the person either—
“(i)
The historical cost of the asset less accumulated depreciation (if any), or other value used by the foreign company as the commencement value in respect of that period for the purposes of income tax calculations in the country in which that foreign company is resident (being a value not higher than the market value of the asset at the beginning of that period); or
“(ii)
The value which would be used for the purposes of this Act at the beginning of that period calculated as if the controlled foreign company had at all times been resident in New Zealand and subject to the provisions of this Act.
“(5)
The acquisition price for the purposes of this Act of any financial arrangement at the beginning of that period shall be,—
“(a)
Where that person has any attributed foreign income or attributed foreign loss in respect of the period immediately preceding that period in respect of an income interest in that controlled foreign company, the value at the end of that immediately preceding period of the financial arrangement used for the purposes of calculating that attributed foreign income or attributed foreign loss in respect of that immediately preceding period; or
“(b)
Where that person did not have any attributed foreign income or attributed foreign loss in respect of the period immediately preceding that period in respect of an income interest in that controlled foreign company, at the option of the person either—
“(i)
The market value of the financial arrangement; or
“(ii)
The adjusted base price, being in the case of the issuer of a financial arrangement, the acquisition price of that financial arrangement together with all accrued expenditure incurred by the issuer less consideration paid by the issuer in relation to that financial arrangement for periods prior to that period, and, in the case of the holder of a financial arrangement, the acquisition price of that financial arrangement together with all accrued income derived by the holder less consideration received by the holder in respect of that financial arrangement for periods prior to that period.
“(6)
The following provisions of this Act shall not apply:
“(a)
Section 61(18):
“(b)
Section 61(33):
“(c)
Section 64m(e):
“(d)
Section 65(2)(ea) and (eb):
“(e)
Section 112:
“(f)
Section 127:
“(g)
Section 127a:
“(h)
Section 128:
“(i)
Sections 175 to 186:
“(j)
This Part of this Act, except for this section and section 245r.
“(7)
For the purposes of the following provisions of this Act, any business carried on by the controlled foreign company shall be assumed to be carried on in New Zealand:
“(a)
Section 74:
“(b)
Section 113a:
“(c)
Sections 128a to 128c.
“(8)
Where it appears to the Commissioner that the branch equivalent income of any controlled foreign company in relation to any person is less than might be expected, or the branch equivalent loss is greater than might be expected, by virtue of any transaction between the controlled foreign company and any person associated with the controlled foreign company, section 22 of this Act shall apply with any necessary modifications in determining the branch equivalent income or branch equivalent loss of the controlled foreign company; and for the purposes of this subsection a person and a controlled foreign company shall be treated as associated if they would be treated as so associated by virtue of any of the provisions of section 8 or section 245b of this Act.
“(9)
Section 63 of this Act shall not apply and all dividends derived by the controlled foreign company shall be assessable income:
“Provided that dividends shall be exempt if derived in any accounting period from shares held by that controlled foreign company in another controlled foreign company, where the person has for an accounting period of that other controlled foreign company that ends on a date falling in the same income year of the person as the accounting period first mentioned or falling in the income year immediately preceding that income year, an income interest of 10 percent or greater in that other controlled foreign company.
“(10)
For the purposes of section 65(2)(ja)(i) of this Act, where any money advanced is borrowed by a controlled foreign company, that money advanced shall be assumed to be used in relation to a business carried on in New Zealand by the borrower.
“(11)
Sections 67 and 191(4a) of this Act shall not apply to treat any profits or gains as income if those profits or gains would not be treated as income but for the nature of activities undertaken by persons associated with the controlled foreign company where those persons are resident outside New Zealand.
“(12)
For the purposes of section 78(2)(b) of this Act, reference to the Bankruptcy Act 1908, the Insolvency Act 1967, or the Companies Act 1955 shall include any legislation of a country, territory, state, or province other than New Zealand, which legislation has similar intent and application to those New Zealand Acts.
“(13)
For the purposes of section 82(1) of this Act, references to the Crown shall be assumed to include the Government of any country or territory other than New Zealand.
“(14)
For the purposes of section 117 of this Act, where in relation to any asset any allowance for depreciation has been deducted when calculating (for the purposes of determining the attributed foreign income or attributed foreign loss of any person) the branch equivalent income or loss of the controlled foreign company for any period, the controlled foreign company shall be assumed to have been allowed by the Commissioner a deduction in respect of that allowance for depreciation and the cost of the asset less such allowances in prior periods shall be assumed to be the amount to which the value of the asset has been reduced by such deductions.
“(15)
For the purposes of section 129 of this Act, where interest has been payable by a controlled foreign company in relation to land and that interest has been deducted when calculating (for the purposes of determining the attributed foreign income or attributed foreign loss of any person) the branch equivalent income or loss of the controlled foreign company for any period, the controlled foreign company shall be assumed to have been allowed a deduction for that interest.
“(16)
For the purposes of section 140b of this Act, references to output tax, input tax, or goods and services tax payable shall include, respectively, with respect to any value added or other tax having, in a country other than New Zealand, similar intent and application to goods and services tax charged pursuant to section 8(1) of the Goods and Services Tax Act 1985,—
“(a)
Such value added or other tax charged by the person in respect of a supply of goods or services; and
“(b)
Such value added or other tax charged by any other person in respect of a supply of goods or services made to the person; and
“(c)
Such value added or other tax payable to or by, as the case may be, the revenue authorities of that country.
“(17)
For the purposes of section 169 of this Act, reference to the Executive Government of New Zealand shall include the Government of any country or territory other than New Zealand and to the extent to which section 169 of this Act as amended does not apply to payments of subsidies or grants made to the controlled foreign company by the Government of any country other than New Zealand or by any instrument or department of that Government, those payments of subsidies or grants shall be assessable income.
“(18)
The controlled foreign company shall be assumed not to be entitled to carry forward, pursuant to section 188 of this Act, to the accounting period losses in respect of any previous accounting period.
“(19)
The controlled foreign company shall not make any notices of election pursuant to section 191(5) of this Act or payments pursuant to section 191(7) of this Act.
“(20)
Where a controlled foreign company—
“(a)
Has derived a gain from transferring to any other person the ability to utilise any losses of that controlled foreign company for income tax purposes, that gain shall be assessable income of the controlled foreign company; or
“(b)
Has made a payment to any other person resident in the same country or territory as the controlled foreign company in consideration for the transfer from the other person to the controlled foreign company of the ability to utilise any losses of the other person for income tax purposes, and that payment is deductible under the taxation law of the country or territory in which the controlled foreign company is resident, the payment shall be deductible in calculating the assessable income of the controlled foreign company.
“(21)
In calculating the branch equivalent income of any controlled foreign company that carries on the business of insurance or guarantee against loss, damage, or risk of any kind whatever, except life insurance,—
“(a)
Subject to paragraph (b) of this subsection, section 208(1) of this Act shall apply as if the words ‘the country or territory in which the controlled foreign company is resident’ were substituted for the words ‘New Zealand’ wherever they appear in the said section 208(1) and in paragraphs (e), (f), (g), (h), (k), (l), and (m) of section 243(2) of this Act:
“(b)
Where the controlled foreign company insures or guarantees against any loss, damage, or risk of any kind a person associated with that controlled foreign company (that person and the controlled foreign company being treated as associated persons if they would be treated as associated persons by virtue of any of the provisions of section 8 or section 245b of this Act), other than any insurance or guarantee which is life insurance,—
“(i)
The assessable income of the controlled foreign company shall include (in addition to the items specified in paragraph (a) of this subsection) amounts derived in relation to providing insurance or guarantee to the associated person, except to the extent to which such amounts consist of premiums paid on risks reinsured by persons resident in New Zealand which persons have been denied a deduction for such premiums under section 208(1)(b) of this Act; and
“(ii)
No deduction shall be allowed from the income of the controlled foreign company in respect of premiums paid on risks reinsured with persons or companies where the premiums for the reinsurance are not included in income derived from New Zealand by those persons or companies; and the income of the controlled foreign company shall not include sums recovered in respect of losses on risks so reinsured.
“(22)
Sections 214a to 222 of this Act shall apply, with any necessary modifications, where the controlled foreign company carries on activities outside New Zealand of substantially the same nature as the activities governed by those sections.
“(23)
No leases (as that term is defined in section 222a(1) of this Act) entered into by the controlled foreign company before the first day of any accounting period in relation to which that company was a controlled foreign company (being a day falling on or after the 1st day of April 1988) shall be specified leases (as that term is defined in section 222a(1) of this Act), except where the specified lease or leases are entered into between that company and any other controlled foreign company or person resident in New Zealand.
“(24)
Where the controlled foreign company has received a taxable distribution to which section 227(4) of this Act would apply if that controlled foreign company were a taxpayer, the taxable distribution shall not be taken into account in calculating the branch equivalent income or loss of the controlled foreign company and section 245g(5) of this Act shall apply with respect to such taxable distribution.
“(25)
Where the controlled foreign company has derived foreign investment fund income or has incurred a foreign investment fund loss, the foreign investment fund income or the foreign investment fund loss shall not be taken into account in calculating the branch equivalent income or loss of the controlled foreign company and section 245g(6) of this Act shall apply with respect to such foreign investment fund income or foreign investment fund loss.
“245k Foreign tax credits
“(1)
Subject to this section, where any person has for any income year any attributed foreign income in respect of an income interest in a controlled foreign company, that person shall be allowed in respect of income tax payable in New Zealand a credit calculated pursuant to this section for the income tax paid or payable by that controlled foreign company in New Zealand or any other country in respect of that attributed foreign income, and for the purposes of this section income tax paid or payable by a controlled foreign company includes any withholding tax paid or payable on behalf of that controlled foreign company, but does not include withholding tax paid or payable by that controlled foreign company on amounts that are not income derived by that controlled foreign company:
“Provided that for the purposes of this section any income tax paid or payable by that controlled foreign company if paid or payable in a currency other than New Zealand currency shall be converted into New Zealand currency at the option of that person either—
“(a)
By applying the close of trading spot exchange rate applicable on the date when the income tax was paid or became payable; or
“(b)
By applying the average of the close of trading spot exchange rates for the 15th day of each complete month falling within that period:
“Provided further that where the amount of any credit against income tax payable in New Zealand in respect of any attributed foreign income of any person cannot be determined prior to the time at which, pursuant to this Act, the person is required to file that person’s return of income for that income year, the Commissioner shall, if requested by that person in writing within 4 years after the end of that income year, upon determination of the amount of the credit, issue such amended assessments or determinations of loss pursuant to section 19 of this Act or determinations pursuant to this section in relation to that income year or subsequent income years as may be required to reflect determination of the amount of the credit.
“(2)
For the purposes of this section, in respect of any accounting period of a controlled foreign company the amount of income tax paid or payable by that controlled foreign company in respect of the attributed foreign income of any person calculated on the basis of that accounting period shall be the product of the income interest used to calculate attributed foreign income pursuant to section 245g(2) of this Act, and the income tax paid or payable by that company in any country or territory (including New Zealand) in respect of that accounting period:
“Provided that if the controlled foreign company has in that accounting period derived income from sources in 2 or more countries or territories and the controlled foreign company is not in that period liable to tax on income from sources in one or more of those territories, for the purposes of this subsection the income tax paid or payable by that controlled foreign company shall be deemed to be the amount calculated in accordance with the following formula:
_eqn07.JPG)
where—
a
is the income tax paid or payable in respect of that period by that controlled foreign company; and
b
is the income of the controlled foreign company in that accounting period from sources on which the controlled foreign company was liable to income tax; and
c
is the total income of the controlled foreign company in that accounting period.
“(3)
Any person who is, for any income year, entitled pursuant to subsection (1) of this section to a credit against income tax payable in New Zealand in respect of any attributed foreign income in relation to an income interest in a controlled foreign company, shall only be entitled to claim that—
“(a)
The credit be allowed against income tax payable in respect of attributed foreign income derived by that person in that income year in respect of that controlled foreign company; and
“(b)
So far as it is not allowed pursuant to paragraph (a) of this subsection, the credit be allowed against income tax payable in respect of attributed foreign income derived by that person in that income year in respect of any other controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period during which was paid or was payable the income tax giving rise to the credit; and
“(c)
So far as it cannot be so deducted or set off pursuant to paragraph (a) or paragraph (b) of this subsection, the credit be carried forward to the income year immediately succeeding the income year in which the credit was initially allowable and allowed against income tax payable in New Zealand, if any, in respect of the attributed foreign income, if any, of the person derived in that immediately succeeding income year in respect of—
“(i)
The first-mentioned controlled foreign company, where the first-mentioned controlled foreign company remains resident in the same country or territory as that in which it was resident in the accounting period during which was paid or was payable the income tax giving rise to the tax credit; or
(ii)
Any controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period during which was paid or was payable the income tax giving rise to the credit,—
and so on.
“(4)
Where credits initially allowable in 2 or more income years are carried forward in accordance with the provisions of this section, those credits shall be allowed in the same order as those credits were initially allowable.
“(5)
If the person who has any credit allowable is a company, that credit may only be carried forward to any succeeding income year in accordance with this section if and to the extent to which, had that credit been a loss to which section 188 of this Act applied, the carry forward of that loss would have been permitted by section 188 of this Act and, for the purposes of this subsection only, that credit shall be deemed to be a loss incurred on the last day of the income year in respect of which the credit was initially allowable.
“(6)
Where during any accounting period any controlled foreign company receives a taxable distribution (as defined in section 226 of this Act), and, in relation to any person with an income interest of 10 percent or greater in the controlled foreign company, that taxable distribution gives rise to attributed foreign income to which section 245g(5) of this Act applies,—
“(a)
A credit against income tax payable in New Zealand in respect of that attributed foreign income shall be allowed only in respect of any tax paid in respect of that attributed foreign income which is substantially of the same nature as non-resident withholding tax imposed under Part IX of this Act; and
“(b)
The amount of the tax for which a credit is allowed against income tax payable in New Zealand in respect of the attributed foreign income shall not exceed an amount calculated in accordance with the following formula:
_eqn08.JPG)
where—
a
is the tax which qualifies for a credit pursuant to paragraph (a) of this subsection; and
b
is the amount of the taxable distribution received by the controlled foreign company; and
c
is the amount of the distribution received by the controlled foreign company; and
“(c)
The credit to which the person is entitled shall be calculated as the product of the income interest of the person in the controlled foreign company and the tax calculated in accordance with the formula in paragraph (b) of this subsection.
“(7)
Where any person has furnished a return in respect of any income year, and—
“(a)
The return shows that the person has any credit allowable for that income year that cannot in accordance with this section be deducted from or set off against income tax payable in New Zealand in respect of any attributed foreign income of that person; or
“(b)
The Commissioner ascertains that the person has any such credit,—
the Commissioner shall make a determination of whether or not and to what extent, if any, credit may be carried forward to a later income year pursuant to the provisions of this section.
“(8)
As soon as is convenient after a determination of an excess credit available for carry forward is made, the Commissioner shall cause notice of the determination to be given to the person, which notice may be included in a notice of assessment made pursuant to section 29(1) of this Act, or a notice of determination of loss made pursuant to section 29(2) of this Act:
“Provided that the omission to give any such notice shall not invalidate any assessment, or the determination of excess credit available for carry forward, as the case may be.
“(9)
For the purposes of this section, where and to the extent to which by virtue of any legislation of any country or territory which has similar intent and application to the provisions of this Part of this Act, any foreign company has paid income tax in respect of the income derived by any controlled foreign company, that income tax shall be deemed to have been paid by the controlled foreign company and not by the foreign company.
“(10)
Where, by virtue of the foregoing provisions of this section,—
“(a)
A credit has been allowed against New Zealand income tax payable by any person; and
“(b)
That credit has not taken into account any refund or repayment of income tax received by the controlled foreign company in question, whether before or after that credit was allowed; and
“(c)
The amount of that credit was in excess of the amount that would have been allowed if only the amount of the foreign income tax not refunded or repaid to the controlled foreign company had been taken into account in calculating the credit,—
the amount of that excess—
“(d)
Shall be applied to reduce the balance of the credits carried forward pursuant to subsection (3) of this section in respect of that controlled foreign company; and
“(e)
To the extent that the amount of the excess is not applied in accordance with paragraph (d) of this subsection that excess shall be deemed to be income tax due and payable to the Commissioner on the thirtieth day after the date of the notice of determination of the credit or the date of the receipt by the controlled foreign company of that refund or repayment, whichever date is the later, and this Act shall apply accordingly.
“245l Group of companies foreign tax credits
“(1)
Where a company (in this subsection hereafter referred to as the ‘first company’) has for any income year a credit allowable in relation to an income interest in a controlled foreign company (or has carried forward to that income year such a credit in accordance with section 245k(3) of this Act) and that credit may not be utilised by the first company in that income year in accordance with section 245k(3) of this Act, that credit may in accordance with subsection (2) of this section and so far as income tax on such income extends, be allowed against income tax payable in New Zealand in respect of attributed foreign income derived, in respect of that income year and in respect of any controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period in which was paid or was payable the income tax giving rise to the credit, by any other company where for that income year that other company is a member of the same group of companies as the first company.
“(2)
Any credit allowable to one company (hereafter in this subsection referred to as the ‘first company’) may only be allowed against income tax payable by another company (referred to in this subsection as the ‘second company’) from attributed foreign income derived in respect of any controlled foreign company resident in the same country or territory as that in which the controlled foreign company first mentioned in subsection (1) of this section was resident in the accounting period in which was paid or was payable the income tax giving rise to the credit where the first and second companies constitute in respect of the relevant income year a ‘specified group’ (as that term is defined in section 191(4) of this Act) and,—
“(a)
The first company has so elected irrevocably in respect of the income year for which such a credit is claimed by notice given to the Commissioner in writing within the time within which the first company is required to furnish a return of income for that income year or such further time as the Commissioner may allow; and
“(b)
The first company and the second company were members of the same group of companies for the income year in respect of which the credit was initially allowable; and
“(c)
Where, in accordance with the proviso to section 191(4) of this Act, the Commissioner has disregarded shares held at the end of an income year, the first company has disclosed to its shareholders that an election has been made; and
“(d)
Section 191(7c) of this Act would not apply to the first company and the second company in relation to the income year for which the credit is allowed; and
“(e)
The credit allowed to the second company does not exceed the amount which the first company could have carried forward pursuant to section 245k(3) of this Act to the income year immediately succeeding the income year in respect of which the credit was initially allowable,—
and to the extent to which a credit has been so allowed to the second company, the credit may not be allowed to or carried forward by the first company.
“245m Attributed foreign losses
“(1)
Any person who has, for any income year, incurred an attributed foreign loss in relation to an income interest in a controlled foreign company shall be entitled to claim that—
“(a)
The attributed foreign loss be deducted from or set off against attributed foreign income derived by that person in that income year in respect of any other controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period during which was incurred the branch equivalent loss giving rise to the attributed foreign loss; and
“(b)
So far as it cannot be so deducted or set off, the loss be carried forward to the income year immediately succeeding the income year in which the loss was incurred and deducted from or set off against the attributed foreign income, if any, of the taxpayer derived in that immediately succeeding income year in respect of—
“(i)
The first-mentioned controlled foreign company where that first-mentioned controlled foreign company remains resident in the same country or territory as that in which it was resident in the accounting period during which was incurred the branch equivalent loss giving rise to the attributed foreign loss; or
“(ii)
Any other controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period during which was incurred the branch equivalent loss giving rise to the attributed foreign loss,—
and so on.
“(2)
No person who has in any income year incurred an attributed foreign loss shall be entitled to deduct or set off that attributed foreign loss against any assessable income of that person except pursuant to this section.
“(3)
Where attributed foreign losses incurred in 2 or more income years are carried forward in accordance with the provisions of this section those losses shall be deducted or set off in the same order as those losses were incurred.
“(4)
If the person who has any attributed foreign loss is a company, that loss may only be carried forward to any succeeding income year in accordance with this section if, and to the extent to which, had that loss been a loss to which section 188 of this Act had applied, carry forward of that loss would have been permitted by section 188 of this Act and, for the purposes of this subsection only, that attributed foreign loss shall be deemed to be a loss incurred on the last day of the income year in respect of which the loss was attributed.
“(5)
Where any person has furnished a return in respect of any income year, and—
“(a)
The return shows that the person has any attributed foreign loss for that income year that cannot in accordance with this section be deducted from or set off against any attributed foreign income of that person; or
“(b)
The Commissioner ascertains that the person has any such attributed foreign loss,—
the Commissioner shall make a determination of the person’s attributed foreign loss or losses or (as the case may be) whether and to what extent any attributed foreign loss or losses may be carried forward to a later income year pursuant to the provisions of this section.
“(6)
As soon as is convenient after a determination of an attributed foreign loss or of an attributed foreign loss carried forward is made, the Commissioner shall cause notice of the determination to be given to the person, which notice may be included in a notice of assessment made pursuant to section 29(1) of this Act, or a notice of determination of loss made pursuant to section 29(2) of this Act:
“Provided that the omission to give any such notice shall not invalidate any assessment, or the determination of attributed foreign loss, or the determination of attributed foreign loss carried forward, as the case may be.
“245n Group of companies attributed foreign losses
“(1)
Where a company (in this subsection hereafter referred to as the ‘first company’) has for any income year an attributed foreign loss in relation to an income interest in a controlled foreign company (or has carried forward to that income year such a loss in accordance with section 245m(1) of this Act) and that loss may not be deducted by the first company in that income year in accordance with section 245m(1) of this Act, that loss may, in accordance with subsection (2) of this section and so far as such income extends, be deducted from attributed foreign income derived, in respect of that income year and in respect of any controlled foreign company resident in the same country or territory as that in which the first-mentioned controlled foreign company was resident in the accounting period in which was incurred the branch equivalent loss giving rise to the attributed foreign loss, by any other company where for that income year that other company is a member of the same group of companies as the first company.
“(2)
Any attributed foreign loss or attributed foreign loss carried forward of one company (in this subsection hereafter referred to as the ‘first company’) may only be deducted by another company (referred to in this subsection as ‘the second company’) from attributed foreign income derived in respect of any controlled foreign company resident in the same country or territory as that in which the controlled foreign company first mentioned in subsection (1) of this section was resident in the accounting period in which was incurred the branch equivalent loss giving rise to the attributed foreign loss where the first and second companies constitute in respect of the relevant income year a ‘specified group’ (as that term is defined in section 191(4) of this Act) and,—
“(a)
The first company has so elected irrevocably in respect of the income year for which such a deduction is claimed by notice given to the Commissioner in writing within the time within which the first company is required to furnish a return of income for that income year or such further time as the Commissioner may allow; and
“(b)
The first company and the second company were members of the same group of companies for the income year in respect of which the attributed foreign loss was incurred; and
“(c)
Where, in accordance with the proviso to section 191(4) of this Act, the Commissioner has disregarded shares held at the end of an income year, the first company had disclosed to its shareholders that an election has been made; and
“(d)
Section 191(7c) of this Act would not apply to the first company and the second company in relation to the income year for which the deduction is claimed; and
“(e)
The loss deducted by the second company does not exceed the amount which the first company could have carried forward pursuant to section 245m of this Act to the income year immediately succeeding the income year in respect of which the attributed foreign loss was incurred,—
and to the extent to which a loss has been so deducted by the second company, the loss may not be deducted or carried forward by the first company.
“(3)
Notwithstanding subsection (2) of this section, where the first company is a ‘dual resident company’ (as that term is defined in section 191(1) of this Act) no amount may be deducted by virtue of that subsection by the second company.
“245o Changes of residence of controlled foreign companies
“(1)
Where at any time after the 1st day of April 1988 a company that is not a foreign company becomes a foreign company, an accounting period of that foreign company shall be deemed to commence on the day upon which the company became a foreign company and the former accounting period shall be deemed to end on the day preceding the day upon which the company became a foreign company.
“(2)
Where at any time after the 1st day of April 1988 a foreign company ceases to be a foreign company and becomes or continues to be resident in New Zealand, an accounting period of that foreign company shall be deemed to commence on the day upon which the company ceased to be a foreign company and the former accounting period shall be deemed to end on the day preceding the day upon which the company became a foreign company.
“(3)
Where, by virtue of subsection (1) or subsection (2) of this section, any person holding an income interest of 10 percent or greater in a controlled foreign company is required to calculate the branch equivalent income or loss of a controlled foreign company on the basis of an accounting period that is shorter than the otherwise applicable accounting period of the controlled foreign company, that branch equivalent income or loss shall be deemed to be, at the option of the person,—
“(a)
The amount calculated in accordance with the following formula:
_eqn09.JPG)
where—
a
is the branch equivalent income or loss calculated in relation to that controlled foreign company and that otherwise applicable accounting period, determined without regard being had to subsection (1) or subsection (2) of this section; and
b
is the number of days in the accounting period; and
c
is the number of days in that otherwise applicable accounting period; or
“(b)
The branch equivalent income or loss calculated in relation to that controlled foreign company for that accounting period.
“245p Controlled foreign companies in certain countries
“(1)
Notwithstanding any provision of this Part of this Act, no person shall have any attributed foreign income or attributed foreign loss in respect of an income interest in a controlled foreign company and any accounting period where that controlled foreign company at all times in that accounting period is resident in a country or territory specified in the Fifteenth Schedule to this Act, and that controlled foreign company has for the purposes of income tax in that country or territory calculated its income liable to income tax without applying any features of the taxation law of that country or territory as are specified in Part A of the Sixteenth Schedule to this Act:
“Provided that—
“(a)
Notwithstanding the provision of section 245q of this Act, a controlled foreign company shall not be treated as being resident in a country or territory specified in the Fifteenth Schedule to this Act unless that controlled foreign company is liable to income tax in that country or territory by reason of domicile, residence, place of incorporation or place of management in that country or territory; and
“(b)
Nothing in this subsection shall prevent foreign investment fund income or foreign investment fund loss being attributed to a person pursuant to section 245g(6) of this Act.
“(2)
Where any person in any income year has an income interest in a controlled foreign company to which subsection (1) of this section would apply were it not for that controlled foreign company applying when calculating its income for the purposes of income tax in that country or territory specified in the Fifteenth Schedule to this Act, any one or more of those features of the taxation law of that country or territory specified in Part A of the Sixteenth Schedule to this Act, section 245g(2) of this Act shall apply as if item b were the net income or loss of the foreign company for that income year calculated in accordance with the taxation law of the country in which the controlled foreign company is resident (and excluding any allowance in that taxation law for carry forward of prior year tax losses) but adjusted to the figure that would have been arrived at had no benefit been derived from any such feature of the taxation law and converted into New Zealand currency at the average of the close of trading spot exchange rates for the 15th day of each complete month falling within that period.
“245q Determination of residence
“(1)
A company shall be deemed to be a non-resident company if it is not resident in New Zealand for the purposes of this Act.
“(2)
A foreign company shall, for the purposes of this Part of this Act, for any accounting period of that foreign company be deemed to be resident in a particular country or territory if at any time during that accounting period the company is liable to income tax in that country or territory by reason of domicile, residence, place of incorporation, or place of management in that country or territory.
“(3)
If, in the case of any company, there are for any accounting period 2 or more countries or territories falling within subsection (2) of this section or the company is not resident in any country or territory pursuant to the said subsection (2), the company shall for that accounting period be regarded as being resident in the country or territory in which, if that country or territory were New Zealand, that company would be treated as being resident by virtue of the application of section 241(6) of this Act.
“(4)
If, in the case of any company and any accounting period, the application of subsections (2) and (3) of this section does not result in the treatment of that company as resident for that accounting period in one country or territory only, that company shall for that accounting period be regarded as being resident in the country or territory in which in that accounting period its centre of management is located.
“(5)
If, in the case of any company and any accounting period, there is no single country or territory of residence able to be determined by applying the foregoing subsections of this section, that company shall for that accounting period be regarded as being resident in such country or territory as the Commissioner determines.
“Foreign Investment Fund Income and Losses
“245r Foreign investment fund income and losses
“(1)
For the purposes of this section and sections 245s and 245t of this Act,—
“‘Excepted financial arrangement’ has the meaning assigned to that term by section 64b of this Act:
“‘Financial arrangement’ has the meaning assigned to that term by section 64b of this Act:
“‘Foreign entity’ means a foreign company as defined in section 245a(1) of this Act, a foreign unit trust or a natural person not resident in New Zealand where policies of life insurance on human life are issued by that natural person (but only in that natural person’s capacity as issuer of such policies):
“‘Foreign investment fund’ means, in relation to any person at any time, a foreign entity where a right or rights of that person in relation to that foreign entity constitutes an interest in a foreign investment fund, as defined in subsection (2) of this section:
“‘Foreign superannuation scheme’ means a foreign entity established or created principally for the purpose of providing retirement benefits to beneficiaries who are natural persons:
“‘Foreign unit trust’ means a unit trust, as defined in section 211(1) of this Act which, if it were a company, would be a foreign company:
“‘Interest in a foreign personal savings scheme’ means an entitlement to benefit as a beneficiary from a foreign superannuation scheme or an entitlement to benefit from a policy of life insurance upon human life issued by a foreign entity (not being a policy of life insurance issued by that entity as part of a business of life insurance carried on in New Zealand to which business section 204 of this Act applies):
“‘Land’ has the meaning assigned to that term by section 67 of this Act.
“(2)
For the purposes of this section, where a person holds at any time in any income year—
“(a)
Rights in relation to a foreign company or a foreign unit trust (not being an interest in a foreign personal savings scheme) where, if that foreign company or foreign unit trust were at that time a controlled foreign company, the rights of that person would be deemed to be a direct income interest in that foreign company or foreign unit trust by virtue of the application of section 245d of this Act; or
“(b)
An interest in a foreign personal savings scheme,—
those rights or that interest shall be an interest in a foreign investment fund, unless in respect of the relevant foreign entity (being, in the case of an interest in a foreign personal savings scheme, the foreign superannuation scheme or the foreign entity issuing the policy of life insurance upon human life)—
“(c)
At all times during that period in that income year in which those rights or that interest was held by that person the foreign entity would, if that foreign entity were a foreign company subject to section 245q of this Act, by virtue of section 245q of this Act be treated as being resident in a country or territory specified in the Fifteenth Schedule to this Act; or
“(d)
The foreign entity distributes, by way of dividends, during the accounting year of that foreign entity which ends on a date which falls within that income year, an amount equal to 60 percent or greater of the income, profits, and gains derived during such accounting year by that foreign entity as measured according to generally accepted accounting principles; or
“(e)
As at the end of any accounting year of that foreign entity which falls within that income year not more than in aggregate 40 percent by market value of the assets of the foreign entity (whether held directly or indirectly) are assets of any of the following types:
“(i)
Rights in relation to a company where, if that company were a controlled foreign company, those rights would, by virtue of the application of sections 245d and 245f(2) of this Act be an income interest of less than 25 percent; or
“(ii)
Rights as a beneficiary in relation to any trust, other than a bare trust; or
“(iii)
Rights as a partner in relation to any partnership; or
“(iv)
Interests in foreign investment funds (as defined in accordance with this section); or
“(v)
Financial arrangements, other than financial arrangements held by a person where that person is engaged principally in the business of issuing or holding financial arrangements (not being financial arrangements directly or indirectly issued to or issued by associated persons of the holder or issuer, persons resident in New Zealand, or controlled foreign companies); or
“(vi)
Annuities; or
“(vii)
Land acquired or held for the purpose of, or for purposes including the purpose of, deriving from or in relation to the land, rents, fines, premiums, or other revenues from any lease, licence, or other agreement affecting the land or from the grant of any right of taking the profits thereof, unless the person acquiring or holding such land is engaged principally in the business of renting or leasing land; or
“(viii)
Any of the rights or forbearances described in paragraphs (a) to (g) of the definition of the term ‘royalty in section 2 of this Act; or
“(ix)
Rights or options to acquire or dispose of any of the foregoing; or
“(f)
The foreign and New Zealand income tax paid or payable and any withholding tax paid or payable on behalf of that foreign entity in respect of its income, profits, or gains derived during any accounting year of that foreign entity which ended on a date falling within that income year was equal in amount to not less than 20 percent of those income, profits, or gains measured according to generally accepted accounting principles; or
“(g)
The foreign entity is an entity in relation to which the Commissioner has determined by virtue of section 245s of this Act that interests in that entity, or in a class of entities of which that entity is a part, are not interests in a foreign investment fund; or
“(h)
The person is a resident of New Zealand and the foreign entity is a controlled foreign company in relation to which the rights or interest of that person are an income interest of 10 percent or greater as defined in section 245a of this Act:
“Provided that—
“(i)
The foregoing paragraphs (g) and (h) of this subsection shall be applicable to exclude any rights or interest of the person in relation to a foreign entity from being an interest in a foreign investment fund only for such period during that income year in which the terms of the paragraph are satisfied; and
“(j)
The foregoing paragraphs of this subsection shall not have effect to exclude any rights or an interest of any person from being an interest in a foreign investment fund if the foreign entity is a foreign entity, or part of a class of foreign entities, specified in Part B of the Sixteenth Schedule to this Act or in relation to which the Commissioner has determined by virtue of section 245s of this Act that interests in that foreign entity are interests in a foreign investment fund.
“(3)
Where in any income year a person has an interest in a foreign investment fund, the foreign investment fund income or foreign investment fund loss of that person in relation to that interest in that income year shall be an amount calculated as at the last day of the income year in accordance with the following formula:
(a + b) − (c + d)
where—
a
is the market value as at the last day of that income year of the interest in the foreign investment fund to the extent to which that interest is still held by the person on that date; and
b
is the market value (calculated as at the date derived) of all consideration derived or deemed to have been derived or received or receivable by the person with respect to that interest during that income year (including any tax paid or payable by or on behalf of the person (whether by way of withholding tax or otherwise) in respect of that consideration which is allowable as a credit to that person by virtue of section 293 of this Act); and
c
is the market value as at the last day of the preceding income year of the interest in the foreign investment fund to the extent to which that interest was held by the person at that date; and
d
is the market value (calculated as at the date incurred) of all consideration payable or deemed to be payable by the person with respect to that interest during that income year:
“Provided that to the extent to which in relation to that person the market value of consideration derived or deemed to be derived or received or deemed to be received with respect to that interest has been included in item b of the calculation required by this subsection, that consideration shall not be included in calculating the assessable income of that person by virtue of any paragraph of section 65(2) of this Act, other than section 65(2)(eb).
“(4)
Any person who has in respect of any income year incurred a foreign investment fund loss or has, pursuant to subsection (5) of this section, carried forward to that income year any foreign investment fund loss shall—
“(a)
Deduct the foreign investment fund loss against the foreign investment fund income derived by that person in that income year; or
“(b)
To the extent to which the person can establish to the satisfaction of the Commissioner that the balance of the foreign investment fund loss, not deducted under paragraph (a), does not exceed the aggregate of foreign investment fund income in respect of interests in foreign investment funds derived by the person in any previous income years, be entitled to claim that the foreign investment fund loss be deducted from or set off against assessable income of the person, not being foreign investment fund income, and, to the extent to which the person has so claimed,—
“(i)
The foreign investment fund loss shall be deemed not to be a foreign investment fund loss for the purposes of this section; and
“(ii)
For the purpose of applying this subsection on any subsequent occasion the aggregate amount of the foreign investment fund income derived by the person in previous years shall be reduced by the amount of the foreign investment fund loss deducted pursuant to this paragraph.
“(5)
Where a foreign investment fund loss cannot be deducted or set off pursuant to subsection (4) of this section, it shall be carried forward to the immediately succeeding income year, and subsection (4) of this section shall apply with respect to that foreign investment fund loss in the immediately succeeding income year.
“(6)
No person who has in any income year incurred a foreign investment fund loss shall be entitled to deduct or set off that foreign investment fund loss against any assessable income of that person except pursuant to this section.
“(7)
Where foreign investment fund losses incurred in 2 or more income years are carried forward in accordance with the provisions of this section those losses shall be deducted or set off in the same order as those losses were incurred.
“(8)
If the person who incurs any foreign investment fund loss is a company, that loss may only be carried forward to any succeeding income year in accordance with this section if and to the extent to which, had that loss been a loss to which section 188 of this Act had applied, carry forward of that loss would have been permitted by section 188 of this Act and, for the purposes of this subsection only, that foreign investment fund loss shall be deemed to be a loss incurred on the last day of the income year in respect of which the loss was incurred.
“(9)
Where any person has furnished a return in respect of any income year, and—
“(a)
The return shows that the person has any foreign investment fund loss for that income year that cannot in accordance with this section be deducted from or set off against any assessable income of that person; or
“(b)
The Commissioner ascertains that the person has any such foreign investment fund loss,—
the Commissioner shall make a determination of the person’s foreign investment fund loss or losses or (as the case may be) whether and to what extent any foreign investment fund loss or losses may be carried forward to a later income year pursuant to the provisions of this section.
“(10)
As soon as is convenient after a determination of a foreign investment fund loss or of a foreign investment fund loss carried forward is made, the Commissioner shall cause notice of the determination to be given to the person, which notice may be included in a notice of assessment made pursuant to section 29(1) of this Act, or a notice of determination of loss made pursuant to section 29(2) of this Act:
“Provided that the omission to give any such notice shall not invalidate any assessment, or the determination of a foreign investment fund loss, or the determination of a foreign investment fund loss carried forward, as the case may be.
“(11)
Notwithstanding any of the foregoing provisions of this section, no person shall be treated as deriving any foreign investment fund income or as incurring any foreign investment fund losses in respect of an interest in a foreign investment fund in any income year where that person is at all times during that year resident outside New Zealand.
“(12)
For the purposes of this section, if at any time a person holding an interest in a foreign investment fund—
“(a)
Ceases to be a New Zealand resident; or
“(b)
Disposes of that interest by way of gift or bequest or disposes of that interest to an associated person for a consideration which is less than market value; or
“(c)
Dies,—
or in relation to that person that interest in a foreign investment fund ceases to be an interest in a foreign investment fund by virtue of an amendment to Part B of the Sixteenth Schedule to this Act or a determination made by the Commissioner pursuant to section 245s of this Act, or by virtue of the interest ceasing to be an interest in a foreign investment fund pursuant to section 245r(2) of this Act; that person shall be deemed to have disposed of that interest at its market value as at the date of cessation, disposal, or death, or on the date on which that interest ceases to be an interest in a foreign investment fund, as the case may be.
“(13)
If a person holds an interest in a foreign investment fund and in respect of any accounting period of that foreign investment fund that interest (not being immediately prior to that accounting period, in relation to that person, an income interest of 10 percent or greater in a controlled foreign company) becomes, in relation to that person and that accounting period, an income interest of 10 percent or greater, in a controlled foreign company, that person shall be deemed to have disposed of that interest at its market value as at the last day of the immediately preceding accounting period of the controlled foreign company.
“(14)
If at any time a person—
“(a)
Being the holder of an interest in a foreign investment fund, becomes a New Zealand resident; or
“(b)
Acquires an interest in a foreign investment fund by way of gift or bequest, or acquires an interest in a foreign investment fund from an associated person for a consideration which is greater than the market value,—
or in relation to that person any rights of that person become an interest in a foreign investment fund by virtue of an amendment to Part B of the Sixteenth Schedule to this Act or a determination made by the Commissioner pursuant to section 245s of this Act or by virtue of any rights in relation to a foreign entity becoming an interest in a foreign investment fund pursuant to subsection (2) of this section, that person shall be deemed to have acquired that interest on the date of becoming a New Zealand resident or acquisition or the date on which those rights became such an interest, as the case may be, for a consideration payable equal to its market value on that date.
“(15)
If a person holds an interest in a foreign investment fund and in respect of any accounting period of that foreign investment fund that interest (being immediately prior to that accounting period, in relation to that person, an income interest of 10 percent or greater in a controlled foreign company) ceases to be in relation to that person for that accounting period an income interest of 10 percent or greater in a controlled foreign company, that person shall be deemed to have acquired that interest on the day immediately succeeding the last day of the accounting period of the controlled foreign company for which period the interest was last an income interest of 10 percent or greater in a controlled foreign company, for consideration payable equal to its market value on that date.
“245s Determinations in relation to foreign investment funds
“(1)
For the purposes of section 245r(2) of this Act, a foreign entity or any person holding rights in relation to that entity shall be entitled at any time to apply to the Commissioner for a determination whether or not the rights held by persons in relation to that foreign entity constitute interests in a foreign investment fund by virtue of the application of the said section 245r(2) and on receipt of any such application the Commissioner may make a determination of whether or not rights in relation to that foreign entity, or in relation to a class of foreign entities of which that foreign entity is a part, constitute interests in a foreign investment fund by virtue of the application of the said section 245r(2).
“(2)
Every such application shall be made in accordance with such procedure as may be prescribed by regulations made under section 433 of this Act or, if no such regulations have been made or the regulations do not provide for the eventuality that occurs, in accordance with such procedure as may be prescribed by the Commissioner.
“(3)
For the purposes of section 245r(2) of this Act, the Commissioner may, notwithstanding that no application for such a determination has been made pursuant to subsections (1) and (2) of this section, in the Commissioner’s discretion make at any time a determination as to whether or not the rights held by any persons in relation to any foreign entity or any class of foreign entities constitute interests in a foreign investment fund by virtue of the application of the said section 245r(2).
“(4)
Where the Commissioner exercises the discretion to make a determination, such determination shall be subject to such terms and conditions as the Commissioner may specify, and the Commissioner shall give notice to the applicant of any determination within a reasonable period of time:
“Provided that without limiting the situations where the Commissioner may decline to make a determination, the Commissioner may decline to make a determination if the foreign company or foreign unit trust has been operating for an insufficient period to provide the Commissioner with adequate information upon which to base a determination.
“(5)
Where a person who has applied for or is affected by a determination in accordance with this section is dissatisfied with the determination, the person may object to the determination by delivering or posting to the Commissioner, within one month after the date on which notice of the determination has been published by the Commissioner, a written notice of objection stating shortly the grounds of that person’s objection.
“(6)
Except where it is otherwise expressly provided, Part III of this Act, except section 36, shall, in relation to any objection to a determination under this section, apply in the same manner and to the same extent as if the said objection were an objection made under section 30(1) or, in the case of a late objection, section 30(2) of this Act.
“(7)
Where the Commissioner is satisfied that a determination made under this section should be varied or rescinded, or restricted or extended in scope, he may make a fresh determination which shall be effective to vary, rescind, restrict, or extend the determination first mentioned in this section.
“(8)
All determinations made by the Commissioner under this section shall be published in the Gazette within 30 days of the making of the determination, in such form as may be specified by regulations made under section 433 of this Act.
“(9)
For the purposes of this section a determination shall be deemed to be made when it is signed by the Commissioner.
“(10)
The Commissioner shall assess persons in accordance with any determination made under this section, except where there was a material misrepresentation or omission in the application for the determination as a result of fraud or wilful default.
“245t Group of companies foreign investment fund income and losses
“(1)
Where a company (in this subsection hereafter referred to as the ‘first company’) has for any income year any foreign investment fund loss (or has carried forward to that income year such a loss in accordance with section 245r(5) of this Act) and that loss may not be deducted by the first company in that income year in accordance with section 245r(4) of this Act, that loss may in accordance with subsection (2) of this section and so far as such income extends, be deducted from foreign investment fund income derived, in respect of that income year, by any other company where for that income year that other company is a member of the same group of companies as the first company.
“(2)
Any foreign investment fund loss or foreign investment fund loss carried forward of one company (in this subsection hereafter referred to as the ‘first company’) may only be deducted by another company (referred to in this subsection as ‘the second company’) where the first and second companies constitute in respect of the relevant income year a ‘specified group’ (as that term is defined in section 191(4) of this Act) and,—
“(a)
The first company has so elected irrevocably in respect of the income year for which such a deduction is claimed by notice given to the Commissioner in writing within the time within which the first company is required to furnish a return of income for that income year or such further time as the Commissioner may allow; and
“(b)
The first company and the second company were members of the same group of companies for the income year in respect of which the foreign investment fund loss was incurred; and
“(c)
Where, in accordance with the proviso to section 191(4) of this Act, the Commissioner has disregarded shares held at the end of an income year, the first company has disclosed to its shareholders that an election has been made; and
“(d)
Section 191(7c) of this Act would not apply to the first company and the second company in relation to the income year for which the deduction is claimed; and
“(e)
The loss deducted by the second company does not exceed the amount that the first company could have carried forward pursuant to section 245r of this Act to the income year immediately succeeding the income year in respect of which the foreign investment fund loss was incurred,—
and to the extent to which a loss has been so deducted by the second company, the loss may not be deducted or carried forward by the first company.
“(3)
Notwithstanding subsection (2) of this section, where the first company is a ‘dual resident company’ (as that term is defined in section 191(1) of this Act), no amount may be deducted by virtue of that subsection by the second company.
“General Provisions
“245u Conflict of provisions
For the purposes of this Act, where, pursuant to section 245r of this Act, any person has been required to calculate for any income year any foreign investment fund income or loss with respect to an interest in a foreign investment fund, the cost to the person of acquiring that interest shall be deemed to be an amount equal to item a of the calculation required by section 245r(3) of this Act, as calculated for the then current year or, where section 245r of this Act has applied to require such a calculation only for a prior income year or years, for the most immediately preceding income year for which such a calculation was required.
“245v Cases where assessable income calculation cannot be undertaken
“(1)
Where any person—
“(a)
Has failed to disclose for any period in accordance with section 245w of this Act a control interest or an income interest of that person in a controlled foreign company or an interest of that person in a foreign investment fund; or
“(b)
Has failed to disclose any information requested by the Commissioner pursuant to section 17 of the Inland Revenue Department Act 1974 in relation to an interest of that taxpayer in a controlled foreign company or a control interest or an income interest of that person in a foreign investment fund; or
“(c)
Is unable to obtain sufficient information to calculate that person’s attributed foreign income or attributed foreign loss or foreign investment fund income or foreign investment fund loss, as the case may be, with respect to that interest for any period,—
the Commissioner may make an assessment of the amount of attributed foreign income, attributed foreign loss, foreign investment fund income, or foreign investment fund loss, as the case may be, for the relevant period.
“(2)
Without limiting the methods which the Commissioner may use in making an assessment for the purposes of subsection (1) of this section, the Commissioner may calculate such amounts of income or loss—
“(a)
By having regard to the accounts of the controlled foreign company or foreign investment fund as prepared for the purposes of—
“(i)
Furnishing an income tax return in New Zealand or any other country; or
“(ii)
Providing information to creditors, shareholders, or other persons having an economic relationship with the controlled foreign company or foreign investment fund; or
“(b)
By having regard to the branch equivalent income of the controlled foreign company for any prior period in relation to any person, and applying to that branch equivalent income an appropriate percentage rate of presumed increase, being a rate not less than 10 percent compounding annually; or
“(c)
By having regard to the accounts of the controlled foreign company or foreign investment fund as referred to in paragraph (a) of this subsection for any prior period, and applying to the income as disclosed in those accounts such rate of presumed increase as the Commissioner considers appropriate, being a rate not less than 10 percent compounding annually; or
“(d)
By imputing an appropriate rate of return to the value of the interest as at the commencement of the relevant period; or
“(e)
By treating as attributed foreign income, attributed foreign loss, foreign investment fund income, or foreign investment fund loss, as the case may be, any gain derived or loss incurred on disposal of that interest (or part thereof) during the relevant period or any increase in or reduction in the market value of the interest over the relevant period.
“245w Disclosure
“(1)
Where any person has at any time in an income year an income interest or a control interest in a foreign company or an interest in a foreign investment fund, that person shall disclose to the Commissioner in the prescribed form and with that person’s return of income for the relevant income year,—
“(a)
The existence and nature of that interest; and
“(b)
Such other information as may be required by the Commissioner in respect of that interest for the purposes of the administration of this Act:
“Provided that, unless the Commissioner so requires, no person shall be required to disclose a control interest to the extent to which such control interest exists only by virtue of the application of section 245c(3)(b) or (d) of this Act.
“(2)
The Commissioner may exempt any person or class of persons from the requirements of subsection (1) of this section, where, in the opinion of the Commissioner, disclosure by that person or class or classes of persons is not necessary for the administration of this Part of this Act.
“(3)
The Commissioner may at any time cancel any exemption granted to any person or class or classes of persons under subsection (2) of this section.
“245x References to Part IVto include references to this Part
Unless the context otherwise requires, every reference in other Parts of this Act to Part IV of this Act shall be deemed to include a reference to this Part.
“245y Transitional provisions
“(1)
Where any person holds an income interest in a controlled foreign company and that controlled foreign company would by virtue of the provisions of section 245q. of this Act be treated as being resident at all times during the period commencing on the date of acquisition of that income interest (or commencing with the 1st day of April 1988 if the date of acquisition was earlier than the 1st day of April 1988) and ending with the 31st day of March 1990 (or ending with the date of disposition of the income interest by that person, if earlier than the 31st day of March 1990) in a country or territory other than a country or territory specified in the Seventeenth Schedule to this Act, that person shall be deemed for the purposes of calculating any attributed foreign income or attributed foreign loss of that person in respect of that interest pursuant to section 245g(2) of this Act (but not for the purposes of determining whether that foreign company is a controlled foreign company or for the purposes of determining whether the income interest of any person is an income interest of 10 percent or greater or for the purpose of attributing foreign investment fund income or foreign investment fund loss pursuant to section 245g(6) of this Act or for any other purpose) to have acquired that interest on the 1st day of April 1990 or, in any case where the person disposed of the income interest prior to the 31st day of March 1990, never to have held that income interest.
“(2)
Any person holding an income interest in a controlled foreign company, to which interest subsection (1) of this section would apply were it not for the application of this subsection, shall be entitled to elect that the said subsection (1) shall not apply with respect to that income interest:
“Provided that if such an election is made—
“(a)
It must be made with respect to all income interests held by that person; and
“(b)
For the purposes of this Part of this Act in calculating the attributed foreign income or attributed foreign loss of that person in relation to that income interest and to any accounting period of the controlled foreign company falling (in whole or in part) during the period commencing on the 1st day of April 1988 and ending on the 31st day of March 1990 (being an accounting period for which the controlled foreign company has a branch equivalent loss), the person’s income interest in the controlled foreign company to which the said subsection (1) would have applied shall be deemed on any relevant measurement day during that period to be the lesser of—
“(i)
The income interest that that person would be treated as holding on the 17th day of December 1987 if that day were a measurement day; and
“(ii)
The income interest held by that person in that controlled foreign company on that measurement day.
“(3)
Notwithstanding the provisions of section 245q of this Act, a non-resident company shall, for the purposes of subsection (1) of this section, be deemed to be resident in a country or territory specified in the Seventeenth Schedule to this Act unless any person resident in New Zealand with an income interest in that company can establish, to the satisfaction of the Commissioner, that the company is liable to income tax in a country not so specified by reason of domicile, residence, place of incorporation, or place of management in that country or territory.
“(4)
Where attributed foreign income in respect of an income interest of 10 percent or greater in a controlled foreign company, or foreign investment fund income in respect of an interest in a foreign investment fund would, were it not for this subsection, be derived by a taxpayer in the income year ending with the 31st day of March 1988, the attributed foreign income or foreign investment fund income, as the case may be, shall be deemed to have been derived in the income year ending with the 31st day of March 1989.
“(5)
Where a person is required to calculate foreign investment fund income or foreign investment fund loss pursuant to section 245r(3) of this Act, that person shall not include in item b or item d of the formula specified in section 245r(3) of this Act any consideration derived or deemed to be derived, or any consideration payable or deemed to be payable, in respect of the foreign investment fund, on a date earlier than the 1st day of April 1988.
“(6)
Where a person is required to calculate foreign investment fund income or foreign investment fund loss pursuant to section 245r(3) of this Act where that person holds an interest in a foreign investment fund on the 1st day of April 1988, item c of the calculation required pursuant to section 245r in the first income year for which section 245r of this Act applies shall be the market value of the interest on the 1st day of April 1988.
“(7)
Where any person acquires or holds an interest in a foreign investment fund and the foreign entity in relation to which rights or an interest of that person constitute an interest in a foreign investment fund would, if that foreign entity were a foreign company subject to section 245q of this Act, by virtue of the provisions of section 245q of this Act be treated as being resident at all times during the period commencing on the date of acquisition of that interest (or commencing with the 1st day of April 1988 if the date of acquisition was earlier than the 1st day of April 1988) and ending with the 31st day of March 1989 (or ending with the date of disposition of that income interest, if earlier than the 31st day of March 1989) in a country or territory, other than a country or territory specified in the Seventeenth Schedule to this Act, that person shall be deemed for the purposes of calculating any foreign investment fund income or foreign investment fund loss of that person in respect of that interest pursuant to section 245r(3) of this Act (but not for any other purpose) to have acquired that interest on the 1st day of April 1989 for its market value at that date or, in any case where the person disposed of that interest prior to the 31st day of March 1989, never to have held that interest.
“(8)
Notwithstanding any other provision of this Act, for the purposes of Part XII of this Act in calculating the provisional tax payable by any person in respect of the income year that commenced on the 1st day of April 1988 no regard shall be had to any attributed foreign income or attributed foreign loss or foreign investment fund income or foreign investment fund loss of that person or any other person in respect of the income year that commenced on the 1st day of April 1988.”
25 Reduction of provisional tax in cases of relief from double taxation
Section 385 of the principal Act is hereby amended by inserting, after the words “section 293”
, the words “or sections 245k or 245l”
.
26 Offences
Section 416(1) of the principal Act is hereby amended by inserting, after paragraph (b), the following paragraphs:
“(ba)
Knowingly fails, or knowingly permits the failure, to disclose to the Commissioner in the prescribed form, wholly or in part, any information which that corporate body is required to disclose—
“(i)
Under section 245w of this Act; or
“(ii)
Under section 231 of this Act; or
“(bb)
Knowingly makes any false disclosure or knowingly gives any false information, to the Commissioner in relation to the disclosure obligation imposed on the person—
“(i)
Under section 245w of this Act; or
“(ii)
Under section 231 of this Act; or”.
27 Officers and employees of corporate bodies
Section 416a of the principal Act (as inserted by section 41 of the Income Tax Amendment Act 1986) is hereby amended by inserting, after subsection (2), the following subsection:
“(3)
Every person commits an offence against this Act who, being an officer or an employee of a corporate body, is, by reason of that office or, as the case may be, that employment, responsible (whether pursuant to any statute or rule of law, or any instructions of the corporate body or for any other reason) for the disclosing to the Commissioner in the prescribed form the information required pursuant to section 245w of this Act or, as the case may be, the details required pursuant to section 231 of this Act, and who—
“(a)
Knowingly fails, or knowingly permits the failure, to disclose to the Commissioner in the prescribed form, wholly or in part, any information which that corporate body is required to disclose—
“(i)
Under section 245w of this Act; or
“(ii)
Under section 231 of this Act; or
“(b)
Knowingly makes any false disclosure, or knowingly gives any false information, to the Commissioner in relation to the disclosure obligation imposed on the corporate body,—
“(i)
Under section 245w of this Act; or
“(ii)
Under section 231 of this Act.”.
28 Penalties for offences
(1)
Section 416b of the principal Act (as inserted by section 42 of the Income Tax Amendment Act 1986) is hereby amended by inserting, after subsection (2), the following subsections:
“(2a)
Every person who commits an offence against section 416(1)(ba) or section 416(1)(bb) or section 416a(3) of this Act shall be liable on conviction to imprisonment for a term not exceeding 2 years or to a fine not exceeding $50,000, or to both.
“(2b)
For the purposes of subsection (2a) of this section and section 416(1)(ba) or section 416(1)(bb) or section 416a(3) of this Act, the term ‘person’ shall include any person who aids, abets, or incites any other person to commit such offences.”
(2)
Section 416b(2) of the principal Act (as so inserted) is hereby amended by omitting the expression “416a”
, and substituting the expression “416a(2)”
.
29 Schedules added
The principal Act is hereby amended by adding the Fifteenth, Sixteenth, and Seventeenth Schedules as set out in the First Schedule to this Act.
Part IV Full Imputation, Dividend Withholding Payments, Branch Equivalent Tax Accounts, and Related Amendments
30 Interpretation
(1)
Section 2 of the principal Act is hereby amended by repealing subparagraph (i) of paragraph (a) of the term “expenditure on account of an employee”
(as inserted by section 34(3) of the Income Tax Amendment Act (No. 2) 1985 and amended by section 2 of the Income Tax Amendment Act 1986), and substituting the following subparagraph:
“(i)
A payment made by a proprietary company, before the 1st day of April 1989, in respect of or in relation to expenditure incurred by an employee of the proprietary company, where and to the extent that the payment is in respect of or in relation to expenditure that, under section 4(1)(k) of this Act, is deemed to be a dividend:”.
(2)
Section 2 of the principal Act is hereby further amended by omitting the expression “section 4(2)”
from paragraph (b)(iii) of the definition of the term “expenditure on account of an employee”
(as so inserted and amended), and substituting the expression “section 4(1)(k)”
.
(3)
Section 2 of the principal Act is hereby further amended by inserting in paragraph (d) of the definition of the term “expenditure on account of an employee”
(as so inserted and amended), after the words “A payment made”
, the words “, before the 1st day of April 1989,”
.
(4)
Section 2 of the principal Act is hereby further amended by inserting, before the definition of the term “withholding payment”
, the following definition:
“‘Winding up’, in relation to a company, includes a dissolution under the Companies Act 1955 or under any other Act:”.
(5)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
31 New sections substituted in principal Act
(1)
The principal Act is hereby amended by repealing sections 3 and 4, and substituting the following sections:
“3 Meaning of term ‘bonus issue’
“(1)
For the purposes of this Act the term ‘bonus issue’, in relation to a company, means a capitalisation of any amount available for capitalisation, being a capitalisation by way of—
“(a)
The allotment of fully paid-up or partly paid-up shares in the company; or
“(b)
The giving of credit in respect of the whole or part of the amount unpaid on any shares in the company.
“(2)
Notwithstanding subsection (1) of this section, where—
“(a)
A company has reduced the amount of the paid-up capital of any of its shareholders by writing off losses incurred by the company; and
“(b)
The company subsequently makes a capitalisation of the whole or part of any amount specified in subsection (1) of this section, being a capitalisation by way of—
“(i)
The allotment to those shareholders of fully paid-up or partly paid-up shares in the company; or
“(ii)
The giving to those shareholders of credit in respect of the whole or part of the amount unpaid on any shares in the company,—
the term ‘bonus issue’ shall be deemed for the purposes of this Act not to include the paid-up value of the shares so allotted or the credit so given, as the case may be, to such extent as the Commissioner thinks just and reasonable, having regard to the amount of the paid-up capital lost by those shareholders and any other relevant considerations.
“4 Meaning of term ‘dividends’
“(1)
Except as provided in section 4a of this Act, and subject to the provisions of this section, for the purposes of this Act the term ‘dividends’, in relation to any company, includes—
“(a)
All sums, including any sums that are specified payments, distributed in any manner and under any name among all or any of the shareholders of the company:
“(b)
Any money advanced by the company to or for the benefit of any of its shareholders if, in the opinion of the Commissioner, the making of the advance was not a bona fide investment by the company but was virtually a distribution of profits or a distribution of an amount capitalised by way of bonus issue where the bonus issue—
“(i)
Was made by the company after the 31st day of March 1982 and before the 1st day of October 1988 and within the period of 78 months immediately preceding the making of the advance; or
“(ii)
Is a non-taxable bonus issue:
“(c)
The value of any property of the company that is—
“(i)
Distributed in any manner and under any name among all or any of the shareholders of the company; or
“(ii)
Sold or otherwise disposed of to a shareholder,—
to the extent that the market value of the property exceeds the amount of any consideration provided to the company by the shareholder for the distribution, sale, or disposition:
“(d)
The value of any property that is acquired, on or after the 1st day of October 1988, from any shareholder of the company to the extent that the consideration provided by the company for the property exceeds the market value of the property:
“(e)
The making available, on or after the 1st day of October 1988, of any property of the company for the benefit of any shareholder of the company to the extent that the value of the benefit enjoyed by the shareholder exceeds the amount or value of any consideration provided to the company by the shareholder for provision of the benefit if, in the opinion of the Commissioner, the making available of the property is virtually a distribution of an amount that, if distributed other than in the course of the winding up of the company, would be dividends under this Act:
“(f)
A taxable bonus issue (as defined in subsection (3) of this section):
“(g)
All amounts (whether in money or money’s worth) distributed in any manner and under any name from and in respect of any reduction or return of the share capital of the company:
“(h)
All interest received by debenture holders under debentures to which section 192 or section 195 of this Act applies:
“(i)
All interest paid under a convertible note (as defined in section 196(1) of this Act), being a convertible note to which section 196(3) of this Act applies, and all other payments and transactions in relation to such a convertible note that, if made to or with a shareholder in relation to share capital in a company, would be dividends under this Act:
“(j)
All income of a unit trust (as defined in section 211(1) of this Act) distributed to a unit holder (as defined in that section), and all other payments to and transactions with a unit holder in relation to the unit holder’s interest in the unit trust that would, if made to or with a shareholder in relation to shares in a company, be dividends under this Act:
“(k)
Any expenditure of the company (the company being a proprietary company) where the benefit of the expenditure is enjoyed by a shareholder of the company and the expenditure is not—
“(i)
Expenditure by way of a donation made to any society, institution, association, organisation, or trust of any of the kinds referred to in section 56a(2) of this Act:
“(ii)
Expenditure that is deductible, pursuant to this Act, in calculating the assessable income of the company:
“(l)
Any payment, distribution, or transaction of the kind referred to in paragraphs (a) to (k) of this subsection made by a proprietary company which, if made to or with a shareholder in the company, would be dividends under any of those paragraphs where the payment, distribution, or transaction is made to or with—
“(i)
An associated person of a shareholder of the company; or
“(ii)
Any trust under which the shareholder is a beneficiary; or
“(iii)
Any trust under which the spouse of the shareholder (the spouse not being a shareholder) is a beneficiary:
“(m)
Any cash distribution in respect of which a statutory producer board or a co-operative company makes a determination pursuant to section 394r(1) or section 394x(1) of this Act.
“(2)
For the purposes of this Act, the term ‘dividends’, in relation to any group investment fund (as defined in section 211a of this Act), includes—
“(a)
All category A income (as defined in that section) that is distributed to an investor (as defined in that section):
“(b)
All other payments to and transactions with an investor (as so defined) in relation to the funds deposited by or on behalf of the investor with the group investment fund that, if made to or with a shareholder in relation to shares in a company, would be dividends under this Act.
“(3)
For the purposes of this section,—
“‘Arrangement’ means any contract, agreement, plan, or understanding (whether enforceable or unenforceable), including all steps and transactions by which it is carried into effect:
“‘Bonus issue in lieu’, in relation to a company, means any bonus issue made, on or after the 1st day of October 1988, pursuant to an arrangement conferring on shareholders of the company an election whether to receive—
“(a)
Money or money’s worth (not being money’s worth that is a bonus issue); or
“(b)
A bonus issue:
“‘Non-taxable bonus issue’ means any bonus issue—
“(a)
That a company elects in accordance with subsection (5)(a)(ii) of this section to be a bonus issue that is not to be treated as a dividend for the purposes of this Act; or
“(b)
In respect of which the company fails to make any election under subsection (5) of this section:
“‘Specified payments’ has the meaning assigned to that term in section 4a(3) of this Act:
“‘Taxable bonus issue’ means—
“(a)
Any bonus issue in lieu:
“(b)
Any bonus issue that a company elects in accordance with subsection (5)(a)(i) of this section to be a bonus issue that will be treated as a dividend for the purposes of this Act.
“(4)
For the purposes of this section—
“(a)
The amount of the market value of any property to which paragraph (c) or paragraph (d) of subsection (1) of this section applies, or of any corresponding property to which paragraph (l) of that subsection applies, shall be—
“(i)
The market price or true value of the property on the day the property was distributed, sold, or otherwise disposed of; or
“(ii)
In any case where section 90 or section 91 or section 117(5) of this Act applies, the price deemed to have been realised pursuant to a determination of the Commissioner under the relevant one of those sections; or
“(iii)
In any case where the provisions of subparagraphs (i) and (ii) of this paragraph do not apply, such price as the Commissioner determines might have been expected to have been realised if the company had disposed of that property to a person where, at the time of the disposal, that person was not a shareholder of the company and the person and the company were not associated persons:
“(b)
When ascertaining the value of a benefit referred to in subsection (1)(e) of this section, or any corresponding benefit under subsection (1)(l) of this section, the Commissioner—
“(i)
Shall, so far as is practicable, and with any necessary modifications, have regard to and apply the provisions of sections 336o and 336p of this Act as if the benefit were a fringe benefit, or the provisions of section 72 of this Act in the case of any accommodation benefit of a type referred to in that section:
“(ii)
May, where it is not practicable to have regard to or apply those provisions, ascertain the value of the benefit in such manner as the Commissioner thinks fit.
“(5)
Where a company proposes to make a bonus issue, other than a bonus issue in lieu, on or after the 1st day of October 1988,—
“(a)
The company may elect, by resolving upon the making of the bonus issue, whether the bonus issue shall be—
“(i)
A taxable bonus issue (in which case the bonus issue will be treated as a dividend by virtue of subsection (1)(f) of this section); or
“(ii)
A non-taxable bonus issue (in which case the bonus issue will be excluded from being treated as a dividend by virtue of section 4a(1)(a) of this Act):
“(b)
If the company fails to make an election under paragraph (a) of this section, the bonus issue shall be deemed to be a non-taxable bonus issue.
“(6)
The amount of the dividend arising in respect of a bonus issue shall be,—
“(a)
In relation to a taxable bonus issue, the greater of—
“(i)
The amount capitalised in the making of the bonus issue; or
“(ii)
The amount of the money or money’s worth offered as an alternative to the bonus issue:
“(b)
In relation to a non-taxable bonus issue, the amountcapitalised in the making of the bonus issue.
“(7)
The dividends referred to in paragraph (l) of subsection (1) of this section shall, for the purposes of this Act, be dividends derived by the shareholder referred to in that paragraph. Where more than one shareholder is so deemed to derive the dividends, the dividends shall be apportioned rateably among those shareholders in proportion to the paid-up value of the interest of each of those shareholders in the share capital of the company.
“(8)
Where any money advanced by a company to or for the benefit of any shareholder and deemed by virtue of subsection (1)(b) of this section to constitute a dividend is subsequently repaid to the company, the Commissioner may amend in such manner as may be appropriate the assessment made in respect of income derived by that shareholder during the income year in which the advance was made, and may, notwithstanding anything in section 409 of this Act, at any time refund any tax found to have been paid in excess of the amount properly payable.
“(9)
Where the Commissioner is satisfied that dividends arising pursuant to paragraph (k) of subsection (l) of this section (or any corresponding dividends arising pursuant to paragraph (1) of that subsection in respect of a proprietary company) arise from the charging of expenditure, in the accounts of the company, in the reasonable belief of all of the shareholders of the company that the benefit of that expenditure was enjoyed by the company and not by any other person, the Commissioner may, where any of that expenditure is subsequently repaid to the company, amend in such manner as may be appropriate the assessment in respect of income derived, by the shareholder, during the income year in which the benefit arose, and may, notwithstanding anything in section 409 of this Act, at any time refund any tax found to have been paid in excess of the amount properly payable.
“4a Exclusions from term ‘dividends’
“(1)
For the purposes of this Act, and subject to the provisions of this section, the term ‘dividends’, in relation to any company, does not include—
“(a)
Any non-taxable bonus issue (as defined in section 4(3) of this Act):
“(b)
Any amount (whether in money or money’s worth) distributed in any manner and under any name from and in respect of any reduction or return, before the 1st day of October 1988, of the share capital of the company, except to the extent of the amount of every bonus issue made after the 31st day of March 1982 and before the 1st day of October 1988:
“(c)
Any amount, including the amount of any qualifying premium of the kind referred to in subparagraph (iv) of this paragraph, that is returned upon the redemption of shares, on or after the 1st day of October 1988, where—
“(i)
The amount returned does not exceed the amount paid to the company to pay up the shares and the qualifying premium; and
“(ii)
The shares are wholly redeemed; and
“(iii)
The Commissioner is satisfied that the shares are not redeemed pursuant to an arrangement to regularly or systematically or expressly redeem shares in lieu of the payment of dividends whether in whole or in part; and
“(iv)
The qualifying premium returned per share is an amount calculated in accordance with the following formula:
_eqn10.JPG)
where—
a
is an amount equal to the number of shares being redeemed; and
b
is an amount equal to the number of shares of the company of the same class as those being redeemed on issue immediately before the redemption; and
c
is the amount of the premium of the kind referred to in paragraph (e) of this subsection paid upon subscription for all shares of that class, less the amount of any premiums distributed or applied before the redemption:
“(d)
The return of any amount paid-up on the shares of the company made upon the winding up of the company except to the extent of—
“(i)
The amount of every bonus issue—
“(A)
Made after the 31st day of March 1982 and before the 1st day of October 1988; and
“(B)
Made within the period of 120 months immediately preceding the date of the return of the paid-up capital:
“(ii)
The amount of every non-taxable bonus issue, except in so far as there was applied in the capitalisation of the non-taxable bonus issue—
“(A)
Any capital gain amount; or
“(B)
The amount of any premiums arising from a payment (whether in money or money’s worth) made by a shareholder or former shareholder to the company for the acquisition of shares issued at a premium, not being a premium arising with respect to the issue of shares in one company as consideration for the acquisition of shares in any other company (whether by one transaction or a series of transactions), where such premiums were credited to a share premium account in the books of the company or, where the company in which the premiums arose has been taken over by another company or merged with another company, in the books of that other company:
“(e)
The amount of any payment made upon the winding up of the company to the extent that the payment relates to premiums paid by any shareholder or former shareholder to the company in respect of the issue of share capital by the company and the Commissioner is satisfied that—
“(i)
Such premiums arose from a payment (whether in money or money’s worth) made by the shareholder or former shareholder to the company for the acquisition of shares issued at a premium, and
“(ii)
Such premiums did not arise with respect to the issue of shares in one company as consideration for the acquisition of shares in any other company, whether by one transaction or a series of transactions; and
“(iii)
Such premiums were credited to a share premium account in the books of the company or, where the company has been taken over by another company or merged with another company, in the books of that other company:
“(f)
Any capital gain amount distributed to a shareholder of the company upon the winding up of the company:
“(g)
The value of any capital asset of the company which is received by any shareholder in respect of the shareholder’s shares upon the winding up of the company to the extent that that value exceeds the sum of—
“(i)
The cost to the company of the capital asset; and
“(ii)
Any capital losses arising from the realisation of capital assets (other than a realisation to which subsection (9) of this section applies) incurred in the income year in which the capital asset was received by the shareholder, not being losses already taken into account in calculating a profit or gain which is or is not to be included in the assessable income of the company for any income year:
“(h)
Such amount distributed to a shareholder of the company as the Commissioner considers Just and reasonable, having regard to the loss of paid-up capital referred to in subparagraph (i) of this paragraph and any other relevant considerations, where—
“(i)
The company reduced the amount of the paid-up capital of the shareholder by writing off losses incurred by the company; and
“(ii)
The company is subsequently wound up; and
“(iii)
There is distributed to the shareholder upon the winding up of the company an amount (whether in money or money’s worth) in excess of the amount paid-up on the shares of the shareholder:
“(i)
Any amount to which any of paragraphs (b) to (e) and (k) of section 4(1) of this Act applies, where the transaction referred to in any of those paragraphs constitutes the provision or granting of a fringe benefit subject to fringe benefit tax:
“(j)
Any distribution by a statutory producer board (as defined in section 394q of this Act) in so far as the Commissioner is satisfied that the distribution—
“(i)
Is in respect of part of an amount deemed by section 394u of this Act to be a dividend for which a member (as defined in the said section 394q) of the statutory producer board accordingly has been assessable and liable for tax; or
“(ii)
Is of any part of a levy charged specifically for capital development where the distribution of that levy is made in the course of dissolution of the statutory producer board:
“(k)
Any distribution by a co-operative company (as defined in section 394w of this Act) in so far as the Commissioner is satisfied that the distribution is in respect of part of an amount deemed under section 394za of this Act to be a dividend for which a shareholder of the co-operative company accordingly has been assessable and liable for tax:
“(l)
Except for the purposes of sections 27 to 29 of the Income Tax Amendment Act (No. 3) 1988, the amount of any distribution in respect of which the Commissioner is satisfied that the correct amount of winding up distribution tax has been paid in accordance with those sections:
“(m)
The market value (calculated as at the date derived) of all consideration derived or deemed to have been derived or received or receivable to the extent to which the consideration has been included by a person, pursuant to section 245r(3) of this Act, in item b of the formula for the calculation of foreign investment fund income.
“(2)
For the purposes of this section—
“‘Arrangement’ means any contract, agreement, plan or understanding (whether enforceable or unenforceable), including all steps and transactions by which it is carried into effect:
“‘Capital gain amount’, in relation to a company, means—
“(a)
The amount of any profit or gain where the profit or gain—
“(i)
Was derived before the 1st day of April 1988; and
“(ii)
Is a profit or gain to which subsection (5) of section 4 of this Act applied (not being a profit or gain to which subsection (5a) of that section applied) immediately before the repeal of those provisions by section 31(1) of the Income Tax Amendment Act (No. 5) 1988:
“(b)
The amount of any profit or gain derived by the company determined in accordance with subsections (8) to (11) of this section:
“‘Shares’, for the purposes of subsection (1)(c) of this section, includes—
“(a)
Any debenture, issued on or after the 1st day of October 1988, to which section 192 or section 195 of this Act applies:
“(b)
Any convertible note (as defined in section 196(1) of this Act) to which section 196(3) of this Act applies:
“‘Shares of the same class’, in relation to shares of a company, means shares of the company that carry the same rights in relation to—
“(a)
The exercise of voting power in the company; and
“(b)
The right to receive profits that may be distributed by the company; and
“(c)
The right to receive paid-up capital of the company (if any) upon a return of that paid-up capital:
“‘Specified company’ means a company that makes a distribution of any of the kinds referred to in paragraphs (e) to (g) of subsection (1) of this section:
“‘Specified payments’, in relation to a company, means any payment or other transaction made by the company to or with all or any of its shareholders to the extent that such payment or other transaction relates to amounts paid by way of premiums by any shareholder or former shareholder to the company in respect of the issue of share capital by the company, being amounts either—
“(a)
Credited to any share premium account and arising from payments or other transactions (including takeovers and mergers) effected on or after the 30th day of July 1976; or
“(b)
Arising from payments or other transactions (including takeovers and mergers) whenever effected and not credited to a share premium account in the accounts of the company for the income year in which those last-mentioned payments or other transactions were effected.
“(3)
For the purposes of paragraphs (b) and (d) of subsection (1) of this section, to the extent that the amount of a bonus issue of the kind referred to in those paragraphs has previously been taken into account in determining an amount included within the term ‘dividends’ under section 4 of this Act, that amount, in relation to any subsequent return of capital, shall cease to be a bonus issue of the kind referred to in those paragraphs.
“(4)
Paragraphs (e) to (g) of subsection (1) of this section shall not apply to any payment or distribution made by a specified company to a shareholder where that shareholder is a company related to the specified company.
“(5)
Any distribution referred to in paragraph (j) or paragraph (k) of subsection (1) of this section shall, for the purposes or section 106(1)(a) of this Act, be deemed to be a return of capital.
“(6)
For the purposes of subsection (1)(g) of this section, the value of any capital asset shall be the market price of the capital asset or, if there is no market price, the amount of the price deemed to have been realised pursuant to a determination of the Commissioner under section 117(5)(b) of this Act.
“(7)
For the purposes of subsections (1)(g)(i) and (8)(a)(i) of this section, the cost of the capital asset referred to in those provisions shall be increased by such amount, if any, of the whole or part of any increase arising from the writing up of the capital asset that has been excluded from—
“(a)
The term ‘dividends’ in accordance with section 4(3) of the Land and Income Tax Act 1954 (as in force immediately before the amendment of that section by subsections (1) to (3) of section 5 of the Land and Income Tax Amendment Act 1965); or
“(b)
The term ‘bonus issue’ in accordance with section 3(3) of this Act (as in force immediately before the repeal of that section by section 31(1) of the Income Tax Amendment Act (No. 5) 1988.
“(8)
Subject to subsections (9) to (11) of this section, the capital gain amount derived by a company, on or after the 1st day of April 1988, shall be the amount of profit or gain derived by the company where—
“(a)
The company—
“(i)
Has realised a capital asset, whether voluntarily or involuntarily, for an amount in excess of the cost to the company of the asset; or
“(ii)
Has otherwise, in the opinion of the Commissioner, made a capital profit or a capital gain (not arising from specified payments), including a capital gain by way of gift; and
“(b)
The profit or gain referred to in subparagraph (i) or subparagraph (ii) of paragraph (a) of this subsection is not a profit or gain that is required to be taken into account under this Act for the purpose of assessing income tax.
“(9)
Subject to subsection (10) of this section, where any asset of any company has been realised as part of, or subject to, any transaction or series of related or connected transactions between the company and any person related to the company, any profit arising from that realisation shall not constitute, for the purposes of subsection (8) of this section, a capital gain amount.
“(10)
Subsection (9) of this section shall not apply in respect of any capital gain amount arising from the realisation of an asset where the asset of the company (being a private company within the meaning of the Companies Act 1955) has been realised, during the course of and for the purpose of the winding up of the company, by the sale of that asset to any person (not being a company) who, under subsection (12) of this section, is deemed to be a person related to the company.
“(11)
Where a company has derived a capital gain amount pursuant to subsection (8) of this section, the capital gain amount shall, for the purposes of subsection (l)(f) of this section, be reduced by any capital losses arising from the realisation of capital assets (other than a realisation to which subsection (9) of this section applies) incurred in the income year in which the capital gain amount was derived or in any subsequent income year (such losses not being losses already taken into account in calculating a profit or gain which is not to be included in the assessable income of the company for any income year).
“(12)
For the purposes of this section—
“(a)
A person shall be deemed to be a person related to a company that is a specified company in any case where that person is—
“(i)
A person who owns, or has in any way the power to control (whether directly or indirectly), or has the right to acquire, 20 percent or more of the ordinary shares of the specified company:
“(ii)
A person who owns, or has in any way the power to control (whether directly or indirectly), or as the right to acquire, 20 percent or more of the voting rights of the specified company:
“(iii)
A person (being a company), 20 percent or more of the voting rights of which the specified company owns, or has in any way the power to control (whether directly or indirectly), or has the right to acquire:
“(iv)
A person (being a company), 20 percent or more of the voting rights of which the specified company owns, or has in any way the power to control (whether directly or indirectly), or has the right to acquire:
“(v)
A person (being a company) the shares of which are owned to the extent of 20 percent or more by any shareholders who own or control or have the right to acquire 20 percent or more of the shares or the voting rights of the specified company, or the voting rights of which are able to be controlled to the extent of 20 percent or more of the shares or the voting rights of the specified company:
“(vi)
A person who is a partner or co-venturer of the specified company:
“(vii)
A trustee of a trust where the specified company, or another person who is a person related to the specified company, benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust either directly or indirectly:
“(viii)
A partnership in which any partner or in which 2 or more partners (being in each case a partner who is a person related to the specified company)—
“(A)
Holds or, as the case may be, hold in the aggregate an entitlement to 50 percent or more of the assets or profits of the partnership; or
“(B)
Is able or, as the case may be, are jointly able in any way to control the partnership:
“(b)
For the purposes of paragraph (a) of this subsection, in relation to any person, any interest held by—
“(i)
The spouse of that person; or
“(ii)
Any child of that person; or
“(iii)
Any child of the spouse of that person; or
“(iv)
Any spouse of any such child; or
“(v)
Any nominee of that person;—
shall be deemed to be held by that person:
“(c)
For the purposes of paragraph (a)(v) of this subsection, where any shares or voting rights of any company are owned or controlled by another company those shares or voting rights shall be deemed to be owned or, as the case may be, controlled by the shareholders of that other company, and, where any shares or voting rights of that other company are owned or controlled by any further company, the shares or the voting rights of the first-mentioned company in this paragraph shall be deemed to be owned or controlled by the shareholders of that further company, and so on.
“(13)
Every reference in this section to an income year in relation to a company shall, where the company furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and, in every such case, this section shall, with any necessary modifications, apply accordingly.”
(2)
For the purposes of subsection (5) of section 4 of the principal Act (as inserted by subsection (1) of this section), a company that makes a bonus issue on or after the 1st day of October 1988 but before the date on which this Act receives the Royal assent may make an election under that subsection at any time on or before the earlier of—
(a)
The 1st day of March 1989; or
(b)
The end of the company’s income year, where that year ends on or after the date on which this Act receives the Royal assent,—
and paragraph (b) of that subsection shall not apply in respect of the bonus issue until the expiry of the earlier of those dates.
(3)
The following provisions are hereby consequentially repealed:
(a)
Section 3 of the Income Tax Amendment Act (No. 2) 1977:
(b)
Section 49 of the Income Tax Amendment Act 1979:
(c)
Sections 19(1) and 42(5) of the Income Tax Amendment Act 1980:
(d)
Section 7 of the Finance Act (No. 2) 1981:
(e)
Section 4 of the Income Tax Amendment Act (No. 2) 1982:
(f)
Sections 4, 5, and 33(2) of the Income Tax Amendment Act (No. 3) 1983:
(g)
Sections 4 and 34(6) of the Income Tax Amendment Act (No. 2) 1985:
(h)
Section 2(1) to (7) of the Income Tax Amendment Act (No. 3) 1985:
(i)
Section 3 of the Income Tax Amendment Act 1986.
(4)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
32 Commissioner to make assessments, determinations of loss, and other determinations
(1)
Section 19 of the principal Act is hereby amended by inserting, after subsection (1), the following subsection:
“(1a)
Where any taxpayer in any income year has claimed a credit of tax pursuant to Part XIIa or Part XIIb or section 394zzv of this Act, any adjustment by the Commissioner in respect of any such claim shall be deemed for the purposes of this Act to be part of an assessment made under subsection (1) of this section in relation to the amount of tax payable by that person, and—
“(a)
Sections 22 to 29 and Part III of this Act shall apply accordingly; and
“(b)
Reference in section 35 of this Act to the income which is the subject of the assessment objected to shall, in relation to an objection concerning any such credit of tax, be treated as a reference to the credit of tax that is the subject of the assessment.”
(2)
Section 19(5) of the principal Act is hereby amended by inserting, after the words “section 245r(1) of this Act”
(as inserted by section 17(a) of this Act), the words “, or a determination of tax advantage arrangement debit made pursuant to section 394zg of this Act or a determination of incorrect entry made pursuant to section 394zh or section 394zzj or section 394zzr of this Act,”
.
(3)
Section 19(5)(b) of the principal Act is hereby amended by inserting, after the words “foreign investment fund loss,”
(as inserted by section 17(b) of this Act), the words “or of creating or increasing a debit or cancelling or reducing any credit to a company’s special account,”
.
(4)
Section 19(5)(e) of the principal Act is hereby amended by inserting, after the words “foreign investment fund loss,”
(as inserted by section 17(b) of this Act), the words “or to the debit or credit”
.
33 Income of primary producer boards, marketing boards, and milk treatment companies and corporations no longer exempt from tax
(1)
Section 61 of the principal Act is hereby amended by repealing paragraphs (6), (7), and (8).
(2)
The enactments specified in the first column of the Second Schedule to this Act are hereby amended in the manner indicated in the second column of that Schedule.
(3)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
34 Deduction for expenditure or loss incurred in providing fringe benefits to minority shareholders
(1)
Section 105a of the principal Act (as inserted by section 15(1) of the Income Tax Amendment Act 1986) is hereby amended—
(a)
By omitting the words “For the purposes of this Act”
, and substituting the words “(1) For the purposes of this Act, but subject to subsection (2) of this section”
:
(b)
By omitting the words “, not being a shareholder who (within the meaning of section 336n(1) of this Act) is, in relation to that company, a major shareholder,”
.
(2)
Section 105a of the principal Act (as inserted) is hereby further amended by adding the following subsection:
“(2)
Subsection (1) of this section shall not apply in respect of the providing or granting by a company, before the 1st day of April 1989, of any benefit to a person who, within the meaning or section 336n(1) of this Act, is in relation to the company a major shareholder.”
35 Certain deductions not permitted
(1)
Section 106(1) of the principal Act is hereby amended by inserting in paragraph (j) (as substituted by section 16(1) of the Income Tax Amendment Act 1986), after the words “providing or granting”
, the words “, before the 1st day of April 1989,”
.
(2)
Section 106(2) of the principal Act is hereby amended by adding the following paragraph:
“(c)
Any—
“(i)
Further income tax or imputation penalty tax within the meaning of section 394a of this Act:
“(ii)
Dividend withholding payment or further dividend withholding payment or dividend withholding payment penalty tax within the meaning of section 394zk of this Act:
“(iii)
Any penalty by way of additional tax for late payment of any tax or payment referred to in this paragraph.”
36 Limitation of deduction for motor vehicles where insufficient records kept
Section 106b(2) of the principal Act (as inserted by section 17(1) of the Income Tax Amendment Act 1986) is hereby amended by inserting, after the expression “section 336n(1) of this Act)”
, the words “ending before the 1st day of April 1989”
.
37 Repairs, maintenance, and depreciation
Section 108(1) of the principal Act is hereby amended by inserting in the third proviso (as added by section 18(1) of the Income Tax Amendment Act 1986), after the words “in the providing”
, the words “, before the 1st day of April 1989,”
.
38 Excessive remuneration by proprietary company to shareholder, director, or relative
(1)
Section 190 of the principal Act is hereby amended by adding to the proviso the following paragraph:
“(c)
That the person is resident in New Zealand.”
(2)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1989 and in every subsequent income year.
39 New sections inserted in relation to producer boards, co-operative companies, etc., previously exempt from tax
(1)
The principal Act is hereby amended by inserting, after section 197d, the following sections:
“197e Statutory producer boards
“(1)
In this section, the term ‘statutory producer board’ means—
“(a)
Any body specified in the Eighteenth Schedule to this Act:
“(b)
Any marketing authority within the meaning of the Primary Products Marketing Act 1953 that is established by regulations made under that Act:
“(c)
Any primary producer board or marketing board established by any Act,—
but does not include any body that is exempt from tax or a body to which section 197b of this Act applies.
“(2)
For the purposes of this Act—
“(a)
A statutory producer board is deemed to be a company; and
“(b)
The activities of any statutory producer board are deemed to be a business; and
“(c)
Levies received by any statutory producer board, other than levies charged specifically for capital development, are deemed to be assessable income; and
“(d)
The provisions of section 104 of this Act shall apply to expenditure incurred in fulfilling the functions of any statutory producer board (not being expenditure for which no deduction is permitted pursuant to section 106 of this Act) as if that expenditure were—
“(i)
Incurred in gaining or producing the assessable income of the producer board; or
“(ii)
Necessarily incurred in the carrying on of a business by the producer board.
“(3)
For the purpose of determining the amount of any deduction allowable under section 108 of this Act to any statutory producer board in respect of the depreciation of any asset that—
“(a)
Was acquired by the statutory producer board in any income year commencing on or before the 1st day of April 1987; and
“(b)
Was not used in the production of assessable income in any income year commencing on or before the 1st day of April 1987 by reason of being an asset used in tax exempt activities of the statutory producer board,—
the Commissioner shall, subject to subsection (4) of this section, have regard to the cost of the asset and to all amounts that the Commissioner would have allowed as a deduction under section 108 of this Act if the asset had been used in the production of the assessable income of the statutory producer board for—
“(c)
The income year in which the asset was acquired; and
“(d)
Any subsequent income year commencing on or before the 1st day of April 1987.
“(4)
Where any asset to which subsection (3) of this section applies is a building, the Commissioner shall, when determining the amount of any deduction allowable in respect of the asset under section 108 of this Act, have regard to the amount of expenditure that the statutory producer board incurred in acquiring the asset.
“(5)
Where there is any question under this section as to—
“(a)
The cost of any asset acquired by a statutory producer board during any income year commencing on or before the 1st day of April 1987; or
“(b)
The date on which a statutory producer board acquired, altered, or added to any such asset,—
it shall be determined by agreement between the statutory producer board and the Commissioner or, in default of such agreement, by the Commissioner.
“(6)
Subject to subsection (7) of this section, the value of any trading stock of a statutory producer board to be taken into account at the beginning of the income year that commenced on the 1st day of April 1988 shall be the lesser of its cost price, its market selling price, or the price at which it can be replaced.
“(7)
No deduction shall be allowed under section 85(7) of this Act in respect of the value of trading stock of any statutory producer board at the beginning of the income year that commenced on the 1st day of April 1988 unless an auditor’s certificate stating that the value of the trading stock is in accordance with subsection (6) of this section is furnished to the Commissioner within the time in which the statutory producer board is required to furnish a return of income for that income year.
“(8)
Notwithstanding anything in Part XIIb of this Act, a statutory producer board shall not be liable to deduct or pay dividend withholding payment in respect of any foreign withholding payment dividend derived by the producer board during the income year that ended on the 31st day of March 1988.
“(9)
Every reference in this section to an income year shall, where the statutory producer board furnishes a return of income under section 15 of this Act for an accounting year ending with a balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this section shall, with any necessary modifications, apply accordingly.
“197f Milk treatment companies and corporations
“(1)
In this section, the term ‘milk treatment station’ means—
“(a)
Any milk treatment company or milk treatment corporation that was, immediately before the beginning of the income year that commenced on the 1st day of April 1988, exempt from tax under section 61(7) or section 61(8) of this Act (as repealed by section 33(1) of the Income Tax Amendment Act (No. 5) 1988):
“(b)
Any organisation that—
“(i)
Was established on or before the beginning of the income year that commenced on the 1st day of April 1988; and
“(ii)
Has taken over the undertaking of and is carrying on a business referred to in paragraph (a) of this definition.
“(2)
For the purposes of determining the amount of any deduction allowable under section 108 of this Act to any milk treatment station in respect of the depreciation of any asset that—
“(a)
Was acquired by that milk treatment station in any income year commencing on or before the 1st day of April 1987; and
“(b)
Was used in tax exempt activities of the milk treatment station in any income year commencing on or before the 1st day of April 1987,—
the Commissioner shall, subject to subsection (3) of this section, have regard to the cost of the asset and to all amounts that the Commissioner would have allowed as a deduction under section 108 of this Act if the asset had been used in the production of the assessable income of the milk treatment station for—
“(c)
The income year in which the asset was acquired; and
“(d)
Every subsequent income year commencing on or before the 1st day of April 1987.
“(3)
Where any asset to which subsection (2) of this section applies is a building, the Commissioner shall, when determining the amount of the deduction allowable in respect of the asset under section 108 of this Act, have regard to the amount of expenditure that the milk treatment station incurred in acquiring the asset.
“(4)
Where there is any question under this section as to—
“(a)
The cost of any asset acquired by a milk treatment station during any income year commencing on or before the 1st day of April 1987; or
“(b)
The date on which a milk treatment station acquired, altered, or added to any such asset,—
it shall be determined by agreement between the milk treatment station and the Commissioner or, in default of such agreement, by the Commissioner.
“(5)
The value of trading stock of any milk treatment station to be taken into account at the beginning of the income year that commenced on the 1st day of April 1988 shall be the lesser of its cost price, its market selling price, or the price at which it can be replaced.
“(6)
No deduction shall be allowed under section 85(7) of this Act in respect of the value of trading stock of any milk treatment station at the beginning of the income year that commenced on the 1st day of April 1988 unless an auditor’s certificate stating that the value of the trading stock is in accordance with subsection (5) of this section is furnished to the Commissioner within the time in which the milk treatment station is required to furnish a return of income for that income year.
“(7)
Every reference in this section to an income year shall, where the milk treatment station furnishes a return of income under section 15 of this Act for an accounting year ending with a balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this section shall, with any necessary modifications, apply accordingly.
“197g Primary producer co-operative companies
“(1)
In this section, the term ‘primary producer co-operative company’ means a company that, as at the beginning of the income year that commenced on the 1st day of April 1988, was a primary producer co-operative company within the meaning of section 200(1) of this Act (as in force before its repeal by section 41(1) of the Income Tax Amendment Act (No. 5) 1988).
“(2)
The value of trading stock of any primary producer cooperative company to be taken into account at the beginning of the income year that commenced on the 1st day of April 1988 shall be the lesser of its cost price, its market selling price, or the price at which it can be replaced.
“(3)
No deduction shall be allowed under section 85(7) of this Act in respect of the value of trading stock of any primary producer co-operative company at the beginning of the income year that commenced on the 1st day of April 1988 unless an auditor’s certificate stating that the value of the trading stock is in accordance with subsection (2) of this section is furnished to the Commissioner within the time in which the company is required to furnish a return of income for that income year.
“(4)
Where in any income year a primary producer cooperative company sells or otherwise disposes of any asset (other than trading stock), being an asset that was a qualifying asset within the meaning of section 200(1) of this Act (as in force before its repeal by section 41(1) of the Income Tax Amendment Act (No. 5) 1988), such amount as the Commissioner considers to be equitable in respect of the proceeds of that sale or other disposition, having regard to any deduction allowed under that section (as in force before so repealed) in relation to that asset, shall be deemed to be assessable income derived by that company in that income year.
“(5)
Where in any income year there is paid to a shareholder of a primary producer co-operative company—
“(a)
On the surrender of any of the shareholder’s shares in that company, any amount in excess of the paid-up value of those shares; or
“(b)
On the winding up of that company, any amount in excess of the paid-up value of the shareholder’s shares in that company—
so much of the excess as the Commissioner considers to be attributable to any increase in the value of the assets of the company caused by the application or appropriation by the company of any amount in respect of which a deduction has been allowed under section 200(4) of this Act (as in force before so repealed) shall be deemed to be assessable income derived by that shareholder in that income year.
“(6)
Every reference in subsections (1) to (4) of this section to an income year shall, where a primary producer co-operative company furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this section shall, with any necessary modifications, apply accordingly.
“197h Co-operative dairy, milk marketing, and pig marketing companies
“(1)
In this section, the term ‘cooperative marketing company’ means—
“(a)
Any company that is registered as a co-operative dairy company under the Co-operative Dairy Companies Act 1949; or
“(b)
Any co-operative milk marketing company within the meaning of section 2 of the Co-operative Companies Act 1956 that is registered as a co-operative company under that Act; or
“(c)
Any co-operative pig marketing company within the meaning of section 2 of the Co-operative Companies Act 1956 that is registered as a co-operative company under that Act,—
being a company that was in existence at the beginning of the income year that commenced on the 1st day of April 1988 and to which any of sections 201 to 203 of this Act (as repealed by section 41(1) of the Income Tax Amendment Act (No. 5) 1988) applied at that time.
“(2)
For the purposes of determining the amount of any deduction allowable under section 108 of this Act to any cooperative marketing company in respect of the depreciation of any asset that—
“(a)
Was acquired by the co-operative marketing company in any income year commencing on or before the 1st day of April 1987; and
“(b)
Was not used, or was only partially used, in the production of assessable income in any income year commencing on or before the 1st day of April 1987, by reason or being an asset used or partially used in tax exempt activities of the co-operative marketing company,—
the Commissioner shall, subject to subsection (3) of this section, have regard to the cost of the asset and to all amounts that the Commissioner would have allowed as a deduction under section 108 of this Act if the asset had been used or fully used in the production of the assessable income of the co-operative marketing company for—
“(c)
The income year in which the asset was acquired; and
“(d)
Every subsequent income year commencing on or before the 1st day of April 1987.
“(3)
Where any asset to which subsection (2) of this section applies is a building, the Commissioner shall, when determining the amount of the deduction allowable in respect of the asset under section 108 of this Act, have regard to the amount of expenditure that the co operative marketing company incurred in acquiring the asset.
“(4)
Where there is any question under this section as to—
“(a)
The cost of any asset acquired by a co-operative marketing company during any income year commencing on or before the 1st day of April 1987; or
“(b)
The date on which a co-operative marketing company acquired, altered, or added to any such asset,—
it shall be determined by agreement between the co-operative marketing company and the Commissioner or, in default of such agreement, by the Commissioner.
“(5)
The value of trading stock of any co-operative marketing company to be taken into account at the beginning of the income year that commenced on the 1st day of April 1988 shall be the lesser of its cost price, its market selling price, or the price at which it can be replaced.
“(6)
No deduction shall be allowed under section 85(7) of this Act in respect of the value of trading stock of any co-operative marketing company at the beginning of the income year that commenced on the 1st day of April 1988 unless an auditor’s certificate stating that the value of the trading stock is in accordance with subsection (5) of this section is furnished to the Commissioner within the time in which the company is required to furnish a return of income for that income year.
“(7)
Regulations may be made under section 433 of this Act for all or any of the following purposes:
“(a)
Authorising the Commissioner to classify as assessable income (other than as a dividend) of any shareholder of a co-operative marketing company the whole or any part of any amount paid to the shareholder on the surrender of any share in the company, or on the winding up of the company, in excess of the paid-up value of the share surrendered or of the shareholder’s shares in the company, as the case may be:
“(b)
Authorising the Commissioner to allocate any amount so classified as assessable income to such income year or years as the Commissioner thinks fit:
“(c)
Conferring on the Commissioner such discretionary powers as may be necessary for the purposes of the regulations:
“(d)
Providing for the appointment and prescribing the powers and procedure of one or more appeal authorities, any such authority to consist of not less than 2 members, one of whom shall be an officer of the Ministry of Agriculture and Fisheries:
“(e)
Conferring such rights of objection and appeal to the appeal authority from decisions made by the Commissioner under this section or the regulations as may be deemed necessary or desirable.
“(8)
Regulations made under subsection (7) of this section may make different provision, and provide for different appeal authorities, in respect of different classes of co operative marketing companies.
“(9)
Every reference in this section to an income year shall, where the co operative marketing company furnishes a return of income under section 15 of this Act for an accounting year ending with a balance date other than the 31st of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this section shall, with any necessary modifications, apply accordingly.”
(2)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
40 Profits of mutual associations in respect of transactions with members
(1)
Section 199 of the principal Act is hereby amended by repealing subsection (1), and substituting the following subsection:
“(1)
For the purposes of this section,—
“‘Association’ means any body or association of persons, whether incorporated or not:
“‘Member’, in relation to an association that is a statutory producer board (as defined in section 197e(1) of this Act) and to any income year, means any person who—
“(a)
Is liable in respect of that year to pay a levy to the statutory producer board; or
“(b)
During that year, supplies produce or goods to the statutory producer board, in terms of the body’s primary statutory functions:
“‘Rebate’ means any payment to its members by an association, being a payment that—
“(a)
Is made by way of a distribution of profits of the association; and
“(b)
Is made not later than 6 months after the end of the trading year of the association in respect of which the payment is made;—
but does not include any such payment to the extent that it forms part of a cash distribution in respect of which the association has made a determination pursuant to section 394r(1)(a) or section 394x(1)(a) of this Act or any distribution referred to in paragraph (j) or paragraph (k) of section 4a(1) of this Act.”
(2)
Section 199 of the principal Act is hereby further amended by inserting, at the beginning of subsection (3), the words “Subject to subsection (3a) of this section,”
.
(3)
Section 199(3)(b) of the principal Act is hereby amended by inserting, after the words “profits attributable to those transactions”
, the words “(not being profits distributed to members by way of a cash distribution in respect of which a determination is made by the association pursuant to section 394r(1)(a) or section 394x(1)(a) of this Act)”
.
(4)
Section 199 of the principal Act is hereby further amended by inserting, after subsection (3), the following subsection:
“(3a)
Where an association to which this section applies is a statutory producer board (as defined in section 197e(1) of this Act),—
“(a)
Any deduction allowed under subsection (3) of this section in respect of rebates paid by the producer board shall be the amount specified in paragraph (a) of that subsection, and nothing in any of subsections (3)(b), (4), and (5) or in the proviso to subsection (6) of this section shall apply in relation to any such deduction; and
“(b)
The statutory producer board may elect whether the amount shall be deductible for the income year in which the rebates were paid, or for the income year in which occurred the transactions in respect of which the rebates were paid; and
“(c)
Where any member of the statutory producer board to whom such a rebate is paid is itself a mutual association to which this section applies, the amount of the rebate shall be deemed to be assessable income of that association derived in the income year in which the rebate is deductible to the statutory producer board in accordance with its election under paragraph (b) of this subsection.”
(5)
Section 199 of the principal Act is hereby further amended by repealing subsection (7).
(6)
Section 199(10) of the principal Act is hereby amended by adding the following paragraph:
“(g)
In relation to an association that is a statutory producer board (as defined in section 197e of this Act), produce transactions within the meaning of section 394q of this Act, and the payment of levies (as defined in that section) to the statutory producer board by its members.”
(7)
Section 199 of the principal Act is hereby further amended by adding the following subsection:
“(11)
Every reference in this section to an income year in relation to an association shall, where the association furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this section shall, with any necessary modifications, apply accordingly.”
(8)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
41 Exemptions and deductions relating to primary producer and other co-operative companies no longer to apply
(1)
The principal Act is hereby amended by repealing sections 200 to 203.
(2)
The following enactments are hereby consequentially repealed:
(a)
Section 64 of the Income Tax Amendment Act 1969:
(b)
Sections 12, 13, and 14 of the Income Tax Amendment Act 1988.
(3)
The following regulations are hereby consequentially revoked:
(a)
Regulation 5 of the Co-operative Dairy Companies Income Tax Regulations 1955 (S.R. 1955/55):
(b)
Regulation 5 of the Co-operative Milk Marketing Companies Income Tax Regulations 1960 (S.R. 1960/1):
(c)
Regulation 5 of the Co-operative Pig Marketing Companies Income Tax Regulations 1964 (S.R. 1964/57).
(4)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
42 Amendment of term “dividends”
in relation to excess retention tax
(1)
Section 246 of the principal Act is hereby amended by repealing the definition of the term “distributable portion of the income derived by a company in an accounting year”
(as amended by section 40(1)(d) of the Income Tax Amendment Act (No. 2) 1982), and substituting the following definition:
“‘Distributable portion of the dividend income derived by a company in an accounting year’ means the amount by which the total dividend income derived by the company in that accounting year exceeds the amount calculated in accordance with the following formula:
_eqn11.JPG)
where—
a
is the amount of all imputation credits and dividend withholding payment credits (as those terms are defined in section 394a of this Act) attached to dividends received by the company during the accounting year; and
b
is the sum of all amounts of dividend withholding payment (as defined in section 394zk of this Act) paid by the company during the accounting year; and
c
is the highest rate specified in Part B of the First Schedule to this Act for the income year to which the company’s accounting year corresponds (being that rate expressed as a percentage):”.
(2)
Section 246 of the principal Act is hereby amended by repealing paragraph (a) of the definition of the term “dividends”
, and substituting the following paragraph:
“(a)
Any distribution referred to in paragraph (h) or paragraph (1) of section 4a(1) of this Act that would, were it not for either of those paragraphs, be a dividend within the meaning of section 4 of this Act; and”.
(3)
Section 246 of the principal Act is hereby further amended by repealing paragraph (c) of the definition of the term “dividends”
, and substituting the following paragraph:
“(c)
Any bonus issue that is not a non-taxable bonus issue (as defined in section 4(3) of this Act):”.
(4)
Section 246 of the principal Act is hereby further amended by repealing the definitions of the terms “income tax”
and “retention allowance”
.
(5)
Section 246 of the principal Act is hereby further amended by repealing the definition of the term “total income”
(as substituted by section 41 of the Income Tax Amendment Act (No. 2) 1977), and substituting the following definition:
“‘Total dividend income’, in relation to a company and an accounting year, means the total amount of all dividends derived by the company in that accounting year from New Zealand or elsewhere, being dividends that are exempt from income tax under section 63 of this Act.”
(6)
Section 246 of the principal Act is hereby further amended by adding the following subsection:
“(2)
For the purposes of the definition of the term ‘total dividend income’ in subsection (1) of this section, the amount of any dividend derived by a company shall include the amount of any imputation credit and any dividend withholding payment credit (as those terms are defined in section 394a of this Act) attached to the dividend, but shall not include the amount of any foreign withholding tax (as defined in section 394zk of this Act) paid in respect of the dividend.”
(7)
The principal Act is hereby consequentially amended by inserting the word “dividend”
before the word “income”
in—
(a)
Section 250, in both places where the word “income”
occurs:
(b)
Section 251, in the first place where the word “income”
occurs:
(c)
Section 253(1)(a).
(8)
The following enactments are hereby consequentially repealed:
(a)
So much of the Third Schedule to the Income Tax Amendment Act (No. 2) 1977 as relates to section 246 of the principal Act:
(b)
Section 40(1)(d) of the Income Tax Amendment Act (No. 2) 1982.
(9)
Subject to subsection (10) of this section, this section shall apply with respect to the excess retention tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
(10)
For the purposes of section 246 of the principal Act (as that section applied before the application of this section), the definition of the term “distributable portion of the income derived by a company in an accounting year”
shall apply to a company with an accounting year that ended on or after the 1st day of April 1988 but before the 1st day of October 1988 as if there were added to that definition the following paragraph:
“(e)
The amount of any dividend withholding payment paid by the company (whether directly or by way of a reduction of loss) pursuant to section 394zn of this Act in respect of any foreign dividend paid to the company in that accounting year:”.
43 Application of Part V of principal Act
(1)
Section 248 of the principal Act is hereby amended by repealing paragraph (f).
(2)
This section shall apply with respect to the excess retention tax on income derived in the income year commencing on the 1st day of April 1989 and in every subsequent year.
44 Dividends paid in excess of distributable portion of income
(1)
Section 253(1) of the principal Act is hereby amended by omitting the expression “35c”
, and substituting the expression “33c”
.
(2)
This section shall apply in respect of the remission of excess retention tax assessed in respect of any insufficient distribution of income derived in the income year commencing on the 1st day of April 1989 or in any subsequent year.
45 United Kingdom tax on dividends
Section 308 of the principal Act is hereby amended by omitting the words “section 4(6)”
, and substituting the words “section 394zc(3)”
.
46 New interpretation provision in relation to nonresident withholding tax
(1)
The principal Act is hereby amended by repealing section 309 (as amended by section 3(2) of the Income Tax Amendment Act 1983), and substituting the following section:
“309
“(1)
For the purposes of this Part of this Act, unless the context otherwise requires,—
“‘Dividend withholding payment credit’ has the meaning assigned to that term by section 394zk of this Act:
“‘Imputation credit’ has the meaning assigned to that term by section 394a of this Act:
“‘Interest’, in relation to non-resident withholding income, includes a redemption payment:
“‘Paid’, in relation to non-resident withholding income, includes distributed, credited, or dealt with in the interest of or on behalf of a person; and ‘pay’ and ‘payment’ have corresponding meanings.
“(2)
For the purposes of this Part of this Act, the term ‘dividends’—
“(a)
Includes any dividend withholding payment credit attached to the dividends:
“(b)
Does not include—
“(i)
The amount of any imputation credit attached to the dividends:
“(ii)
Any dividends in respect of which the Commissioner is satisfied that the correct amount of winding-up distribution tax has been paid in accordance with sections 27 to 29 of the Income Tax Amendment Act (No. 3) 1988.”
(2)
Section 3(2) of the Income Tax Amendment Act 1983 is hereby consequentially repealed.
47 Non-resident withholding tax imposed
(1)
The principal Act is hereby amended by repealing section 311 (as substituted by section 44(1) of the Income Tax Amendment Act 1980 and amended by section 32(1) of the Income Tax Amendment Act (No. 2) 1985), and substituting the following section:
“311
“(1)
Every person who derives non-resident withholding income shall be liable to pay non-resident withholding tax upon that income—
“(a)
At the rate of 30 percent of the gross amount of so much of that income as consists of dividends (other than investment society dividends):
“(b)
At the rate of 15 percent of the gross amount of so much of that income as consists of income to which paragraph (a) of this subsection does not apply.
“(2)
Every person liable under subsection (1) of this section to pay an amount of non-resident withholding tax in respect of non-resident withholding income consisting of dividends shall be deemed to have paid the non-resident withholding tax to the extent of the amount of any dividend withholding payment credit that is included within the non-resident withholding income.”
(2)
The following enactments are hereby consequentially repealed:
(a)
Section 44 of the Income Tax Amendment Act 1980:
(b)
Section 32 of the Income Tax Amendment Act (No. 2) 1985.
48 Deduction of non-resident withholding tax
(1)
Section 312 of the principal Act is hereby amended by repealing subsection (4) (as amended by section 45(1) of the Income Tax Amendment Act 1986), and substituting the following subsection:
“(4)
This section shall not apply where the non-resident withholding income consists of a dividend that is a taxable bonus issue, or a dividend of a kind referred to in paragraph (c) of subsection (1) of section 4 of this Act, or in paragraph (1) of that subsection where the dividends derived pursuant to that paragraph are of a kind referred to in paragraph (c) of that subsection.”
(2)
Section 45(1) of the Income Tax Amendment Act 1986 is hereby consequentially repealed.
49 Non-resident withholding tax on dividends not paid in money
(1)
Section 313(1) of the principal Act is hereby amended by repealing paragraph (a) (as amended by section 45(2) of the Income Tax Amendment Act 1986), and substituting the following paragraph:
“(a)
Any non-resident withholding income that consists of a dividend that is a taxable bonus issue, or a dividend of any of the kinds referred to in—
“(i)
Paragraph (c) of subsection (1) of section 4 of this Act; or
“(ii)
Paragraph (l) of that subsection where the dividends derived pursuant to that paragraph are of a kind referred to in paragraph (c) of that subsection,—
is to be paid by a company to a person; and”.
(2)
Section 313(2) of the principal Act is hereby amended by repealing paragraph (a) (as so amended), and substituting the following paragraph:
“(a)
Any non-resident withholding income that consists of a dividend that is a taxable bonus issue, or a dividend of any of the kinds referred to in—
“(i)
Paragraph (c) of subsection (1) of section 4 of this Act; or
“(ii)
Paragraph (l) of that subsection where the dividends derived pursuant to that paragraph are of a kind referred to in paragraph (c) of that subsection,—
is paid to an agent or other person in New Zealand for or on behalf of the person entitled to the dividend; and”.
(3)
Section 45(2) of the Income Tax Amendment Act 1986 is hereby consequentially repealed.
50 Person deriving non-resident withholding income to pay non-resident withholding tax to Commissioner
Section 319 of the principal Act is hereby amended by inserting, after paragraph (b), the expression “; or”
, and the following paragraph:
“(c)
A deduction of non-resident withholding tax in respect of non-resident withholding income consisting of dividends is not made, or is not made in full, because allowance for a dividend withholding payment credit included in the non-resident withholding income is in excess of the proper amount of the dividend withholding payment credit,—”.
51 Amendments to interpretation provisions relating to fringe benefit tax
(1)
Section 336n(1) of the principal Act (as inserted by section 34(1) of the Income Tax Amendment Act (No. 2) 1985) is hereby amended—
(a)
By repealing paragraph (f) of the definition of the term “fringe benefit”
(as substituted by section 11(5) of the Income Tax Amendment Act (No. 3) 1988):
(b)
By repealing the definitions of the terms “major shareholder”
and “private company”
(as both inserted by section 34(4) of the Income Tax Amendment Act 1986).
(2)
Section 336n of the principal Act is hereby amended by repealing subsection (2a) (as inserted by section 34(6) of the Income Tax Amendment Act 1986).
(3)
Section 336n(3) of the principal Act is hereby amended by repealing the proviso (as added by section 34(7) of the Income Tax Amendment Act 1986).
(4)
Section 336n of the principal Act is hereby further amended by repealing subsection (3a) (as inserted by section 34(8) of the Income Tax Amendment Act 1986), and substituting the following subsection:
“(3a)
For the purposes of this Part of this Act, any benefit provided or granted by an employer (being a company) for or to any employee of that company where that employee holds, whether in the employee’s own right or beneficially, any shares of that company, shall be deemed to have been used, enjoyed, or received by that employee directly in relation to the employee’s employment as an employee of that company.”
(5)
The following provisions are hereby consequentially repealed:
(a)
Subsections (2), (6), (7), and (8) of section 34 of the Income Tax Amendment Act 1986:
(b)
Section 11(5) of the Income Tax Amendment Act (No. 3) 1988.
(6)
Subject to subsection (7) of this section, this section shall apply with respect to fringe benefits provided or granted on or after the 1st day of April 1989.
(7)
Subject to subsection (8) of this section, nothing in subsections (1) to (5) of this section shall apply with respect to any fringe benefit provided or granted by a company at any time before the 1st day of October 1989 where—
(a)
The company is in the course of being wound up; and
(b)
The Commissioner is satisfied that the company has paid, or will pay, the correct amount of winding-up distribution tax (if any) payable in accordance with sections 27 to 29 of the Income Tax Amendment Act (No. 3) 1988.
(8)
Where, in respect of a company referred to in subsection (7) of this section,—
(a)
The final accounts of the company are not furnished by the liquidator of the company to the Registrar of Companies on or before the 30th day of September 1989; or
(b)
The company has not, on or before that date, paid the correct amount of winding-up distribution tax (including any penalty by way of additional tax for late payment) payable in accordance with sections 27 to 29 of the Income Tax Amendment Act (No. 3) 1988,—
subsections (1) to (5) of this section shall be deemed to apply to that company in respect of fringe benefits provided or granted by the company on or after the 1st day of April 1989, and the company shall be deemed to be, and to have been, liable to pay fringe benefit tax accordingly.
(9)
Where a company is liable to pay fringe benefit tax in accordance with subsection (8) of this section, the Commissioner may recover the amount of the fringe benefit tax (including any penalty by way of additional tax for late payment) from any person who was a shareholder of the company as at the 30th day of September 1989, in the proportion that the amount of the person’s shares bears to the total shareholding in the company, as if the amount were income tax payable by the person, and for that purpose the relevant provisions of the principal Act shall, with any necessary modifications, apply accordingly.
52 Guaranteed minimum family income credit of tax
(1)
Section 374e(1) of the principal Act (as inserted by section 17(1) of the Income Tax Amendment Act (No. 2) 1986) is hereby amended by repealing paragraph (c) of the definition of the term “employment”
, and substituting the following paragraph:
“(c)
A payment made by a private company (as defined in section 2 of the Companies Act 1955) to any person who, in relation to that private company, is a major shareholder:”.
(2)
Section 374e(1) of the principal Act (as so inserted) is hereby further amended by inserting, after the definition of the term “full-time earner”
, the following definition:
“‘Major shareholder’, in relation to a private company (as defined in section 2 of the Companies Act 1955), means any person who—
“(a)
Owns or has in any way the power to control (whether directly or indirectly), or has the right to acquire, 10 percent or more of the ordinary shares of the private company:
“(b)
Owns, or has in any way the power to control (whether directly or indirectly), or has the right to acquire, 10 percent or more of the voting rights of the private company:
“(c)
Has by any other means whatever 10 percent or more of the control of the private company:”.
53 Amendment of term “residual income tax”
Section 375 of the principal Act (as substituted by section 17(1) of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by adding to the definition of the term “residual income tax”
the following paragraphs:
“(h)
The amount of any imputation credit or dividend withholding payment credit deducted from or set off against that income tax in accordance with section 394ze or section 394zp of this Act:
“(i)
The amount of any credit deducted from or set off against that income tax in accordance with section 394zzv(3) of this Act.”
54 Offset of further income tax
The principal Act is hereby amended by inserting, after section 378 (as substituted by section 17(1) of the Income Tax Amendment Act (No. 3) 1988), the following section:
“378a
“(1)
For the purposes of sections 379, 380, and 381 of this Act, where a company has paid an amount of tax by way of further income tax pursuant to section 394l of this Act, the payment of any instalment of provisional tax for which the company becomes liable after the date of the payment of the further income tax shall be satisfied by the amount of the further income tax, so far as that amount extends.
“(2)
The Commissioner shall credit the amount of the further income tax in payment successively of—
“(a)
The instalment of provisional tax that first falls due and payable after the date of payment of the further income tax:
“(b)
Instalments subsequent to that instalment, in the order in which they fall due and payable, so far as the amount of the further income tax extends.”
55 New Parts inserted relating to full imputation, dividend withholding payments, and branch equivalent tax accounts
(1)
The principal Act is hereby amended by inserting, after section 394, the following Parts:
“PART XIIA “Full Imputation
“394a Interpretation
“(1)
In this Part and in Parts XIIb and XIIc of this Act, unless the context otherwise requires,—
“‘Allocation debit’ means any amount arising as an allocation debit in accordance with section 394g(4) of this Act:
“‘Annual imputation return’ means the return to be furnished to the Commissioner by a company in accordance with section 394j of this Act:
“‘Arrangement’ means any contract, agreement, plan, or understanding (whether enforceable or unenforceable) including all steps and transactions by which it is carried into effect:
“‘Benchmark dividend’, in relation to a company and an imputation year,—
“(a)
Except as provided in paragraph (b) of this definition, means the first dividend paid by the company in that imputation year:
“(b)
Where in that imputation year the first dividend paid by the company—
“(i)
Is a distribution of a co-operative company in respect of which the company has made a determination under section 394x of this Act; or
“(ii)
Was paid at a time when the company was not an imputation credit account company,—
means the first dividend paid by the company in the imputation year that is not a dividend referred to in subparagraph (i) or subparagraph (ii) of this paragraph:
“‘Branch equivalent tax account’ and ‘branch equivalent tax account company’ have the meanings assigned to those terms by section 394zzm of this Act:
“‘Category A income’ has the meaning assigned to that term by section 211a(1) of this Act:
“‘Company’ includes a group investment fund in so far as the group investment fund derives income that is category A income:
“‘Company dividend statement’ means a statement required by section 394h of this Act to be completed and retained by a company in respect of any dividend:
“‘Dividend withholding payment’, ‘dividend withholding payment account’, ‘dividend withholding payment account company’, and ‘dividend withholding payment credit’ have the meanings assigned to those terms by section 394zk of this Act:
“‘Dividends’, except as provided in section 394zk(2) of this Act in relation to Part XIIb of this Act, does not include—
“(a)
Any dividend paid on a specified preference share to which section 194 of this Act applies:
“(b)
Any dividend arising in accordance with—
“(i)
Any of paragraphs (b) to (e) and (k) of subsection (1) of section 4 of this Act; or
“(ii)
Paragraph (l) of that subsection, where the payment, distribution, or transaction, if made to or with a shareholder in relation to shares in a company, would be a dividend in accordance with any of paragraphs (b) to (e) and (k) of that subsection:
“(c)
Any amount deemed to be a dividend pursuant to section 97 or section 152(4) or section 190 or the proviso to section 199(6) of this Act:
“‘Further income tax’, in relation to a company, means any amount of tax by way of further income tax that the company may be liable to pay pursuant to section 394l of this Act:
“‘Group investment fund’ has the meaning assigned to that term by section 211a(1) of this Act:
“‘Imputation credit’, in relation to a dividend, means the amount attached to the dividend in accordance with section 394f of this Act:
“‘Imputation credit account’ means the account required to be maintained by a company in accordance with section 394b of this Act:
“‘Imputation credit account company’ means a company that is required by section 394b of this Act to maintain an imputation credit account:
“‘Imputation ratio’, in relation to a dividend, means an amount calculated in accordance with the following formula:
_eqn12.JPG)
where—
a
is the amount of the imputation credit attached to the dividend (which amount shall be zero where no imputation credit is attached); and
b
is the amount of the dividend paid (exclusive of any imputation credit or dividend withholding payment credit):
“‘Imputation year’, or ‘year’, means the period of 12 months commencing on the 1st day of April in any year and ending with the following 31st day of March:
“‘Income tax’ means income tax levied under section 38 of this Act; but does not include—
“(a)
Penal tax, additional tax by way of penalty, excess retention tax, or fringe benefit tax; or
“(b)
Any interest imposed under section 398a of this Act, or any interest payable by the Commissioner under section 413a of this Act:
“‘Paid’ includes distributed, credited, or dealt with in the interest of or on behalf of; and, in relation to a dividend that is a bonus issue, means the allotment of shares or the giving of credit (as the case may be) in respect of the shares comprising the bonus issue; and ‘payment’ and ‘pays’ have corresponding meanings:
“‘Shareholder’ includes—
“(a)
Any member (as defined in section 394q of this Act) of a statutory producer board:
“(b)
A sharemilker (as defined in section 2 of the Sharemilking Agreements Act 1937), in so far as the sharemilker derives payment for produce transactions (as defined in section 394w of this Act) directly from a co-operative dairy or milk company:
“(c)
Any investor (as defined in section 211a of this Act) of a group investment fund in so far as the investor derives income from the group investment fund that is category A income:
“‘Shareholder dividend statement’ means a statement required by section 394i of this Act to be given by a company to a shareholder to whom is paid a dividend with an imputation credit attached; and includes a statement required by section 394zzb(2) of this Act to be given to a shareholder to whom is paid a dividend with a dividend withholding payment credit attached:
“‘Statutory producer board’ has the meaning assigned to that term by section 394q of this Act:
“‘Subsequent dividend’, in relation to a company that has paid a benchmark dividend during an imputation year, means any dividend paid by the company after the benchmark dividend during the imputation year, not being a dividend that is—
“(a)
Paid at a time when the company is not an imputation credit account company; or
“(b)
A distribution by a co-operative company in respect of which the company has made a determination under section 394x of this Act.
“Terms defined in sections 394zk and 394zzm of this Act have the meanings as so defined.
“(2)
Except where the context otherwise requires, every reference in this Part of this Act to an income year in relation to a company shall, where the company furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this Part of this Act shall, with any necessary modifications, apply accordingly.
“(3)
For the purposes of this Part of this Act, the balance of an imputation credit account at any time shall be ascertained by calculating the difference in amount between the aggregate of credits and the aggregate of debits to the account at that time, and the account shall have—
“(a)
A credit balance to the extent that credits exceed debits:
“(b)
A debit balance to the extent that debits exceed credits.
“(4)
For the purposes of this Part and Parts XIIb and XIIc of this Act,—
“(a)
The interest of an investor (as defined in section 211a of this Act) in a group investment fund that derives income that is category A income shall be deemed to be shares in the group investment fund; and
“(b)
There shall be deemed to be paid up in respect of those shares an amount equal to the nominal amount of the interest of the investor in the group investment fund.
“(5)
For the purposes of this Part and Parts XIIb and XIIc of this Act, references to income tax, in relation to tax that has been paid by a taxpayer, include references to provisional tax paid by the taxpayer.
“Imputation Credit Accounts
“394b Companies required to maintain imputation credit account
“(1)
Except as provided in subsection (2) of this section, every company that is resident in New Zealand shall establish and maintain an imputation credit account for each imputation year.
“(2)
A company shall not establish and maintain an imputation credit account in respect of any imputation year, or any period within an imputation year, if, during the whole of that imputation year or that period, the company is—
“(a)
Not resident in New Zealand; or
“(b)
A company acting only in the capacity of trustee (not being a company that is a group investment fund that derives income that is category A income); or
“(c)
A company whose constitution prohibits all of its income or property from being distributed to any proprietor, member, or shareholder of the company; or
“(d)
A company the income of which is wholly exempt from income tax otherwise than under section 63 of this Act; or
“(e)
A company to which section 204 of this Act applies that, in New Zealand, is engaged solely in the business of life insurance or reinsurance referred to in subsection (2) of that section.
“(3)
Where a company that acts in the capacity of trustee is required to establish and maintain an imputation credit account by virtue of also engaging in other activities, no debits or credits shall arise to the account in respect of any activities of the company in its capacity as trustee.
“(4)
Where a company to which section 204 of this Act applies is required to establish and maintain an imputation credit account by virtue of engaging in business other than life insurance or reinsurance business referred to in subsection (2) of that section, no debits or credits shall arise to the account to the extent that they relate to such life insurance or reinsurance business.
“394c Imputation credit account
“(1)
Every imputation credit account company shall record in its imputation credit account for each imputation year—
“(a)
The opening balance of the account for the imputation year, in accordance with subsection (2) of this section:
“(b)
Credits as they arise in accordance with section 394d of this Act:
“(c)
Debits as they arise in accordance with section 394e of this Act.
“(2)
The opening balance of the imputation credit account for any imputation year shall be—
“(a)
For the imputation year during which the company first becomes an imputation credit account company, nil:
“(b)
For any subsequent imputation year, the amount of the closing balance of the imputation credit account for the preceding imputation year, and such amount shall be—
“(i)
A credit arising to the imputation credit account where the closing balance is a credit balance:
“(ii)
A debit arising to the imputation credit account where the closing balance is a debit balance.
“394d Credits arising to imputation credit account
“(1)
There shall arise as credits to be recorded in a company’s imputation credit account for any imputation year the following amounts:
“(a)
The amount of any income tax paid by the company during the imputation year, other than,—
“(i)
In the case of a company acting in the capacity of trustee, income tax paid by the company in respect of its activities when acting in the capacity of trustee:
“(ii)
In the case of a company to which section 204 of this Act applies (which section relates to life insurance and reinsurance companies), income tax that is paid in respect of income derived for the benefit of policyholders of the company:
“(iii)
In the case of a company that is a group investment fund deriving category A income, income tax paid in relation to income that is category B income (as defined in section 211a of this Act):
“(iv)
In the case of a company that becomes an imputation credit account company during the imputation year, income tax paid in respect of income derived when the company was not an imputation credit account company:
“(v)
Income tax that is paid by way of a crediting of further income tax pursuant to section 394l(5) of this Act:
“(vi)
Income tax paid in relation to the income tax payable for an income year commencing on or before the 1st day of April 1987:
“(b)
The amount of any further income tax paid by the company during the imputation year pursuant to section 394l of this Act:
“(c)
The amount of any excess retention tax paid by the company during the imputation year in respect of any insufficient distribution of income derived by the company during the income year commencing on the 1st day of April 1988 or any subsequent income year (but not including the amount of any additional tax or penal tax):
“(d)
The amount of any imputation credit attached to a dividend that is paid to the company during the imputation year, where the company does not include the amount of that credit in its assessable income:
“(e)
The amount of any dividend withholding payment credit attached to a dividend paid to the company during the imputation year at a time when the company is not a dividend withholding payment account company:
“(f)
The amount of any dividend withholding payment paid by the company during the imputation year at a time when the company is not a dividend withholding payment account company:
“(g)
Any amount forming all or part of an end of year credit balance in the company’s dividend withholding payment account that the company elects in accordance with section 394zze of this Act to be a credit to the company’s imputation credit account:
“(h)
Any amount forming all or part of a credit balance in the company’s branch equivalent tax account that the company elects in accordance with section 394zzq of this Act to be a credit to the company’s imputation credit account:
“(i)
The amount of any debit arising pursuant to section 394zzp(3)(a) of this Act to the company’s branch equivalent tax account in respect of a reduction of the amount of any dividend withholding payment payable by the company:
“(j)
An amount equal to any amount of a debit arising to the imputation credit account pursuant to section 394e(1)(h) of this Act (which relates to debits arising in respect of imputation credits determined to have been the subject of an arrangement to obtain a tax advantage), to the extent that it is subsequently established that the relevant imputation credit should not have been determined to be the subject of such an arrangement.
“(2)
The credits referred to in subsection (1) of this section shall arise—
“(a)
In the case of the credits referred to in paragraphs (a), (b), and (c) of that subsection, on the date the relevant tax is paid:
“(b)
In the case of the credits referred to in paragraphs (d) and (e) of that subsection, on the date the relevant dividend is paid:
“(c)
In the case of a credit referred to in paragraph (f) of that subsection, on the date the dividend withholding payment is paid:
“(d)
In the case of a credit referred to in paragraph (g) of that subsection, on the date that the amount of the credit arises as a debit to the company’s dividend withholding payment account pursuant to section 394zw(2)(b) of this Act:
“(e)
In the case of a credit referred to in paragraph (h) of that subsection, on the date that the amount of the credit arises as a debit to the company’s branch equivalent tax account pursuant to section 394zzp(4)(b) of this Act:
“(f)
In the case of a credit referred to in paragraph (i) of that subsection, on the date that the amount of the credit arises as a debit to the company’s branch equivalent tax account pursuant to section 394zzp(4)(a) of this Act:
“(g)
In the case of a credit referred to in paragraph (j) of that subsection, on the date that the relevant debit arose pursuant to section 394e(2)(g) of this Act.
“394e Debits arising to imputation credit account
“(1)
There shall arise as debits to be recorded in a company’s imputation credit account for any imputation year the following amounts:
“(a)
The amount of any imputation credit attached to a dividend paid by the company during the imputation year:
“(b)
The amount of any refund of income tax paid to the company during the imputation year (exclusive of the amount of any refundable excess paid pursuant to section 156f(4) of this Act, or interest on overpaid tax paid pursuant to section 413a of this Act), except to the extent that—
“(i)
The refund arises as a debit to the company’s branch equivalent tax account under section 394zzp(3)(c) of this Act; or
“(ii)
The refund is in respect of income tax paid in relation to an income year commencing on or before the 1st day of April 1987; or
“(iii)
The refund is in respect of income tax paid in respect of income derived when the company was not an imputation credit account company:
“(c)
The amount of any refund of excess retention tax paid to the company during the imputation year, being a refund of tax paid in respect of any insufficient distribution of income derived by the company during the income year commencing on the 1st day of April 1988 or any subsequent income year:
“(d)
The amount of any allocation debit arising in respect of the imputation year pursuant to section 394g(4) of this Act:
“(e)
The amount of any refund of dividend withholding payment paid to the company during the imputation year at a time when the company is not a dividend withholding payment account company:
“(f)
An amount equal to any credit arising to the company’s branch equivalent tax account in accordance with section 394zzp of this Act:
“(g)
Except in the case of a company specified in subsection (3) of this section, the amount of any particular credit in the company’s imputation credit account where, since the date on which the credit arose and before that credit is cancelled out by a subsequent debit in accordance with subsection (4)(d) of this section (which period is referred to in subsection (4) of this section as the shareholding continuity period), the same persons cease to hold, in the same proportions, whether directly or through any one or more interposed companies, shares in the company carrying between them the right to receive not less than 75 percent of the profits that may be distributed by the company:
“(h)
The amount of any further debit arising to the imputation credit account under section 394zg of this Act in relation to an imputation credit determined to be the subject of an arrangement to obtain a tax advantage:
“(i)
The amount of credit balance, if any, of the imputation account where, during the imputation year, the company ceases to be an imputation credit account company.
“(2)
The debits referred to in subsection (1) of this section shall arise—
“(a)
In the case of a debit referred to in paragraph (a) of that subsection, on the date the dividend is paid:
“(b)
In the case of a debit referred to in paragraph (b) or paragraph (c) of that subsection, on the date the refund is paid:
“(c)
In the case of a debit referred to in paragraph (d) of that subsection, at the end of the imputation year in respect of which the allocation debit arises:
“(d)
In the case of a debit referred to in paragraph (e) of that subsection, on the date the refund is paid:
“(e)
In the case of a debit referred to in paragraph (f) of that subsection, on the date the credit to the branch equivalent tax account arises pursuant to section 394zzp(2) of this Act:
“(f)
In the case of a debit referred to in paragraph (g) of that subsection, on the date there ceases to be the continuity of shareholding referred to in that paragraph:
“(g)
In the case of a debit referred to in paragraph (h) of that subsection, at the end of the imputation year in respect of which it is determined under section 394zg of this Act that the arrangement to obtain tax advantage occurred or commenced:
“(h)
In the case of a debit referred to in paragraph (i) of that subsection, immediately before the company ceases to be an imputation credit account company.
“(3)
Subsection (1)(g) of this section shall not apply to—
“(a)
Any company any of whose shares are quoted on the official list of the New Zealand Stock Exchange:
“(b)
Any statutory producer board (as defined in section 197e of this Act):
“(c)
Any wholly-owned subsidiary of a statutory producer board (as so defined):
“(d)
Any co-operative company registered under the Cooperative Companies Act 1956, the Co-operative Dairy Companies Act 1949, the Co-operative Freezing Companies Act 1960, or the Co-operative Forestry Companies Act 1978:
“(e)
Any private company (as defined in section 2 of the Companies Act 1955) that is included in a specified group (as defined in section 191(4) of this Act) where shares of any member of the specified group are quoted on the official list of the New Zealand Stock Exchange, and either—
“(i)
The company continues throughout the relevant shareholding continuity period to be in a specified group of which the member with the snares so quoted also continues to be a member; or
“(ii)
During the relevant shareholding continuity period,—
(A)
The failure to meet the continuity of shareholding requirement was by reason only of the fact that the quoted shares of the other company that was a member of the specified group had been sold in the ordinary course of trading on the share market; and
(B)
Not more than 10 percent of those shares in that other company had been acquired by any one person (including any nominee of that person as defined in section 7(1) of this Act) or by any 2 or more persons who are associated persons.
“(4)
For the purposes of paragraph (g) of subsection (1) of this section,—
“(a)
The provisions of section 191(1) of this Act that apply in determining the prescribed proportion of title to profits held by any person shall, with any necessary modifications, apply for the purpose of determining the extent of the rights of any person to receive profits that may be distributed by the company as if references to an income year were references to the relevant shareholding continuity period; and for the purposes of this paragraph,—
“(i)
The reference to paid-up capital in subsection (4)(a) of section 191 of this Act shall be read as a reference to the right to receive profits that may be distributed:
“(ii)
The proviso to subsection (4) of that section shall not apply, and the provisions of subsections (7c) and (7d) of that section shall apply, in determining any particular proportion of shares held:
“(b)
Where during any shareholding continuity period shares are transferred in accordance with a matrimonial agreement, the shares of the transferee shall be deemed to be held by the transferor for the remainder of that period:
“(c)
Where a shareholder dies during any shareholding continuity period, shares held by or on behalf of the trustee of the estate of the deceased shareholder, or by or on behalf of the persons entitled to those snares as beneficiaries under the will or intestacy of the deceased shareholder, shall be deemed to be held by the deceased shareholder for the remainder of that period:
“(d)
A credit to an imputation credit account that is subject to the continuity of shareholding requirement referred to in that paragraph shall cease to be subject to that requirement to the extent that, before the required continuity of shareholding ceases, any debit to the account sufficient to cancel out the amount of the credit arises subsequent to that credit arising, and for this purpose—
“(i)
Any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit is no longer subject to the requirement; and
“(ii)
The amount of any debit shall be offset against the amount of any credit in the order in which the credits arise:
“(e)
The continuity of shareholding requirement referred to in that paragraph shall apply only in respect of any credit arising after the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent.
“394f Company may attach imputation credit to dividend
“(1)
An imputation credit account company may, on payment of a dividend by the company, attach an imputation credit to that dividend.
“(2)
An imputation credit account company may, in accordance with section 394zj of this Act, retrospectively attach an imputation credit to a dividend paid by the company on or after the 1st day of April 1988 but before the 1st day of February 1989.
“394g Allocation rules for imputation credits
“(1)
A company shall not attach to a dividend an imputation credit of such an amount that the imputation ratio of the dividend would exceed the ratio calculated in accordance with the following formula:
_eqn13.JPG)
where—
a
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the dividend is paid.
“(2)
Where an imputation credit account company has paid a benchmark dividend in any imputation year, the company shall, unless it makes a ratio change declaration in accordance with subsection (3) of this section, ensure that the imputation ratio of every subsequent dividend paid by the company during that imputation year is the same as the imputation ratio of the benchmark dividend; and for the purposes of this subsection any benchmark dividend with an imputation ratio exceeding the ratio specified in subsection (1) of this section shall be deemed to nave the ratio so specified.
“(3)
The imputation ratio of a subsequent dividend may differ from that of a benchmark dividend if—
“(a)
An officer of the company declares, in a ratio change declaration in the prescribed form, that the subsequent dividend is not being paid as part of an arrangement to obtain a tax advantage within the meaning of section 394zg of this Act, and provides such further information as may be prescribed; and
“(b)
The ratio change declaration is delivered to the Commissioner before the date of payment of the subsequent dividend, or before such later date as the Commissioner may allow in any case or class of cases; and
“(c)
The subsequent dividend is not paid as part of an arrangement to obtain a tax advantage within the meaning of section 394zg of this Act.
“(4)
Where the imputation ratio of a subsequent dividend differs from the imputation ratio of a benchmark dividend in contravention of subsection (2) of this section, there shall arise an allocation debit of an amount calculated in accordance with the following formula:
(a × b) − c
where—
a
is the aggregate of the amount of all dividends paid by the company during the imputation year (exclusive of any imputation credit or withholding payment credit attached to those dividends); and
b
is the lesser of—
“(i)
The imputation ratio of the dividend with the greatest imputation ratio of all dividends paid by the company during the imputation year; or
“(ii)
The ratio calculated in accordance with the formula stated in subsection (1) of this section; and
c
is the aggregate of all imputation credits attached to dividends paid by the company during the imputation year.
“(5)
Nothing in this section applies to a dividend that is the subject of a determination made by a statutory producer board or a co-operative company in accordance with section 394r or section 394x of this Act.
“394h Company dividend statement
“(1)
An imputation credit account company that declares any dividend shall, at the time it declares the dividend, complete and retain a company dividend statement in a form approved by the Commissioner showing—
“(a)
The number of shares in respect of which the dividend is declared or, in case of a dividend that is a bonus issue, the number of shares included in the bonus issue:
“(b)
The date the dividend is declared and the date of payment of the dividend:
“(c)
The total amount paid as dividends in respect of the shares or, in the case of a dividend that is a bonus issue, the amount of the bonus issue as determined in accordance with section 4(6) of this Act:
“(d)
The total amount of the imputation credits attached in respect of the dividend (which amount shall be shown as a nil amount where no credits are attached):
“(e)
The imputation ratio of the dividend:
“(f)
Such further information as may be required by the Commissioner.
“(2)
Every company required to complete and retain a company dividend statement shall furnish the statement to the Commissioner not later than the 31st day of May that follows the end of the imputation year in which the dividend was paid.
“394i Shareholder dividend statement
“(1)
A company that pays to a shareholder a dividend with an imputation credit attached shall, at the time of payment of the dividend, give to the shareholder a shareholder dividend statement in a form approved by the Commissioner showing—
“(a)
The name of the company:
“(b)
The date of payment of the dividend:
“(c)
The name and address of the shareholder to whom the dividend is paid:
“(d)
The amount, if any, deducted by way of non-resident withholding tax:
“(e)
The amount of the dividend paid to the shareholder (exclusive of the imputation credit):
“(f)
The amount of the imputation credit:
“(g)
The aggregate of the amount of the dividend and the amount of the imputation credit:
“(h)
Such other information as may be required by the Commissioner.
“(2)
For the purposes of this section and of section 394zzb(2) of this Act, a shareholder dividend statement shall be deemed to have been given to a shareholder where the statement—
“(a)
Is given to the shareholder personally; or
“(b)
Is sent by post addressed to the shareholder at the shareholder’s usual or last known place of abode or business; or
“(c)
Is given personally to any person authorised to act on behalf of the shareholder; or
“(d)
Is sent by post addressed to that other person at that other person’s usual or last known place of abode or business.
“394j Annual imputation return
“(1)
Every imputation credit account company shall, not later than the 31st day of May following the end of each imputation year, furnish to the Commissioner an annual imputation return for that year in the prescribed form, showing—
“(a)
The opening balance and closing balance of the imputation credit account for the imputation year:
“(b)
The amount and source of all credits and debits that have arisen during the imputation year in accordance with sections 394d and 394e of this Act:
“(c)
The amount of any further income tax payable in respect of the imputation year pursuant to section 394l of this Act:
“(d)
The amount of any imputation penalty tax payable in respect of the imputation year:
“(e)
Where the company is a branch equivalent tax account company,—
“(i)
The opening balance and closing balance of the company’s branch equivalent tax account for the imputation year:
“(ii)
The amount and source of all credits and debits to the company’s branch equivalent tax account for the imputation year that have arisen in accordance with section 394zzp of this Act:
“(f)
Such further information as may be prescribed or as may be required by the Commissioner.
“(2)
Every imputation credit account company shall, where in respect of any imputation year either of the ratios specified in subsection (3) of this section has increased or decreased by more than 20 percent from the equivalent ratio for the preceding imputation year,—
“(a)
Disclose that fact in the annual imputation return for the imputation year; and
“(b)
Furnish an explanation of the reasons for any such change.
“(3)
The ratios referred to in subsection (2) of this section shall be calculated as follows:
“(a)
One ratio is the fraction equal to—
_eqn14.JPG)
where—
a
is the total amount of imputation credits and dividend withholding payment credits attached to all dividends paid by the company during the imputation year; and
b
is the total amount of all dividends paid by the company during the imputation year:
“(b)
The other ratio is the fraction equal to—
_eqn15.JPG)
where—
c
is the aggregate amount of all debits arising to the company’s imputation credit account during the imputation year; and
d
is the aggregate amount of all credits arising to the company’s imputation credit account during the imputation year.
“394k Imputation return to be furnished where Commissioner so requires, or where company ceases to be an imputation credit account company
“(1)
The Commissioner may require an imputation credit account company to furnish, within such time as the Commissioner may allow, an imputation return in respect of any period specified by the Commissioner.
“(2)
A company that in any imputation year ceases to be an imputation credit account company shall furnish to the Commissioner, not later than 2 calendar months after the last day on which it is still an imputation credit account company, an imputation return in respect of the period commencing on the first day of the imputation year and ending with the last day on which the company is an imputation credit account company.
“(3)
An imputation return required to be furnished under this section shall, except where the Commissioner otherwise specifies, contain the matters referred to in section 394j of this Act as if the references in that section to an imputation year were—
“(a)
In the case of a return required to be furnished under subsection (1) of this section, references to the period specified by the Commissioner:
“(b)
In the case of a return required to be furnished under subsection (2) of this section, references to the period referred to in that subsection.
“394l Further tax payable where end of year debit balance, or when company ceases to be an imputation credit account company
“(1)
Where there is a debit balance in a company’s imputation credit account at the end of any imputation year, and the company is not a company that is liable to pay further income tax pursuant to subsection (3) of this section, the company is liable to pay to the Commissioner an amount of tax by way of further income tax of an amount equal to that debit balance.
“(2)
A company shall pay any further income tax for which it is liable under subsection (1) of this section not later than the 31st day of May following the end of the imputation year for which there was the debit balance.
“(3)
Where there is a debit balance in a company’s imputation credit account immediately before the company ceases to be an imputation credit account company, the company is liable to pay to the Commissioner an amount of tax by way of further income tax of an amount equal to that debit balance.
“(4)
A company shall pay any further income tax to which it is liable under subsection (3) of this section not later than the last day on which it is still an imputation credit account company.
“(5)
Where a company pays any further income tax for which it is liable under this section, that tax may be credited in payment of any income tax (including any instalment of provisional tax in accordance with section 378a of this Act) for which the company becomes liable after the date of payment of the further income tax.
“(6)
Where a company liable to pay further income tax under this section fails to pay the tax within the time for payment provided for in subsection (2) or subsection (4) of this section, as the case may be, the company is liable to a penalty by way of additional tax equal to—
“(a)
Ten percent of the amount in respect of which default has been made (in this subsection referred to as the amount in default); and
“(b)
Ten percent of so much of the amount in default and the amount of any penalty added in accordance with paragraph (a) of this subsection as remains unpaid at the end of the day on which there expires the period of 6 months immediately following the day on which the failure to pay occurred; and
“(c)
Ten percent of so much of—
“(i)
The amount in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) or paragraph (b) of this subsection; and
“(iii)
The amount of any penalty previously added in accordance with this paragraph,—
as remains unpaid at the expiry of any of the periods of 6 months that, consecutively, succeed the 6-month period referred to in paragraph (b) of this subsection;—
and subject to this Part of this Act, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to the amount of every penalty imposed under this subsection as if it were additional tax under section 398 of this Act and as if the company liable to the penalty were the taxpayer.
“(7)
The Commissioner may, in respect of any company liable to pay further income tax under this section, make an assessment of the amount of the further income tax that in the Commissioner’s judgment ought to be levied, and the company shall be liable to pay the further income tax so assessed except in so far as the company establishes on objection that the assessment is excessive or that the company is not chargeable with the further income tax.
“(8)
Sections 23, 27, and 29 of this Act shall apply, so far as may be, with respect to every assessment made under this section as if—
“(a)
In those sections, the expression ‘taxpayer’ included a company which is chargeable with further income tax; and
“(b)
In section 23, the expression ‘tax already assessed’ included the further income tax already assessed under this section.
“(9)
An assessment made under this section shall be subject to objection in the same manner as an assessment of income tax, and Part III of this Act shall apply, so far as may be, to an objection to an assessment made under this section as if the expressions ‘income tax’ and ‘tax’ in that Part included the further income tax for which a company may be chargeable under this section.
“(10)
Subject to this section, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to any further income tax for which a company is chargeable under this section as if it were income tax.
“394m Limits on refunds of tax
“(1)
Where an imputation credit account company becomes entitled at any time to a refund of income tax in accordance with section 409 of this Act, the amount of the refund to be paid to the company shall not exceed the amount of the credit balance (if any) of the company’s imputation credit account at the end of the most recently ending imputation year.
“(2)
Where a company that has ceased to be an imputation credit account company becomes entitled to a refund of income tax in accordance with section 409 of this Act in respect of any income year during which it was an imputation credit account company, the amount of the refund to be paid to the company shall not exceed the amount of the credit balance (if any) of the company’s imputation credit account that arose as a debit under section 394e(1)(i) of this Act immediately before the company ceased to be an imputation credit account company.
“(3)
For the purposes of subsections (1) and (2) of this section, the amount of any credit balance referred to in those subsections shall be deemed to be reduced by any earlier refund paid to the company during the same imputation year, being a refund of income tax or a refund of dividend withholding payment that may not, pursuant to this section or section 394zo of this Act, exceed the amount of that credit balance.
“(4)
Where an amount of income tax paid in excess is not refunded to a company by reason of subsection (1) or subsection (2) of this section, the amount of income tax not refunded—
“(a)
Shall be credited in payment of any income tax or provisional tax payable by the company for the income year during which the entitlement to the refund arose, or for any subsequent income year:
“(b)
To the extent that it cannot be credited in accordance with paragraph (a) of this subsection, whether by reason of the company being wound up or for any other reason, shall be retained by the Commissioner.
“(5)
For the purposes of section 409 of this Act, every company that has paid further income tax pursuant to section 394l of this Act shall be deemed not to have paid tax in excess of the amount properly payable to the extent that the Commissioner is satisfied that any tax paid in excess is referrable to the further income tax paid by the company.
“(6)
Nothing in this section shall apply to limit the amount of any refund of tax paid by a company in respect of income derived by the company in the income year ending on the 31st day of March 1988 or in any previous income year.
“Imputation Penalty Tax
“394n Imputation penalty tax payable where end of year debit balance
“(1)
Every company that is liable to pay further income tax pursuant to section 394l(1) of this Act in respect of an end of year debit balance is also liable to pay a special tax by way of an income tax known as imputation penalty tax.
“(2)
The amount of the imputation penalty tax payable by a company shall be 10 percent of the amount of further income tax that gives rise to the liability for the imputation penalty tax.
“(3)
A company that is liable to pay imputation penalty tax shall pay the tax not later than the 31st day of May following the end of the imputation year in which occurred the end of year debit balance giving rise to the liability for the further income tax and the imputation penalty tax.
“(4)
Where a company that is liable to pay imputation penalty tax fails to pay the tax on or before the relevant 31st day of May, the company is liable to a penalty by way of additional tax equal to—
“(a)
Ten percent of the amount of imputation penalty tax in respect of which default has been made (in this subsection referred to as the tax in default); and
“(b)
Ten percent of so much of—
(i)
The tax in default; and
(ii)
The amount of any penalty added in accordance with paragraph (a) of this subsection,—
as remains unpaid at the end of the day on which there expires the period of 6 months immediately following the day on which the failure to pay occurred; and
“(c)
Ten percent of so much of—
“(i)
The tax in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) or paragraph (b) of this subsection; and
“(iii)
The amount of any penalty previously added in accordance with this paragraph,—
as remains unpaid at the expiry of any of the periods of 6 months that, consecutively, succeed the 6-month period referred to in paragraph (b) of this subsection;—
and subject to this Part of this Act, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to the amount of every penalty imposed under this subsection as if it were additional tax under section 398 of this Act and as if the company liable to the penalty were the taxpayer.
“(5)
The Commissioner may, in respect of any company chargeable with imputation penalty tax, make an assessment of the amount of imputation penalty tax that in the judgment of the Commissioner ought to be levied on the company.
“(6)
The company shall be liable to pay the imputation penalty tax so assessed except in so far as the company establishes on objection that the assessment is excessive or that the company is not chargeable with the imputation penalty tax.
“(7)
Sections 23, 27, and 29 of this Act shall apply with respect to every assessment under this section as if—
“(a)
In those sections, the expression ‘taxpayer’ included a company chargeable with imputation penalty tax; and
“(b)
In section 23, the expression ‘tax already assessed’ included any imputation penalty tax already assessed under this section.
“(8)
An assessment made under this section shall be subject to objection in the same manner as an assessment of income tax levied under section 38 of this Act, and Part III of this Act shall apply, so far as may be, to an objection to an assessment made under this section as if the terms ‘income tax’ and ‘tax’ in that Part included imputation penalty tax.
“394o Remissions and refunds of imputation penalty tax
“(1)
The Commissioner shall remit any imputation penalty tax imposed under section 394n of this Act to the extent that the Commissioner is satisfied that—
“(a)
Liability for the imputation penalty tax arose by virtue of a debit arising to the company’s imputation credit account under section 394e(1)(h) of this Act in relation to an arrangement to obtain a tax advantage, and it is established subsequently that, in relation to any such debit, a credit arises to the imputation credit account in accordance with section 394d(1)(j) of this Act; or
“(b)
Liability for the imputation penalty tax arose by virtue of a refund of income tax having been sent but not having been received by the company, or not having been known by the company to have been received, before the end of the imputation year or before the company ceased to be an imputation credit account company, as the case may be.
“(2)
Where the Commissioner remits any imputation penalty tax under this section, the Commissioner shall also remit any penalty by way of additional tax imposed under section 394n(4) of this Act to the extent that the Commissioner is satisfied that the penalty was imposed in respect of the imputation penalty tax so remitted.
“(3)
Where the Commissioner remits any imputation penalty tax under subsection (1)(a) of this section, the Commissioner shall also remit any penalty by way of additional tax imposed under section 394l(6) of this Act to the extent that the Commissioner is satisfied that the penalty was imposed in respect of the amount of further income tax that gave rise to the imposition of the imputation penalty tax so remitted.
“394p Application of other provisions of this Act to imputation penalty tax
“(1)
Subject to this Part of this Act and to subsection (2) of this section, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to imputation penalty tax as if it were income tax levied under section 38 of this Act.
“(2)
Nothing in this Part of this Act shall be so construed as to include imputation penalty tax within the meaning of the terms ‘income tax’ or ‘tax’ for the purposes of this Part or any of Parts IV, XIIb, and XIIc or sections 398a and 413a of this Act.
“Statutory Producer Boards
“394q Interpretation
“(1)
In this section and in sections 394r to 394v of this Act, unless the context otherwise requires,—
“‘Levy’, in relation to a statutory producer board, means any sum payable by a member of the producer board pursuant to any power of the producer board to require or request a member of the producer board to pay a sum by way of levy:
“‘Member’, in relation to a statutory producer board and any year of determination, means any person (being a person resident in New Zealand) carrying on in that year any farming or agricultural or other business in respect of which the producer board has special statutory functions and who—
“(a)
Was liable in relation to that year to pay a levy to the producer board; or
“(b)
Entered into produce transactions with the producer board during that year:
“‘Produce transactions’ means transactions between a statutory producer board and its members involving the acceptance by the statutory producer board of produce or goods (being produce or goods that are trading stock within the meaning of section 85 of this Act) from its members in terms of the producer board’s primary statutory functions:
“‘Statutory producer board’, or ‘producer board’, means—
“(a)
Any body specified in the Eighteenth Schedule to this Act:
“(b)
Any marketing authority within the meaning of the Primary Products Marketing Act 1953 that is established by regulations made under that Act:
“(c)
Any primary producer board or marketing board established by any Act:
“‘Year of determination’ means an income year that commences on or after the 1st day of April 1988.
“394r Statutory producer board may determine to attach imputation credit to certain distributions
“(1)
Every statutory producer board that is an imputation credit account company is entitled to determine, in respect of any year of determination,—
“(a)
To attach an imputation credit to a cash distribution in respect of which the producer board makes an election in accordance with subsection (2) of this section (being a cash distribution that the producer board is otherwise authorised to make):
“(b)
To make a notional distribution with an imputation credit attached in respect of all persons who were members of the producer board at any time during the year of determination.
“(2)
A statutory producer board may, where—
“(a)
It is to make a cash distribution in respect of all persons who at any time during the year of determination were members of the producer board, based on—
“(i)
The proportion that amounts paid in respect of each such member’s produce transactions bear to the total amount paid in respect of produce transactions of all members of the producer board; or
“(ii)
The proportion that levies payable by each such member bear to the total levies payable by all members of the producer board; or
“(iii)
Such other method as the Commissioner may approve; and
“(b)
All or any part of that cash distribution would, were it not for this section, be deductible from the assessable income of the producer board, whether as a rebate under section 199 of this Act or otherwise,—
elect, on or before the day it makes the distribution, by notice in writing to the Commissioner, not to deduct the amount of the cash distribution in determining its assessable income; and where a producer board so elects the amount of the cash distribution shall, to the extent it is not so deducted, be deemed for the purposes of this Act to be a dividend.
“(3)
Any determination under subsection (1) of this section shall be made after the year of determination in respect of which the determination is made, but not later than 6 months after the end of that year.
“394s Amount of imputation credit to be attached to cash distribution
“(1)
Where a statutory producer board determines pursuant to section 394r(1)(a) of this Act to attach an imputation credit to a cash distribution, the aggregate of all imputation credits to be attached in respect of the distribution shall be an amount calculated in accordance with the following formula:
_eqn16.JPG)
where—
a
is the total amount of the cash distribution (exclusive of any imputation credit); and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule of this Act and applying in respect of the income year that is concurrent with the imputation year in which the determination is made.
“(2)
Where a statutory producer board determines pursuant to section 394r(1)(a) of this Act to attach an imputation credit to a cash distribution, the amount of the imputation credit attached shall be, in relation to each person who was a member of the producer board during the year of determination, an amount calculated in accordance with the following formula:
_eqn17.JPG)
where—
c
is the member’s share of the cash distribution (exclusive of the imputation credit); and
d
is the total amount of the cash distribution (exclusive of any imputation credit); and
e
is the aggregate of all imputation credits attached in respect of the cash distribution.
“394t Amount of imputation credit to be attached to notional distribution
“(1)
Where a statutory producer board determines pursuant to section 394r(1)(b) of this Act to make a notional distribution with an imputation credit attached, the amount of the imputation credit in relation to each person who was a member of the producer board during the year of determination shall, having regard to any produce transactions of the member during that year and to any levies payable by the member for that year, be calculated by the producer board—
“(a)
In accordance with the formula stated in subsection (2) of this section (which relates to produce transactions of the member); or
“(b)
In accordance with the formula stated in subsection (3) of this section (which relates to levies payable by the member); or
“(c)
Partly in accordance with the formula stated in subsection (2) of this section and partly in accordance with the formula stated in subsection (3) of this section, where it is appropriate to take into account both produce transactions and levies payable; or
“(d)
In such other manner as the Commissioner approves.
“(2)
The producer board may calculate the amount of the imputation credit attached to a notional distribution, in relation to each person who was a member of the producer board during the year of determination, in accordance with the following formula:
_eqn18.JPG)
where—
a
is the aggregate of all amounts paid to or by the member in respect of produce transactions of the member during the year of determination; and
b
is the aggregate of all amounts paid to or by all members of the producer board for produce transactions during the year of determination; and
c
is the aggregate of all imputation credits determined by the producer board to be attached in respect of the notional distribution.
“(3)
The producer board may calculate the amount of the imputation credit attached to a notional distribution, in relation to each member, in accordance with the following formula:
_eqn19.JPG)
where—
d
is the aggregate of all levies payable by the member to the producer board for the year of determination; and
e
is the aggregate of all levies payable by all members to the producer board for the year of determination; and
f
is the aggregate of all imputation credits attached in respect of the notional distribution.
“(4)
Where the Commissioner is satisfied, having regard to—
“(a)
Any levy payable to or any produce transactions of the producer board; and
“(b)
Any other circumstances whatsoever that the Commissioner considers relevant,—
that a calculation made by a producer board under this section does not result in a fair and reasonable allocation of an imputation credit to a person who was a member of the producer board during the relevant year of determination, the Commissioner may determine the extent to which the producer board should have made the calculation under any of paragraphs (a) to (d) of subsection (1) of this section.
“(5)
Where and to the extent that the Commissioner makes a determination under subsection (4) of this section, the amount of the imputation credit attached to the notional distribution shall, notwithstanding any calculation made by the producer board, be the amount calculated pursuant to the determination of the Commissioner.
“394u Notional distribution deemed to be dividend
“(1)
Where a statutory producer board has determined pursuant to section 394r(1)(b) of this Act to attach an imputation credit in respect of a notional distribution to persons who were members of the producer board during a year of determination, the producer board shall, for the purposes of this Act, be deemed to have paid a dividend to each such member of an amount calculated in accordance with the following formula:
_eqn20.JPG)
where—
a
is the amount of the imputation credit attached to the notional distribution of the member; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the determination is made.
“(2)
Any notional distribution that is deemed by subsection (1) of this section to be a dividend shall, for the purposes of this Act, be deemed to have been derived on the date of the determination made in relation to the distribution pursuant to section 394r(1)(b) of this Act.
“(3)
A statutory producer board that makes a determination in respect of a notional distribution pursuant to section 394r(1)(b) of this Act, shall—
“(a)
Furnish, with the return furnished pursuant to section 9 of this Act for the income year in which the determination is made, particulars of the dividend deemed to have been paid; and
“(b)
Retain such particulars as will enable the Commissioner to determine whether any subsequent distribution in respect of the deemed dividend is excluded from the term ‘dividends’ pursuant to section 4a(1)(j) of this Act.
“394v Statutory producer boards and dividend withholding payments
“(1)
Where a statutory producer board is a dividend withholding payment company, sections 394q. to 394u of this Act shall apply, with any necessary modifications, as if references to an imputation credit included references to a dividend withholding payment credit.
“(2)
Where a statutory producer board proposes in respect of any year of determination to attach both dividend withholding payment credits and imputation credits, the determination under section 394r of this Act in relation to the dividend withholding payment credits shall be made at the same time as the determination under that section in relation to the imputation credits.
“Co-operative Companies
“394w Interpretation
In this section and in sections 394x to 394zb of this Act, unless the context otherwise requires,—
“‘Co-operative company’ does not include a statutory producer board (as defined in section 394q of this Act):
“‘Produce transactions’ means transactions between a cooperative company and its shareholders involving the supply or acceptance of produce or goods (being produce or goods that are trading stock within the meaning of section 85 of this Act), being—
“(a)
Where a principal activity of the co-operative company involves the acceptance of such produce or goods from its shareholders, the purchase or other acquisition by the company of the produce or goods from its shareholders:
“(b)
Where a principal activity of the co-operative company involves the supply of such produce or goods to its shareholders, the sale or other disposition of the produce or goods to its shareholders:
“‘Year of determination’ means an income year that commences on or after the 1st day of April 1988.
“394x Co-operative company may make annual determination to attach imputation credit to certain distributions
“(1)
Every co-operative company that is an imputation credit account company is entitled to determine—
“(a)
Once only in respect of any year of determination to attach an imputation credit to a cash distribution in respect of which the co-operative company makes an election in accordance with subsection (2) of this section:
“(b)
Once only in respect of any year of determination to make a notional distribution with an imputation credit attached in respect of all persons who at any time during the year of determination were shareholders of the company.
“(2)
A co-operative company may, where—
“(a)
It is to make a cash distribution in respect of all persons who at any time during the year of determination were shareholders of the company, based on the proportion that amounts paid in respect of each such shareholder’s produce transactions bear to the total amount paid in respect of produce transactions of all shareholders of the company; and
“(b)
All or any part of that cash distribution would, were it not for this section, be deductible from the assessable income of the co-operative company, whether as a rebate under section 199 of this Act or otherwise,—
elect, on or before the day it makes the distribution, by notice in writing to the Commissioner, not to deduct the amount of the cash distribution in determining its assessable income; and where a co-operative company so elects the amount of the cash distribution snail, to the extent it is not so deducted, be deemed for the purposes of this Act to be a dividend.
“(3)
Any determination under subsection (1) of this section shall be made after the year of determination in respect of which the determination is made, but not later than 6 months after the end of that year.
“394y Amount of imputation credit to be attached to cash distribution
“(1)
Where a co-operative company determines pursuant to section 394x(1)(a) of this Act to attach an imputation credit to a cash distribution, the aggregate of all imputation credits to be attached in respect of the distribution shall be an amount calculated in accordance with the following formula:
_eqn21.JPG)
where—
a
is the total amount of the cash distribution (exclusive of any imputation credit); and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule of this Act and applying in respect of the income year that is concurrent with the imputation year in which the determination is made.
“(2)
Where a co-operative company determines pursuant to section 394x(1)(a) of this Act to attach an imputation credit to a cash distribution, the amount of the imputation credit attached shall be, in relation to each person who was a shareholder of the co-operative company during the year of determination, an amount calculated in accordance with the following formula:
_eqn22.JPG)
where—
c
is the shareholder’s share of the cash distribution (exclusive of the imputation credit); and
d
is the total amount of the cash distribution (exclusive of any imputation credit); and
e
is the aggregate of all imputation credits attached in respect of the cash distribution.
“394z Amount of imputation credit to be attached to notional distribution
Where a co-operative company determines pursuant to section 394x(1)(b) of this Act to make a notional distribution with an imputation credit attached, the amount of the imputation credit shall be, in relation to each person who was a shareholder of the co-operative company during the year of determination, an amount calculated in accordance with the following formula:
_eqn23.JPG)
where—
a
is the aggregate of all amounts paid to or by the shareholder in respect of produce transactions of the shareholder for the year of determination; and
b
is the aggregate of all amounts paid to or by shareholders of the company in respect of all produce transactions for the year of determination; and
c
is the aggregate of all imputation credits determined by the co-operative company to be attached in respect of the notional distribution.
394za Notional distribution deemed to be dividend
“(1)
Where a co-operative company has determined pursuant to section 394x(1)(b) of this Act to attach an imputation credit in respect of a notional distribution to persons who were shareholders of the company during a year of distribution, the co-operative company shall, for the purposes of this Act, be deemed to have paid a dividend to each such shareholder of an amount calculated in accordance with the following formula:
_eqn24.JPG)
where—
a
is the amount of the imputation credit attached to the notional distribution of the shareholder; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the determination is made.
“(2)
Any notional distribution that is deemed by subsection (1) of this section to be a dividend shall, for the purposes of this Act, be deemed to have been derived on the date of the determination made in relation to the distribution pursuant to section 394x(1)(b) of this Act.
“(3)
A co-operative company that makes a determination in respect of a notional distribution pursuant to section 394x(1)(b) of this Act, shall—
“(a)
Furnish, with the return furnished pursuant to section 9 of this Act for the income year in which the determination is made, particulars of the dividend deemed to have been paid; and
“(b)
Retain such particulars as will enable the Commissioner to determine whether any subsequent distribution in respect of the deemed dividend is excluded from the term ‘dividends’ pursuant to section 4a(1)(k) of this Act.
“394zb Co-operative companies and dividend withholding payments
“(1)
Where a co-operative company is a dividend withholding payment company, sections 394w to 394za of this Act shall apply, with any necessary modifications, as if references to an imputation credit included references to a dividend withholding payment credit.
“(2)
Where a co-operative company proposes in respect of any year of determination to attach both dividend withholding payment credits and imputation credits, the determination under section 394x of this Act in relation to the dividend withholding payment credits shall be made at the same time as the determination under that section in relation to the imputation credits.
“Shareholders and Imputation System
“394zc Dividends to include credits for purposes of Part IV of Act
“(1)
Except as provided in subsection (2) of this section, and subject to section 394zd of this Act, where a person derives income consisting of any dividend the amount of the dividend shall, for the purposes of Part IV of this Act, be the aggregate of—
“(a)
The amount of the dividend paid by the company paying the dividend; and
“(b)
The amount of any imputation credit attached to the dividend; and
“(c)
The amount of any dividend withholding payment credit attached to the dividend.
“(2)
Where any notional distribution by a statutory producer board or a co-operative company is deemed to be a dividend pursuant to section 394U or section 394za of this Act, the amount of that dividend shall not for the purposes of Part IV of this Act include the amount of any imputation credit, or dividend withholding payment credit, calculated in respect of the notional distribution under section 394t or section 394z of this Act.
“(3)
Where a taxpayer is entitled, under the law for the time being in force in the United Kingdom or an agreement (as defined in section 292(1) of this Act) entered into between the Government of the United Kingdom and the Government of New Zealand, to a tax credit in the United Kingdom in respect of a dividend paid on or after the 6th day of April 1973 by a company resident in the United Kingdom, the amount of that dividend shall, for the purposes of Part IV of this Act, be deemed to be increased by the amount of that tax credit.
“(4)
Where a taxpayer is entitled, under an agreement (as defined in section 292(1) of this Act) to a tax credit in a country or territory outside New Zealand in respect of a dividend paid by a company resident in that country or territory, the amount of that dividend shall, for the purposes of Part IV of this Act, be deemed to be increased by the amount of that tax credit.
“394zd Determination of amount of credit in certain cases
“(1)
For the purposes of sections 394zc(1), 394ze(1), and 394zp of this Act, the amount of any imputation credit or dividend withholding payment credit shall, where appropriate, be as follows:
“(a)
In the case of a beneficiary of a trust, other than to the extent specified in subsection (2) of this section, the amount of the imputation credit or dividend withholding payment credit calculated, in relation to the beneficiary, in accordance with the formula stated in subsection (3) of this section:
“(b)
In the case of a partner of a partnership, the amount of the imputation credit or dividend withholding payment credit calculated, in relation to the partner, in accordance with the formula stated in subsection (4) of this section:
“(c)
In the case of an imputation credit attached to a dividend that has an imputation ratio greater than the ratio calculated in accordance with the formula stated in section 394g(1) of this Act, so much of the imputation credit as would arise if the imputation ratio of the dividend were the ratio so calculated:
“(d)
In the case of a dividend withholding payment credit attached to a dividend with a dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section 394zy(1) of this Act, so much of the dividend withholding payment credit as would arise if the dividend withholding payment ratio of the dividend were the ratio so calculated:
“(e)
In the case of a dividend with a combined imputation and dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section 394zz(1) of this Act, so much of the dividend withholding payment credit and the imputation credit as remain after any reduction of the dividend withholding payment credit or the imputation credit in accordance with subsection (5) of this section:
“(f)
In the case of an imputation credit in respect of which any credit of tax has been disallowed by the Commissioner pursuant to section 394ze(4) of this Act, so much (if any) of the imputation credit as is not disallowed under that provision:
“(g)
In the case of a dividend withholding payment credit in respect of which any credit of tax has been disallowed by the Commissioner pursuant to section 394zp(3) of this Act, so much (if any) of the dividend withholding payment credit as is not disallowed under that provision:
“(h)
In the case of an imputation credit that gives rise to a reduced credit of tax in accordance with subsection (5) or subsection (7) of section 394ze of this Act, so much of the imputation credit as remains after reduction by an amount equal to the amount of reduction pursuant to the relevant one of those subsections:
“(i)
In the case of a dividend withholding payment credit that gives rise to a reduced credit of tax in accordance with subsection (4) or subsection (6) of section 394zp of this Act, so much of the dividend withholding payment credit as remains after reduction by an amount equal to the amount of reduction pursuant to the relevant one of those subsections:
“(j)
In the case of an imputation credit attached to a dividend to which section 394zf of this Act applies, a nil amount:
“(k)
In the case of an imputation credit determined under section 394zg of this Act to be the subject of an arrangement to obtain a tax advantage, so much of the imputation credit as remains after reduction by the amount referred to in subsection (6)(b) of that section:
“(l)
In the case of a dividend withholding payment credit determined under section 394zg of this Act to be the subject of an arrangement to obtain a tax advantage, so much of the dividend withholding payment credit as remains after reduction by the amount referred to in subsection (6)(b) of that section.
“(2)
Subsection (1)(a) of this section shall not apply to a beneficiary who is an investor of a group investment fund in so far as the beneficiary derives income from the group investment fund that is category A income.
“(3)
The amount of an imputation credit or dividend withholding payment credit, in relation to a beneficiary of a trust who, during an income year, derives dividends with an imputation credit or a dividend withholding payment credit attached by reason of being a beneficiary of the trust shall, for the purposes of subsection (1)(a) of this section, be an amount calculated in accordance with the following formula:
_eqn25.JPG)
where—
a
is the aggregate of all imputation credits and all dividend withholding payment credits attached to all dividends distributed to beneficiaries of the trust in their capacity as such during the income year; and
b
is the aggregate of all distributions (whether of an income or a capital nature, and whether or not included in the assessable income of the beneficiary) made to the beneficiary in his or her capacity as a beneficiary of the trust during the income year; and
c
is the aggregate of all distributions (whether of an income or a capital nature, and whether or not included in the assessable income of the beneficiaries) made to beneficiaries of the trust in their capacity as such during the income year.
“(4)
The amount of an imputation credit or dividend withholding payment credit, in relation to a partner of a partnership that, during an income year, derives dividends with an imputation credit or dividend withholding payment credit attached by reason of being a partner of the partnership shall, for the purposes of subsection (1)(b) of this section, be an amount calculated in accordance with the following formula:
_eqn26.JPG)
where—
a
is the aggregate of all imputation credits and all dividend withholding payment credits attached to dividends derived by partners of the partnership in their capacity as such in the income year; and
b
is the income of the partner as a partner of the partnership for the income year; and
c
is the income of the partnership for the income year.
“(5)
Where there is an excess credit amount (as determined under section 394zz(2) of this Act) in respect of a dividend with a combined imputation and dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section 394zz(1) of this Act,—
“(a)
The amount of the dividend withholding payment credit attached to the dividend shall, for the purposes of section 394zc(1)(c) of this Act, be reduced by the amount of the excess credit amount in so far as the dividend withholding payment credit extends:
“(b)
The amount of the imputation credit attached to the dividend shall, for the purposes of section 394zc(1)(b) of this Act, be reduced by so much of the excess credit amount as remains after deduction from the excess credit amount of the amount of the reduction referred to in paragraph (a) of this subsection.
“394ze Credit of tax for imputation credit
“(1)
Where the assessable income of a taxpayer for an income year includes the amount of any imputation credit, the taxpayer is, subject to the provisions of this section and of section 394zd of this Act, entitled to a credit of tax of an amount equal to the amount so included.
“(2)
Any such credit of tax shall be credited, in so far as it extends, in payment of any income tax payable by the taxpayer in respect of the income year.
“(3)
There shall be no refund to a taxpayer of any of a credit of tax under this section, but where the whole of the credit of the tax is not credited in payment of the income tax payable by the taxpayer for the income year—
“(a)
The taxpayer shall, in respect of any amount of the credit that is not so credited, be deemed to have incurred an amount of loss for the income year that may be carried forward and deducted from or set off against the assessable income of a succeeding income year in accordance with section 188 of this Act; and
“(b)
The amount of any such loss that may be so carried forward shall be an amount calculated in accordance with the following formula:
_eqn27.JPG)
where—
a
is the amount of the credit of tax not credited in payment of income tax payable for the income year; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying for the income year.
“(4)
The Commissioner shall not allow a taxpayer the benefit of a credit of tax in accordance with this section unless the taxpayer furnishes the shareholder dividend statement, or other sufficient evidence in writing, evidencing the imputation credit giving rise to the credit of tax.
“(5)
Subject to subsection (6) of this section, where the Commissioner is satisfied that it would be inappropriate to allow, in whole or in part, a credit of tax to a taxpayer by reason of the taxpayer receiving an imputation credit in respect of which insufficent income tax or further income tax has been paid by the company that issued the imputation credit,—
“(a)
The Commissioner shall not allow any claim for credit of tax under this section to the extent that the Commissioner is so satisfied; and
“(b)
Any such disallowance by the Commissioner shall be in such manner as the Commissioner considers fair and equitable.
“(6)
The Commissioner may allow a claim for a credit of tax previously disallowed under subsection (5) of this section to the extent the Commissioner is satisfied that sufficient income tax or further income tax has subsequently been paid by or on behalf of the company and that it would be appropriate to allow the claim for a credit of tax.
“(7)
Where the Commissioner is satisfied that the amount of any credit of tax claimed under this section is in excess of the proper amount, the Commissioner shall not allow the claim to the extent of the excess.
“(8)
Where the Commissioner has made a refund of income tax, and the Commissioner is satisfied that in calculating the refund a credit of tax has been allowed under this section that is in excess of the proper amount, the Commissioner may recover the amount of the excess in the same manner, with any necessary modifications, as if it were income tax payable by a taxpayer.
“Anti-Avoidance Provisions
“394zf Dividend paid by another company
“(1)
Where, in relation to a company and a shareholder of the company, there is an arrangement entered into for the purpose, or for purposes including the purpose, that—
“(a)
The shareholder may be paid a dividend by another company, whether directly or indirectly by any means whatever; or
“(b)
The shareholder may acquire any shares in another company so that the other company may pay a dividend to the shareholder, whether directly or indirectly by any means whatever,—
any dividend paid to the shareholder by that other company pursuant to the arrangement shall, for the purposes of this Part of this Act, be deemed to be a dividend paid by the company.
“(2)
For the purposes of this Part of this Act, the amount of any imputation credit attached to a dividend to which subsection (1) of this section applies—
“(a)
Shall not constitute part of the assessable income of the shareholder:
“(b)
Shall not be eligible for a credit of tax or a carry forward of loss in accordance with section 394ze of this Act:
“(c)
Shall, notwithstanding anything in subsection (1) of this section, be a debit in accordance with section 394e(1)(a) of this Act to the imputation credit account of the company that is deemed by subsection (1) of this section to have paid the dividend.
“394zg Arrangement to obtain a tax advantage
“(1)
In this section—
“‘Company tax advantage’ means—
“(a)
The arising of a credit to an imputation credit account in accordance with section 394d of this Act; or
“(b)
The arising of a credit to a dividend withholding payment account in accordance with section 394zv of this Act:
“‘Shareholder tax advantage’ means—
“(a)
The allowance, in whole or in part, of a credit of tax in accordance with section 394ze of this Act:
“(b)
The allowance, in whole or in part, of a credit of tax in accordance with section 394zp of this Act, or the obtaining of a refund of dividend withholding payment under section 394zq, of this Act:
“‘Tax advantage’ means—
“(a)
The allowance, in whole or in part, of a credit of tax in accordance with section 394ze of this Act:
“(b)
The arising of a credit to an imputation credit account in accordance with section 394d of this Act:
“(c)
The allowance, in whole or in part, of a credit of tax in accordance with section 394zp of this Act, or the obtaining of a refund of dividend withholding payment under section 394zq, of this Act:
“(d)
The arising of a credit to a dividend withholding payment account in accordance with section 394zv of this Act.
“(2)
For the purposes of this section, there shall be an arrangement to obtain a tax advantage where—
“(a)
There is an arrangement for the sale or other disposition of shares where—
“(i)
Any person who is a party to the arrangement might reasonably have anticipated that a dividend would be paid in respect of the shares in any income year; and
“(ii)
Any person who is a party to the arrangement might reasonably have anticipated that an imputation credit or a dividend withholding payment credit would be attached to the dividend; and
“(iii)
Any person who is a party to the arrangement might reasonably expect—
“(A)
That a party to the arrangement will be able to obtain a tax advantage in relation to any such imputation credit or dividend withholding payment credit; or
“(B)
That a party to the arrangement will not be able to obtain a tax advantage in relation to any such imputation credit or dividend withholding payment credit; and
“(iv)
The purpose, not being an incidental purpose, of the arrangement is that a party to the arrangement would obtain any such tax advantage; or
“(b)
In respect of any one or more distributions by a company, whether occurring in the same imputation year or over more than one imputation year, the company streams the payment of dividends, or the attachment of imputation credits or dividend withholding payment credits or both to any dividends, in such a way as will give higher credit values to shareholders who will obtain a tax advantage therefrom than to shareholders who will not so obtain a tax advantage or who may reasonably be expected to derive a lesser benefit from any tax advantage.
“(3)
For the purposes of subsection (2)(b) of this section, a dividend paid by a company shall be deemed to have a higher credit value than another dividend where any of the following applies:
“(a)
The dividend has an imputation credit attached to it, and the other dividend does not:
“(b)
The imputation ratio of the dividend is higher than that of the other dividend:
“(c)
The dividend has a dividend withholding payment credit attached to it, and the other dividend does not:
“(d)
The dividend withholding payment ratio of the dividend is higher than that of the other dividend:
“(e)
The dividend has both an imputation credit and a dividend withholding payment credit attached to it, and the other dividend has no such credit or only one such type of credit attached:
“(f)
The combined imputation and dividend withholding payment ratio of the dividend is greater than that of the other dividend.
“(4)
Where the Commissioner determines that there is an arrangement to obtain a tax advantage, the Commissioner may—
“(a)
Determine whether the arrangement is a company tax advantage arrangement or a shareholder tax advantage arrangement, having regard to whether the tax advantage purpose or effect of the arrangement relates or related mainly to the obtaining of a company tax advantage or mainly to the obtaining of a shareholder tax advantage:
“(b)
Determine the company in whose imputation credit account or dividend withholding payment account there should arise a further debit in accordance with subsection (5) of this section:
“(c)
Determine the amount of the imputation credit or dividend withholding payment credit the subject of the arrangement:
“(d)
Determine the imputation year in which the arrangement occurred or commenced (being the year in which the Commissioner considers that the first reasonably identifiable step towards implementation of the arrangement occurred).
“(5)
Where the Commissioner determines that there is an arrangement within the meaning of subsection (2)(b) of this section, or that an arrangement within the meaning of subsection (2)(a) of this section is a company tax advantage arrangement,—
“(a)
There shall arise a further debit to the imputation credit account or (as the case may require) the dividend withholding payment account of the company determined to be the appropriate company under subsection (4)(b) of this section; and
“(b)
The amount of the further debit shall be an amount equal to the amount of the imputation credit or (as the case may be) the dividend withholding payment credit determined to be the subject of the arrangement under subsection (4)(c) of this section; and
“(c)
The further debit shall be a debit that arises in the imputation year determined to be that in which the arrangement occurred or commenced under subsection (4)(d) of this section.
“(6)
Where the Commissioner determines under subsection (4)(a) of this section that an arrangement within the meaning of subsection (2)(a) of this section is a shareholder tax advantage arrangement,—
“(a)
The shareholder obtaining the tax advantage shall not be entitled in respect of the arrangement to a credit of tax under section 394ze or section 394zp of this Act, or a refund under section 394zq of this Act, as the case may be; and
“(b)
The amount in respect of which the shareholder is not so entitled to a credit or refund shall be an amount equal to the amount of imputation credit or (as the case may be) dividend withholding payment credit determined to be the subject of the arrangement under subsection (4)(c) of this section.
“(7)
As soon as is convenient after a determination is made in relation to a company under subsection (4) of this section (hereafter in this section and in section 19 of this Act referred to as a determination of tax advantage arrangement debit), the Commissioner shall cause notice of the determination to be given to the company in respect of whose imputation credit account or dividend withholding payment account the determination is made.
“(8)
Any such notice may be included in a notice of assessment made pursuant to section 29(1) of this Act, or a notice of determination of loss made pursuant to section 29(2) of this Act, or a notice of determination of incorrect entry pursuant to section 394zh or section 394zzj of this Act.
“(9)
An omission to give the notice referred to in subsection (7) of this section shall not invalidate the determination of tax advantage arrangement debit.
“Credits and Debits Incorrectly Recorded
“394zh Determinations by Commissioner as to credits and debits arising to imputation credit account
“(1)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account is not the correct amount that should have been recorded in respect of the credit or debit, the Commissioner shall determine the amount of the credit or debit properly arising to the account.
“(2)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account should not have been so recorded, the Commissioner shall determine accordingly.
“(3)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s imputation credit account should not have been recorded as arising at the time it was recorded as arising, the Commissioner shall determine the time at which the credit or debit properly arose to the account.
“(4)
Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s imputation credit account should have been so recorded, the Commissioner shall determine—
“(a)
The amount of the credit or debit so arising; and
“(b)
The time at which the credit or debit arose to the account.
“(5)
Where the Commissioner makes a determination under any of subsections (1) to (4) of this section then, except in so far as the company establishes on objection that my credit or debit was correctly recorded, or not recorded as the case may be, in the imputation credit account,—
“(a)
The relevant credit or debit shall be deemed to have arisen, or not to have arisen, or to have been the amount determined by the Commissioner under subsection (1) of this section, as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen:
“(b)
The company shall make such other corrections in respect of my credits or debits or balances arising to its imputation credit account or dividend withholding payment account or branch equivalent tax account, whether for the imputation year to which the determination related or for my subsequent year, as may be directed by the Commissioner to be necessary or appropriate as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
“(6)
As soon as is convenient after a determination is made under my of subsections (1) to (4) of this section (hereafter in this section and in section 19 of this Act referred to as a determination of incorrect entry), the Commissioner shall cause notice of the determination to be given to the company in respect of whose imputation credit account the determination is made.
“(7)
Any such notice may be included in a notice of assessment made pursuant to section 29(1) of this Act or a notice of determination of loss made pursuant to section 29(2) of this Act.
“(8)
An omission to give the notice referred to in subsection (6) of this section shall not invalidate the determination of incorrect entry.
“Transitional
“394zi Credit for provisional tax paid before enactment of Income Tax Amendment Act (No. 5) 1988
“(1)
A credit to a company’s imputation credit account shall arise for the amount of any provisional tax paid by the company where the provisional tax—
“(a)
Is paid in relation to the income tax payable by the company for the income year commencing on the 1st day of April 1988 or any subsequent income year; and
“(b)
Is paid before the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent.
“(2)
A credit that arises to a company’s imputation credit account in accordance with subsection (1) of this section shall, notwithstanding anything in section 394d of this Act, arise on the later of—
“(a)
The 1st day of April 1988; or
“(b)
The date on which the provisional tax giving rise to the credit is paid.
“394zj Dividend paid before 1 February 1989
“(1)
Subject to subsection (4) of this section, an imputation credit account company may, on or before the 31st day of March 1989, determine that an imputation credit shall be retrospectively attached to any dividend paid by the company during the period commencing on the 1st day of April 1988 and ending with the 31st day of January 1989, and to the extent that the company so determines it shall, for the purposes of this Part and Parts XIIb and XIIc of this Act, be deemed to have paid a dividend with an imputation credit attached.
“(2)
Where a company has determined that an imputation créait shall be attached to a dividend in accordance with subsection (1) of this section—
“(a)
The amount of any imputation credit so attached shall, for the purposes of section 394e of this Act, be a debit to the company’s imputation credit account arising on the date the company paid the dividend:
“(b)
The company dividend statement to be completed in accordance with section 394h of this Act shall be completed at the time the company makes the determination under subsection (1) of this section:
“(c)
The shareholder dividend statement to be given by the company in accordance with section 394i of this Act shall be given at the time the company makes the determination under subsection (1) of this section.
“(3)
Any ratio change declaration required by section 394g of this Act in respect of any dividend paid on or before the 31st day of January 1989 whose imputation ratio differs from that of the benchmark dividend may, whether or not the company makes a determination in respect of the dividend under subsection (1) of this section, be delivered to the Commissioner not later than the 7th day of February 1989.
“(4)
A company shall not retrospectively attach an imputation credit under this section in respect of any dividend paid by the company at a time when, if section 394b of this Act had been in force, the company would not have been required to establish and maintain an imputation credit account.
“PART XIIb “Dividend Withholding Payments and Dividend Withholding Payment Accounts
“394zk Interpretation
“(1)
In this Part of this Act, unless the context otherwise requires,—
“‘Allocation deficit debit’ means any amount arising as an allocation deficit debit in accordance with section 394zy(4) of this Act:
“‘Combined imputation and dividend withholding payment ratio’, in relation to a dividend with both an imputation credit and a dividend withholding payment credit attached, means an amount calculated in accordance with the following formula:
_eqn28.JPG)
where—
a
is the amount of the aggregate of the imputation credit and the dividend withholding payment credit; and
b
is the amount of the dividend paid (exclusive of the imputation credit and the dividend withholding payment credit):
“‘Controlled foreign company’ has the meaning assigned to that term by section 245a of this Act:
“‘Dividend withholding payment’ means the amount payable by a company in accordance with section 394zm of this Act in respect of foreign withholding payment dividends paid to the company during any quarter:
“‘Dividend withholding payment account’ means the account required to be maintained by a company that elects to maintain such an account pursuant to section 394zt of this Act:
“‘Dividend withholding payment account company’ means a company that, having made an election under subsection (1) of section 394zt of this Act, is required by subsection (3) of that section to maintain a dividend withholding payment account:
“‘Dividend withholding payment credit’, in relation to a dividend, means the amount attached to the dividend in accordance with section 394zx of this Act:
“‘Dividend withholding payment deduction’ means the deduction required by section 394zl of this Act to be made in respect of foreign withholding payment dividend paid to a company:
“‘Dividend withholding payment ratio’, in relation to a dividend, means an amount calculated in accordance with the following formula:
_eqn29.JPG)
where—
a
is the amount of any dividend withholding payment credit attached to the dividend (which amount shall be zero where no such credit is attached); and
b
is the amount of the dividend paid (exclusive of any imputation credit or dividend withholding payment credit):
“‘Excess credit amount’ means an amount calculated in accordance with subsection (2) of section 394zz of this Act in relation to a dividend with a combined imputation and dividend withholding payment ratio exceeding the ratio stated in subsection (1) of that section:
“‘Foreign withholding payment dividend’, or ‘foreign dividend’, means a dividend from which section 394zl of this Act requires a dividend withholding payment deduction to be made:
“‘Foreign withholding tax’ means a tax (other than New Zealand tax) that—
“(a)
Is imposed in respect of any foreign withholding payment dividend; and
“(b)
Is of substantially the same nature as nonresident withholding tax:
“‘Further dividend withholding payment’, in relation to a company, means an amount the company may be hable to pay pursuant to section 394zzf of this Act:
“‘Income interest’ means on income interest of 10 percent or greater (as that expression is defined by section 245a(1) of this Act):
“‘Quarter’ means a period of 3 consecutive calendar months, in any calendar year, that ends with the last day of March, June, September, or December:
“Terms defined in sections 394a and 394zzm of this Act have the meanings as so defined.
“(2)
For the purposes of sections 394zl to 394zn of this Act, the term ‘dividends’ includes any dividend of a kind referred to in paragraph (a) or paragraph (b) of the definition of the term ‘dividend’ in section 394a(1) of this Act.
“(3)
Except where the context otherwise requires, every reference in this Part of this Act to an income year in relation to a company shall, where the company furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this Part of this Act shall, with any necessary modifications, apply accordingly.
“(4)
For the purposes of this Part of this Act, the balance of a dividend withholding payment account at any time shall be ascertained by calculating the difference in amount between the aggregate of credits and the aggregate of debits to the account existing at that time, and the account shall have—
“(a)
A credit balance to the extent that credits exceed debits:
“(b)
A debit balance to the extent that debits exceed credits.
“Foreign Dividend Withholding Payments
“394zl Liability to make deduction in respect of foreign withholding payment dividend
“(1)
Every company resident in New Zealand that is paid, on or after the 1st day of April 1988, a dividend to which this section applies shall deduct from that dividend an amount by way of dividend withholding payment calculated in accordance with section 394zm of this Act.
“(2)
This section applies to the following dividends:
“(a)
Dividends paid by—
“(i)
A company not resident in New Zealand; or
“(ii)
A company resident in New Zealand but not subject to tax in respect of part or all of its income pursuant to a provision of arrangements to which effect is given by an Order in Council made under section 294 of this Act, where the company is, for the purposes of the arrangements, treated as not being a resident of New Zealand,—
where the dividend is exempt from income tax in accordance with section 63 of this Act upon derivation by the company resident in New Zealand:
“(b)
Dividends paid by a company resident in New Zealand, where—
“(i)
The company previously was not resident in New Zealand; and
“(ii)
The amount of the dividend is less than the amount the company had available, immediately before becoming resident in New Zealand, for distribution by way of dividend (after deduction from that available amount of the amount of any dividend that is a dividend to which this paragraph applies); and
“(iii)
The dividend is exempt from income tax in accordance with section 63 of this Act upon derivation by the company resident in New Zealand.
“394zm Amount of dividend withholding payment to be deducted
“(1)
The amount by way of dividend withholding payment to be deducted from any foreign withholding payment dividend under section 394zl of this Act shall, subject to the provisions of this section, be calculated in accordance with the following formula:
(a × b) − c
where—
a
is the aggregate of the amount of the foreign dividend paid and any amount of foreign withholding tax paid in respect of the dividend; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the quarter occurred; and
c
is the amount of any foreign withholding tax paid in respect of the dividend, to the extent that the amount does not exceed the amount obtained by multiplying items a and b of this formula.
“(2)
Where—
“(a)
A foreign withholding payment dividend is paid to a company in respect of an income interest in a controlled foreign company; and
“(b)
The company is, at the time the dividend is paid, a branch equivalent tax account company,—
the amount to be deducted by the company under subsection (1) of this section shall be reduced by such amount of the credit balance in the company’s branch equivalent tax account, being a credit balance that exists at the time the foreign dividend is paid, as the company elects pursuant to section 394zzq(3) of this Act to use for the purpose.
“(3)
For the purposes of subsection (2)(a) of this section, a foreign withholding payment dividend paid to a company shall be deemed to have been paid in respect of an income interest in a controlled foreign company where the company held the income interest in the controlled foreign company—
“(a)
At any time during the period commencing with the start of the income year of the company in which the dividend was paid and ending with the date of payment of the dividend; or
“(b)
At any time during the income year of the company immediately preceding the income year of the company in which the dividend was paid.
“(4)
Where the amount of any dividend withholding payment deduction is reducible under this section by the amount of any foreign withholding tax paid in respect of the dividend, no such reduction shall be made unless the Commissioner is furnished, within such time as the Commissioner may allow in any case or class of cases having regard to the period stated in section 301 of this Act, with all information necessary for determining the amount of the foreign withholding tax.
“394zn Payment and recovery of dividend withholding payment, etc.
“(1)
A company that during any quarter receives foreign dividends in respect of which it is required by section 394zl of this Act to make dividend withholding payment deductions shall, not later than 14 days after the end of that quarter, pay the amount of the deductions to the Commissioner.
“(2)
Where, in relation to a company that is liable to pay dividend withholding payment in respect of any foreign dividend paid to the company during any quarter, the company satisfies the Commissioner that—
“(a)
It has incurred a loss that may be carried forward and deducted from or set off in accordance with section 188 of this Act against the assessable income, if any, derived by the company during the income year the foreign dividend is paid to the company; or
“(b)
It has reason to believe that, in respect of the income year in which the foreign dividend is paid to the company, the company will incur a loss that may be carried forward and deducted from or set off in accordance with section 188 of this Act against the assessable income, if any, derived by the company during the succeeding income year,—
the company may by notice in writing to the Commissioner elect, within the period for payment specified in subsection (1) of this section, that payment of all or part of the dividend withholding payment shall be satisfied by reducing any such loss, in so far as the balance of the loss extends, by an amount not exceeding an amount calculated in accordance with the following formula:
_eqn30.JPG)
where—
a
is the amount of the dividend withholding payment payable under section 394zm of this Act; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the quarter for which the liability arose occurred.
“(3)
Where a company elects under subsection (2) of this section to satisfy its liability to pay all or part of any dividend withholding payment by way of a reduction of loss, and the company does not in fact incur a loss, or does not incur a loss sufficient to justify the full amount of the reduction of loss pursuant to that subsection,—
“(a)
The Commissioner may disallow the election under that subsection in respect of so much of the amount of the dividend withholding payment as the Commissioner considers appropriate having regard to the amount of loss (if any) actually incurred by the company; and
“(b)
The company shall be liable to pay the amount of dividend withholding payment the subject of that disallowance, and any penalty under subsection (4) of this section, as if the company had failed to pay that amount within the time for payment provided for in subsection (1) of this section in respect of the initial liability to pay the dividend withholding payment.
“(4)
Where a company fails to pay (whether directly or by way of election to reduce an amount of loss) any dividend withholding payment it is liable to pay within the time for payment provided for in subsection (1) of this section, the company is liable to a penalty by way of additional tax equal to—
“(a)
Ten percent of the amount in respect of which default has been made (in this subsection referred to as the amount in default); and
“(b)
Ten percent of so much of the amount in default and the amount of any penalty added in accordance with paragraph (a) of this subsection as remains unpaid at the end of the day on which there expires the period of 6 months immediately following the day on which the failure to pay occurred; and
“(c)
Ten percent of so much of—
“(i)
The amount in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) or paragraph (b) of this subsection; and
“(iii)
The amount of any penalty previously added in accordance with this paragraph,—
as remains unpaid at the expiry of any of the periods of 6 months that, consecutively, succeed the 6-month period referred to in paragraph (b) of this subsection;—
and subject to this Part of this Act, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to the amount of every penalty imposed under this subsection as if it were additional tax under section 398 of this Act and as if the company liable to the penalty were the taxpayer.
“(5)
Where a company fails to deduct any amount that it is liable to pay to the Commissioner by way of dividend withholding payment or further dividend withholding payment, or by way of any additional tax for late payment of any such payment or additional tax, the amount in respect of which default has been made—
“(a)
Shall constitute a debt payable by the company to the Commissioner; and
“(b)
Shall be deemed to have become payable within 14 days of the end of the quarter in respect of which the initial liability arose.
“(6)
Where the amount of any dividend withholding payment is reduced by any amount claimed in respect of foreign withholding tax, but the information referred to in section 394zm(4) of this Act has not been furnished to the Commissioner in accordance with that provision, the Commissioner may recover an amount equal to the amount of the claimed foreign withholding tax as if it were income tax payable by the company.
“(7)
The Commissioner may, in respect of any company chargeable with dividend withholding payment, make an assessment of—
“(a)
The amount of any foreign withholding payment dividend in respect of which dividend withholding payment is in the judgment of the Commissioner payable; and
“(b)
Any amount that in the judgment of the Commissioner is to be taken into account in determining the amount of dividend withholding payment payable in respect of any such dividend; and
“(c)
The amount of dividend withholding payment that is in the judgment of the Commissioner payable in respect of any such dividend,—
and the company shall be liable to pay the amount of dividend withholding payment so assessed except in so far as the company establishes on objection that the assessment is excessive or that the company is not chargeable with the dividend withholding payment.
“(8)
Sections 23, 27, and 29 of this Act shall apply with respect to every assessment under this section as if—
“(a)
In those sections, the expression ‘taxpayer’ included a company chargeable with dividend withholding payment; and
“(b)
In section 23, the expression ‘tax already assessed’ included any dividend withholding payment or other amount already assessed under this section.
“(9)
An assessment made under this section shall be subject to objection in the same manner as an assessment of income tax levied under section 38 of this Act, and Part III of this Act shall apply, so far as may be, to an objection to an assessment made under this section as if the terms ‘income tax’ and ‘tax’ in that Part included dividend withholding payment, or any other amount assessed under this section.
“(10)
Subject to this Part of this Act, the other Parts of this Act, as far as they are applicable and with any necessary modifications, shall apply with respect to dividend withholding payment and further dividend withholding payment ana additional tax for late payment of dividend withholding payment as if it were income tax payable by the company.
“394zo Refund for overpayment and to company in loss
“(1)
Where the Commissioner is satisfied that the amount of dividend withholding payment paid by a company is in excess of the amount properly payable, the company shall, except as otherwise provided by this section, be entitled to a refund of the excess.
“(2)
Where during an imputation year a company becomes entitled to a refund of dividend withholding payment under this section in relation to dividend withholding payment paid by the company during a previous imputation year,—
“(a)
The amount of the refund to be paid to the company shall not exceed—
“(i)
In the case of a company that is a dividend withholding payment account company, the amount of the credit balance (if any) of the company’s dividend withholding payment account at the end of the imputation year preceding that in which the entitlement to the refund arises; or
“(ii)
In the case of a company that is an imputation credit account company but is not a dividend withholding payment account company, the credit balance (if any) of the company’s imputation credit account at the end of the imputation year preceding that in which the entitlement to the refund arises; or
“(iii)
In the case of a company that has ceased to be resident in New Zealand, the amount of the credit balance (if any) of the company’s dividend withholding payment account that arose as a debit to the account under section 394zw(1)(g) of this Act immediately before the company ceased to be so resident, or, where the company was an imputation credit account company but not a dividend withholding payment account company, the amount of the credit balance (if any) of the company’s imputation credit account that arose as a debit under section 394e(1)(i)of this Act immediately before the company ceased to be so resident; but
“(b)
Any amount of dividend withholding payment that is not refunded by reason of exceeding any such credit balance shall be credited in payment of any dividend withholding payment payable by the company during the imputation year in which the entitlement to the refund arises, or any subsequent imputation year.
“(3)
For the purposes of subsection (2) of this section, the amount of any credit balance referred to in that subsection shall be deemed to be reduced by any earlier refund paid to the company during the same imputation year, being a refund of dividend withholding payment or a refund of income tax that may not, pursuant to this section or to section 394m of this Act, exceed the amount of that credit balance.
“(4)
Where, in respect of any income year of a company during which the company has paid dividend withholding payment,—
“(a)
The company has incurred a loss that may be carried forward and deducted from or set off in accordance with section 188 of this Act against the assessable income derived by the company in a succeeding income year; and
“(b)
The company has furnished a return pursuant to section 9 of this Act for the income year in respect of which the loss was incurred,—
the company shall, upon application in writing to the Commissioner, be entitled to a refund of dividend withholding payment of an amount that is the lesser of—
“(c)
The amount of dividend withholding payment paid during the most recently ending imputation year; or
“(d)
The amount of the loss referred to in paragraph (a) of this subsection, multiplied by the rate of resident companies income tax referred to in item b of the formula stated in subsection (5) of this section; or
“(e)
The credit balance of the company’s dividend withholding payment account at the end of the most recently ending imputation year.
“(5)
Where a company is paid a refund pursuant to subsection (4) of this section, the amount of the loss referred to in that subsection shall be reduced by an amount calculated in accordance with the following formula:
_eqn31.JPG)
where—
a
is the amount of the refund paid to the company under subsection (4) of this section; and
b
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year referred to in paragraphs (c) and (e) of subsection (4) of this section.
“(6)
Where the Commissioner is satisfied that the amount of any dividend withholding payment refunded to a company under this section is in excess of the proper amount, the Commissioner may recover the amount of the excess in the same manner, with any necessary modifications, as if it were income tax payable by the company.
“394zp Credit of tax for dividend withholding payment credit in hands of shareholder
“(1)
Where the assessable income of a taxpayer in any income year includes the amount of any dividend withholding payment credit then, subject to the provisions of this section and of section 394zd of this Act,—
“(a)
The taxpayer is entitled to a credit of tax equal to the amount so included; and
“(b)
The credit of tax shall be credited, in so far as it extends, in payment of any income tax payable by the taxpayer in respect of the income year; and
“(c)
To the extent that the credit of tax is not so credited, the excess shall be refundable to the taxpayer in accordance with Part XIV of this Act as if it were tax paid in excess.
“(2)
Any credit of tax to which a taxpayer is entitled under this section shall be credited after allowing for any credit of tax allowable in accordance with sections 293 and 394ze of this Act.
“(3)
The Commissioner shall not credit a credit of tax under this section unless the taxpayer furnishes the shareholder dividend statement, or other sufficient evidence in writing, evidencing the dividend withholding payment credit giving rise to the credit of tax.
“(4)
Subject to subsection (5) of this section, where the Commissioner is satisfied that it would be inappropriate to allow a credit of tax to a taxpayer under this section by reason of the taxpayer receiving any dividend withholding payment credit in respect of which no dividend withholding payment or further dividend withholding payment has been paid by the company that issued the dividend withholding payment credit,—
“(a)
The Commissioner shall not allow any claim for a credit of tax to the extent the Commissioner is so satisfied:
“(b)
Any such disallowance shall be in such a manner as the Commissioner considers fair and reasonable.
“(5)
The Commissioner may allow a claim for a credit of tax previously disallowed under subsection (4) of this section to the extent the Commissioner is satisfied that sufficient dividend withholding payment or further dividend withholding payment has subsequently been paid by or on behalf of the company and that it would be appropriate to allow the claim for a credit of tax.
“(6)
Where the Commissioner is satisfied that the amount of any credit of tax claimed under this section is in excess of the proper amount, the Commissioner shall not allow the claim to the extent of the excess.
“(7)
Where the Commissioner is satisfied that the amount of any credit of tax credited or refunded to a person under this section is in excess of the proper amount, the Commissioner may recover the amount of the excess in the same manner, with any necessary modifications, as if it were income tax payable by a taxpayer.
“(8)
Where the Commissioner has made a refund of dividend withholding payment credit and is satisfied that in calculating the refund a credit of tax has been allowed under this section that is in excess of the proper amount, the Commissioner may recover the amount of the excess in the same manner, with any necessary modifications, as if it were income tax payable by a taxpayer.
“(9)
For the purposes of giving effect to this section, the Commissioner may at any time alter any assessment or any determination, notwithstanding anything in section 25 of this Act.
“394zq Refund to non-resident or exempt shareholders
“(1)
Where a dividend with a dividend withholding payment credit attached is paid to a shareholder of a company (being a company resident in New Zealand) who is—
“(a)
A person who is not resident in New Zealand; or
“(b)
A person who is resident in New Zealand and who is exempt from income tax otherwise than by virtue of section 63 of this Act,—
the Commissioner shall, except as otherwise provided in this section, pay to the shareholder by way of a refund of dividend withholding payment credit an amount equal to the amount of the dividend withholding payment credit.
“(2)
The amount of any refund payable under this section to a shareholder in respect of a dividend withholding payment credit—
“(a)
Shall not exceed the amount of the dividend withholding payment credit that would, if the credit were included in the shareholder’s assessable income under Part IV of this Act, be included in that assessable income in accordance with section 394zc or section 394zd of this Act:
“(b)
Shall be reduced by any amount of the dividend withholding payment credit that is applied in accordance with section 311(2) of this Act to reduce an amount of non-resident withholding tax.
“(3)
A shareholder who becomes entitled to a refund under this section shall make application for the refund, in a form authorised by the Commissioner, no earlier than the 31st day of May following the end of the imputation year during which the dividend with the credit attached was paid to the shareholder.
“(4)
The Commissioner shall not pay a refund under this section unless the Commissioner receives the shareholder dividend statement, or such other evidence as the Commissioner considers necessary, evidencing the dividend withholding payment credit giving rise to the refund of dividend withholding payment.
“(5)
Where the Commissioner is satisfied that the amount of any dividend withholding payment credit refunded to a shareholder under this section is in excess of the proper amount, the Commissioner may recover the amount of the excess in the same manner, with any necessary modifications, as if it were income tax payable by the shareholder.
“394zr Refund out of Consolidated Account
All money payable by the Commissioner pursuant to this Part of this Act by way of a refund of dividend withholding payment shall be paid out of the Consolidated Account without further appropriation than this section.
“394zs Offences
“(1)
Without limiting the application of section 416 of this Act, it is hereby declared that every company commits an offence against this Act that,—
“(a)
Being a company that is required by section 394zl of this Act to make a dividend withholding payment deduction from a foreign withholding payment dividend, fails wholly or in part to make the deduction; or
“(b)
Knowingly applies or permits to be applied any amount of that deduction for any other purpose than the payment thereof to the Commissioner.
“(2)
For the purposes of subsection (1)(b) of this section, a dividend withholding payment deduction shall be deemed to have been made if and when payment is made to the company of any foreign withholding payment dividend, and the amount of the deduction shall be deemed to have been applied for a purpose other than payment to the Commissioner if the amount of foreign withholding payment required to be paid by the company under section 394zm of this Act in respect of the quarter in which the dividend was paid is not duly paid to the Commissioner.
“(3)
It shall be a defence to a charge under subsection (1)(b) of this section if the company satisfies the Court that the amount of the deduction has been accounted for, and that any failure to account for it within the prescribed time was due to accident or other cause beyond the control of the company.
“Dividend Withholding Payment Accounts
“394zt Company may elect to maintain dividend withholding payment account
“(1)
A company that is resident in New Zealand (to the extent that it is not a company to which section 204 of this Act applies) may at any time elect to maintain a dividend withholding payment account for an imputation year.
“(2)
A company that so elects shall notify the Commissioner of that fact in writing within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.
“(3)
A company that makes an election under subsection (1) of this section—
“(a)
Shall maintain a dividend withholding payment account with effect from the date on which the company makes the election; and
“(b)
Shall, subject to this section, maintain a dividend withholding payment account for every imputation year subsequent to the one in which the election was made.
“(4)
A company that has made an election under subsection (1) of this section may, during any imputation year subsequent to that in which the election was made, elect that the company shall cease to be a dividend withholding payment account company, and, subject to subsection (5) of this section, any company that so elects shall, as from the commencement of the imputation year succeeding that in which the election to so cease is made, cease to be a company required to maintain a dividend withholding payment account.
“(5)
An election under subsection (4) of this section shall be of no effect unless the company—
“(a)
Furnishes, within the time provided for in section 394zzc of this Act, the annual dividend withholding payment return required in respect of the imputation year in which the election is made; and
“(b)
Has paid any further dividend withholding payment that may be payable by the company for that imputation year under section 394zzf of thus Act.
“394zu Dividend withholding payment account
“(1)
Every dividend withholding payment account company shall record in its dividend withholding payment account for each imputation year—
“(a)
The opening balance of the account for the imputation year, in accordance with subsection (2) of this section:
“(b)
Credits as they arise in accordance with section 394zv of this Act:
“(c)
Debits as they arise in accordance with section 394zw of this Act.
“(2)
The opening balance of the dividend withholding payment account for any imputation year shall be—
“(a)
For the imputation year during which the company commences to be a dividend withholding payment account company, nil:
“(b)
For any subsequent imputation year, the amount of the closing balance of the dividend withholding payment account for the preceding imputation year, and such amount shall be—
“(i)
A credit arising to the account where the closing balance is a credit balance:
“(ii)
A debit arising to the account where the closing balance is a debit balance.
“394zv Credits arising to dividend withholding payment account
“(1)
There shall arise as credits to be recorded in a company’s dividend withholding payment account for any imputation year the following amounts:
“(a)
The amount of dividend withholding payment paid by the company during the year, other than dividend withholding payment that is paid by way of a crediting of further dividend withholding payment pursuant to section 394zzf(5) of this Act:
“(b)
The amount of any dividend withholding payment credit attached to a dividend paid to the company during the imputation year:
“(c)
The amount of any further dividend withholding payment paid by the company during the imputation year pursuant to section 394zzf of this Act:
“(d)
The amount of any debit arising to the account pursuant to section 394zw(1)(e) of this Act (which relates to debits arising in respect of dividend withholding payment credits determined to have been the subject of an arrangement to obtain a tax advantage), to the extent that it is subsequently established that the relevant dividend withholding payment credit should not have been determined to be the subject of such an arrangement.
“(2)
The credits referred to in subsection (1) of this section shall arise—
“(a)
In the case of a credit referred to in paragraph (a) of that subsection, on the date the dividend withholding payment is paid:
“(b)
In the case of a credit referred to in paragraph (b) of that subsection, on the date the dividend is paid:
“(c)
In the case of a credit referred to in paragraph (c) of that subsection, on the date the further dividend withholding payment is paid:
“(d)
In the case of a credit referred to in paragraph (d) of that subsection, on the date that the relevant debit under section 394zw(1)(e) of this Act arose.
“394zw Debits arising to dividend withholding payment account
“(1)
There shall arise as debits to be recorded in a company’s dividend withholding payment account for any imputation year the following amounts:
“(a)
The amount of any dividend withholding payment credit attached to a dividend paid by the company during the imputation year:
“(b)
Any amount forming all or part of an end of year credit balance in the account that the company elects in accordance with section 394zze of this Act to be a credit to the company’s imputation credit account:
“(c)
The amount of any refund of dividend withholding payment paid to the company during the imputation year pursuant to section 394zo of this Act:
“(d)
The amount of any allocation deficit debit arising in the account pursuant to section 394zy(4) of this Act:
“(e)
The amount of any further debit arising to the dividend withholding payment account under section 394zg of this Act in relation to a dividend withholding payment credit determined to be the subject of an arrangement to obtain a tax advantage:
“(f)
Except in the case of a company specified in subsection (3) of this section, the amount of any particular credit in the company’s dividend withholding payment account where, since the date on which the credit arose and before that credit is cancelled out by a subsequent debit in accordance with subsection (4)(d) of this section (which period is referred to in subsection (4) of this section as the shareholding continuity period), the same persons cease to hold, in the same proportions, whether directly or through any one or more interposed companies, shares in the company carrying between them the right to receive not less than 75 percent of the profits that may be distributed by the company:
“(g)
The amount of the credit balance, if any, of the dividend withholding payment account where, during the imputation year, the company ceases to De a dividend withholding payment account company.
“(2)
The debits referred to in subsection (1) of this section shall arise—
“(a)
In the case of a debit referred to in paragraph (a) of that subsection, on the date the dividend is paid:
“(b)
In the case of a debit referred to in paragraph (b) of that subsection, at the end of the imputation year in which there was the credit balance:
“(c)
In the case of a debit referred to in paragraph (c) of that subsection, on the date the refund is paid:
“(d)
In the case of a debit referred to in paragraph (d) of that subsection, at the end of the imputation year in respect of which the allocation deficit debit arises:
“(e)
In the case of a debit referred to in paragraph (e) of that subsection, at the end of the imputation year in respect of which it is determined under section 394zg of this Act that the tax advantage arrangement occurred or commenced:
“(f)
In the case of a debit referred to in paragraph (f) of that subsection, on the date there ceases to be the continuity of shareholding referred to in that paragraph:
“(g)
In the case of a debit referred to in paragraph (g) of that subsection, immediately before the company ceases to be a dividend withholding payment account company.
“(3)
Subsection (1)(f) of this section shall not apply to—
“(a)
Any company any of whose shares are quoted on the official list of the New Zealand Stock Exchange:
“(b)
Any statutory producer board (as defined in section 197e of this Act):
“(c)
Any wholly-owned subsidiary of a statutory producer board (as so defined):
“(d)
Any co-operative company registered under the Cooperative Companies Act 1956, the Co-operative Dairy Companies Act 1949, the Co-operative Freezing Companies Act 1960, or the Co-operative Forestry Companies Act 1978:
“(e)
Any private company (as defined in section 2 of the Companies Act 1955) that is included in a specified group (as defined in section 191(4) of this Act) where shares of any member of the specified group are quoted on the official list of the New Zealand Stock Exchange, and either—
“(i)
The company continues throughout the relevant shareholding continuity period to be in a specified group of which the member with the snares so quoted also continues to be a member; or
“(ii)
During the relevant shareholding continuity period,—
“(A)
The failure to meet the continuity of shareholding requirement was by reason only of the fact that the quoted shares of the other company that was a member of the specified group had been sold in the ordinary course of trading on the share market; and
“(B)
Not more than 10 percent of those shares in that other company had been acquired by any one person (including any nominee of that person as defined in section 7(1) of this Act) or by any 2 or more persons who are associated persons.
“(4)
For the purposes of paragraph (f) of subsection (1) of this section,—
“(a)
The provisions of section 191(1) of this Act that apply in determining the prescribed proportion of title to profits held by any person shall, with any necessary modifications, apply for the purpose of determining the extent of the rights of any person to receive profits that may be distributed by the company as if references to an income year were references to the relevant shareholding continuity period; and for the purposes of this paragraph,—
“(i)
The reference to paid-up capital in subsection (4)(a) of section 191 of this Act shall be read as a reference to the right to receive profits that may be distributed:
“(ii)
The proviso to subsection (4) of that section shall not apply, and the provisions of subsections (7c) and (7d) of that section shall apply, in determining any particular proportion of shares held:
“(b)
Where during any shareholding continuity period shares are transferred in accordance with a matrimonial agreement, the shares of the transferee shall be deemed to be held by the transferor for the remainder of that period:
“(c)
Where a shareholder dies during any shareholding continuity period, shares held by or on behalf of the trustee of the estate of the deceased shareholder, or by or on behalf of the persons entitled to those snares as beneficiaries under the will or intestacy of the deceased shareholder, shall be deemed to be held by the deceased shareholder for the remainder of that period:
“(d)
A credit to a dividend withholding payment account that is subject to the continuity of shareholding requirement referred to in that paragraph shall cease to be subject to that requirement to the extent that, before the required continuity of shareholding ceases, any debit to the account sufficient to cancel out the amount of the credit arises subsequent to that credit arising, and for this purpose—
“(i)
Any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit is no longer subject to the requirement; and
“(ii)
The amount of any debit shall be offset against the amount of any credit in the order in which the credits arise:
“(e)
The continuity of shareholding requirement referred to in that paragraph shall apply only in respect of any credit arising after the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent.
“394zx Company may attach dividend withholding payment credit to dividend
“(1)
A dividend withholding payment account company may, on payment of a dividend by the company, attach a dividend withholding payment credit to the dividend.
“(2)
A dividend withholding payment company may, in accordance with section 394zzk of this Act, retrospectively attach a dividend withholding payment credit to a dividend paid by the company on or after the 1st day of April 1988 but before the 1st day of February 1989.
“394zy Allocation rules for dividend withholding payment credits
“(1)
A company shall not attach to a dividend a dividend withholding payment credit of such an amount that the dividend withholding payment ratio of the dividend would exceed the ratio calculated in accordance with the following formula:
_eqn32.JPG)
where—
a
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act and applying in respect of the income year that is concurrent with the imputation year in which the dividend is paid.
“(2)
Where a dividend withholding payment account company has paid a benchmark dividend in any imputation year, the company shall, unless it makes a ratio change declaration in accordance with subsection (3) of this section, ensure that the dividend withholding payment ratio of every subsequent dividend paid by the company during that year is the same as the dividend withholding payment ratio of the benchmark dividend; and for the purposes of this subsection any benchmark dividend with a dividend withholding payment ratio exceeding the ratio specified in subsection (1) of this section shall be deemed to have the ratio so specified.
“(3)
The dividend withholding payment ratio of a subsequent dividend may differ from that of a benchmark dividend if—
“(a)
An officer of the company declares, in a ratio change declaration in the prescribed form, that the subsequent dividend is not being paid as part of an arrangement to obtain a tax advantage within the meaning of section 394zg of this Act, and provides such further information as may be prescribed; and
“(b)
The ratio change declaration is delivered to the Commissioner before the date of payment of the subsequent dividend, or before such later date as the Commissioner may allow in any case or class of cases; and
“(c)
The subsequent dividend is not paid as part of an arrangement to obtain a tax advantage within the meaning of section 394zg of this Act.
“(4)
Where the dividend withholding payment ratio of a subsequent dividend differs from the dividend withholding payment ratio of a benchmark dividend in contravention of subsection (2) of this section, there shall arise an allocation deficit debit of an amount calculated in accordance with the following formula:
(a × b) − c
where—
a
is the aggregate of the amount of all dividends paid by the company during the imputation year (exclusive of any imputation credit or withholding payment credit); and
b
is the lesser of—
“(i)
The dividend withholding payment ratio of the dividend with the greatest dividend withholding payment ratio of all dividends paid by the company during the income year; or
“(ii)
The ratio calculated in accordance with the formula stated in subsection (1) of this section; and
c
is the aggregate of all dividend withholding payment credits attached to dividends paid by the company during the imputation year.
“(5)
Nothing in this section shall apply to a dividend that is the subject of a determination made by a statutory producer board or a co-operative company in accordance with section 394r or section 394x of this Act.
“394zz Dividend with both imputation credit and dividend withholding payment credit attached
“(1)
Where a company pays a dividend with both an imputation credit and a dividend withholding payment credit attached, the company shall ensure that the combined imputation and dividend withholding payment ratio of the dividend does not exceed the ratio calculated in accordance with the following formula:
_eqn33.JPG)
where—
a
is the rate of resident companies income tax, expressed as a percentage, stated in clause 7 of the First Schedule to this Act, and applying in respect of the income year that is concurrent with the imputation year in which the dividend is paid.
“(2)
Where a company pays a dividend with a combined imputation and dividend withholding payment ratio exceeding the ratio stated in subsection (1) of this section, there shall be an excess credit amount in relation to the dividend of an amount calculated in accordance with the following formula:
a × (b − c)
where—
a
is the amount of the dividend paid (excluding the imputation credit and the dividend withholding payment credit); and
b
is the combined imputation and dividend withholding payment ratio of the dividend; and
c
is the combined imputation and dividend withholding payment ratio calculated in accordance with the formula stated in subsection (1) of this section.
“394zza Statement to be retained when dividend paid
Where a dividend withholding payment account company attaches a dividend withholding payment credit to a dividend, the company shall include in the company dividend statement required by section 394h of this Act the following information:
“(a)
The total amount of the dividend withholding payment credits attached in respect of the dividend:
“(b)
The dividend withholding payment ratio of the dividend:
“(c)
Where any imputation credit has also been attached to the dividend, the combined imputation and dividend withholding payment ratio of the dividend.
“394zzb Statement to shareholder when dividend paid
“(1)
Where a dividend withholding payment account company attaches a dividend withholding payment credit to a dividend, and the company is required by section 394i of this Act to give a shareholder dividend statement in respect of that dividend, the company shall include in the shareholder dividend statement the following information:
“(a)
The amount of the dividend withholding payment credit:
“(b)
The aggregate of—
“(i)
The dividend paid to the shareholder (excluding the imputation credit and the dividend withholding payment credit); and
“(ii)
The sum of the imputation credit and the dividend withholding payment credit:
“(c)
The aggregate of the imputation credit and the dividend withholding payment credit.
“(2)
Where a dividend withholding payment account company attaches a dividend withholding payment credit to a dividend, and section 394i of this Act does not apply to require a shareholder dividend statement to be given in respect of the dividend, the company, at the time of payment of the dividend, shall give to the shareholder a shareholder dividend statement in a form approved by the Commissioner showing—
“(a)
The information required by paragraphs (a) to (d) of section 394i(1) of this Act:
“(b)
The amount of the dividend paid to the shareholder (excluding the dividend withholding payment credit):
“(c)
The amount of the dividend withholding payment credit:
“(d)
The aggregate of the amount of the dividend and the amount of the dividend withholding payment credit:
“(e)
Such further information as may be required by the Commissioner.
“394zzc Annual dividend withholding payment account return
“(1)
Every dividend withholding payment account company shall, not later than the 31st day of May following the end of each imputation year for which the company was a dividend withholding payment account company, furnish to the Commissioner an annual dividend withholding payment account return for that imputation year in the prescribed form, showing—
“(a)
The opening and closing balances of the dividend withholding payment account for the imputation year:
“(b)
The amount and source of all credits and debits that have arisen during the imputation year in accordance with sections 394zv and 394zw of this Act:
“(c)
The amount of any further dividend withholding payment payable in respect of the imputation year pursuant to section 394zzf of this Act:
“(d)
The amount of any dividend withholding payment penalty tax payable in respect of the imputation year:
“(e)
Whether the company has made an election under section 394zt(4) or this Act to cease to be a dividend withholding payment account company:
“(f)
The amount and source of every foreign withholding payment dividend paid to the company during the year, and the amount of any foreign withholding tax paid in respect of any such foreign withholding payment dividend:
“(g)
Such further information as may be prescribed or as may be required by the Commissioner.
“394zzd Dividend withholding payment account return to be furnished where Commissioner so requires, or where company ceases to be resident in New Zealand
“(1)
The Commissioner may require a dividend withholding payment account company to furnish, within such time as the Commissioner may allow, a dividend withholding payment account return in respect of any period specified by the Commissioner.
“(2)
A company that in any imputation year ceases to be resident in New Zealand shall furnish to the Commissioner, not later than 2 calendar months after the last day on which it is still resident, a dividend withholding payment account return in respect of the period commencing on the first day of the imputation year and ending with the last day on which the company is so resident.
“(3)
A return required to be furnished under this section shall, except where the Commissioner otherwise specifies, contain the matters referred to in section 394zzc of this Act as if the references in that section to an imputation year were,—
“(a)
In the case of a return required to be furnished under subsection (1) of this section, references to the period specified by the Commissioner:
“(b)
In the case of a return required to be furnished under subsection (2) of this section, references to the period referred to in that subsection.
“394zze Transfer of credit balance to imputation credit account
“(1)
A company that has a credit balance in its dividend withholding payment account—
“(a)
At the end of any imputation year; or
“(b)
Immediately before the arising of the debit referred to in section 394zw(1)(g) of this Act, where the company ceases to be resident in New Zealand—
may elect that all or any part of that credit balance shall be a credit to the company’s imputation credit account and a debit to its dividend withholding payment account for the imputation year in which the credit balance occurred.
“(2)
A company shall make an election under this section by recording the amount in respect of which it makes the election—
“(a)
As a debit in the company’s dividend withholding payment account; and
“(b)
As a credit in its imputation credit account.
“394zzf Further dividend withholding payment payable where end of year debit balance, or where company ceases to be resident in New Zealand
“(1)
Where there is a debit balance in a company’s dividend withholding payment account at the end of any imputation year, and the company is not a company that is liable to pay further dividend withholding payment pursuant to subsection (3) of this section, the company is liable to pay to the Commissioner further dividend withholding payment of an amount equal to that debit balance.
“(2)
A company shall pay any further dividend withholding payment to which it is liable under subsection (1) of this section not later than the 31st day of May following the end of the imputation year for which there was the debit balance.
“(3)
Where there is a debit balance in a company’s dividend withholding payment account immediately before the company ceases to be resident in New Zealand, the company is liableto pay to the Commissioner further dividend withholding payment of an amount equal to that debit balance.
“(4)
A company shall pay any further dividend withholding payment to which it is liable under subsection (3) of this section not later than the last day on which it is still resident in New Zealand.
“(5)
Where a company pays any further dividend withholding payment for which it is liableunder this section, that further dividend withholding payment may be credited in payment of any dividend withholding payment for which the company becomes liable after the date of that payment, but, to the extent that it cannot be so credited, whether by reason of the company being wound up or for any other reason, shall be retained by the Commissioner.
“(6)
Where a company liable to pay further dividend withholding payment under this section fails to pay the further dividend withholding payment within the time for payment provided for in subsection (2) or subsection (4) of this section, as the case may be, the company is liable to a penalty by way of additional tax equal to—
“(a)
Ten percent of the amount in respect of which default has been made (in this subsection referred to as the amount in default); and
“(b)
Ten percent of so much of the amount in default and the amount of any penalty added in accordance with paragraph (a) of this subsection as remains unpaid at the end of the day on which there expires the period of 6 months immediately following the day on which the failure to pay occurred; and
“(c)
Ten percent of so much of—
“(i)
The amount in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) or paragraph (b) of this subsection; and
“(iii)
The amount of any penalty previously added in accordance with this paragraph,—
as remains unpaid at the expiry of any of the periods of 6 months that, consecutively, succeed the 6-month period referred to in paragraph (b) of this subsection;—
and subject to this Part of this Act, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to the amount of every penalty imposed under this subsection as if it were additional tax under section 398 of this Act and as if the company liable to the penalty were the taxpayer.
“(7)
The Commissioner may, in respect of any company liable to pay further dividend withholding payment under this section, make an assessment of the amount of further dividend withholding payment that in the Commissioner’s judgment ought to be levied, and the company shall be liable to pay the amount so assessed except in so far as the company establishes on objection that the assessment is excessive or that the company is not chargeable with the further dividend withholding payment.
“(8)
Sections 23, 27, and 29 of this Act shall apply, so far as may be, with respect to every assessment made under this section as if—
“(a)
In those sections, the expression ‘taxpayer’ included a company which is chargeable with further dividend withholding payment; and
“(b)
In section 23, the expression ‘tax already assessed’ included the further dividend withholding payment already assessed under this section.
“(9)
An assessment made under this section shall be subject to objection in the same manner as an assessment of income tax, and Part III of this Act shall apply, so far as may be, to an objection to an assessment made under this section as if the terms ‘income tax’ and ‘tax’ in that Part included the further dividend withholding payment for which a company may be chargeable under this section.
“(10)
Subject to this section, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to any further dividend withholding payment for which a company is chargeable under this section as if it were income tax.
“Dividend Withholding Payment Penalty Tax
“394zzg Dividend withholding payment penalty tax payable where end of year debit balance
“(1)
Every company that is liable to pay further dividend withholding payment pursuant to section 394zzf(1) of this Act in respect of an end of year debit balance is also liable to pay a special tax by way of an income tax known as dividend withholding payment penalty tax.
“(2)
The amount of the dividend withholding payment penalty tax payable by a company shah be 10 percent of the amount of further dividend withholding payment that gives rise to the liability for the dividend withholding payment penalty tax.
“(3)
A company that is liable to pay dividend withholding payment penalty tax shall pay the tax not later than the 31st day of May following the end of the imputation year in which occurred the end of year debit balance giving rise to the liability for the further dividend withholding payment and the dividend withholding payment penalty tax.
“(4)
Where a company that is liable to pay dividend withholding payment penalty tax fails to pay the tax on or before the relevant 31st day of May, the company is liable to a penalty by way of additional tax equal to—
“(a)
Ten percent of the amount of dividend withholding payment penalty tax in respect of which default has been made (in this subsection referred to as the tax in default); and
“(b)
Ten percent of so much of—
“(i)
The tax in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) of this subsection,—
as remains unpaid at the end of the day on which there expires the period of 6 months immediately following the day on which the failure to pay occurred; and
“(c)
Ten percent of so much of—
“(i)
The tax in default; and
“(ii)
The amount of any penalty added in accordance with paragraph (a) or paragraph (b) of this subsection; and
“(iii)
The amount of any penalty previously added in accordance with this paragraph,—
as remains unpaid at the expiry of any of the periods of 6 months that, consecutively, succeed the 6-month period referred to in paragraph (b) of this subsection;—
and subject to this Part of this Act, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to the amount of every penalty imposed under this subsection as if it were additional tax under section 398 of this Act and as if the company liable to the penalty were the taxpayer.
“(5)
The Commissioner may, in respect of any company chargeable with dividend withholding payment penalty tax, make an assessment of the amount of dividend withholding payment penalty tax that in the judgment of the Commissioner ought to be levied on the company.
“(6)
The company shall be liable to pay dividend withholding payment penalty tax so assessed except in so far as the company establishes on objection that the assessment is excessive or that the company is not chargeable with the dividend withholding payment penalty tax.
“(7)
Sections 23, 27, and 29 of this Act shall apply with respect to every assessment under this section as if—
“(a)
In those sections, the expression ‘taxpayer’ included a company chargeable with dividend withholding payment penalty tax; and
“(b)
In section 23, the expression ‘tax already assessed’ included any dividend withholding payment penalty tax already assessed under this section.
“(8)
An assessment made under this section shall be subject to objection in the same manner as an assessment of income tax levied under section 38 of this Act, and Part III of this Act shall apply, so far as may be, to an objection to an assessment made under this section as if the terms ‘income tax’ and ‘tax’ in that Part included dividend withholding payment penalty tax.
“394zzh Remissions and refunds of dividend withholding payment penalty tax
“(1)
The Commissioner shall remit any dividend withholding payment penalty tax imposed under section 394zzg of this Act to the extent that the Commissioner is satisfied that—
“(a)
Liability for the dividend withholding payment penalty tax arose by virtue of a debit arising to the company’s dividend withholding payment account under section 394zw(1)(e) of this Act in relation to an arrangement to obtain a tax advantage, and it is established subsequently that, in relation to any such debit, a credit arises to the dividend withholding payment account in accordance with section 394zv(1)(d) of this Act; or
“(b)
Liability for the dividend withholding payment penalty tax arose by virtue of a refund of dividend withholding payment having been sent but not having been received by the company, or not having been known by the company to have been received, before the end of the imputation year or before the company ceased to be resident in New Zealand, as the case may be.
“(2)
Where the Commissioner remits any dividend withholding payment penalty tax under this section, the Commissioner shall also remit any penalty by way of additional tax imposed under section 394zzg(4) of this Act to the extent that the Commissioner is satisfied that the penalty was imposed in respect of the dividend withholding payment penalty tax so remitted.
“(3)
Where the Commissioner remits any dividend withholding payment penalty tax under subsection (1)(a) of this section, the Commissioner shall also remit any penalty by way of additional tax imposed under section 394zzf(6) of tins Act to the extent that the Commissioner is satisfied that the penalty was imposed in respect of the amount of further dividend withholding payment that gave rise to the imposition of the dividend withholding payment penalty tax so remitted.
“394zzi Application of other provisions of this Act to dividend withholding payment penalty tax
“(1)
Subject to this Part of this Act and to subsection (2) of this section, the other Parts of this Act, so far as they are applicable and with any necessary modifications, shall apply with respect to dividend withholding payment penalty tax as if it were income tax levied under section 38 of this Act.
“(2)
Nothing in this Part of this Act shall be so construed as to include dividend withholding payment penalty tax within the meaning of the terms ‘income tax’ or ‘tax’ for the purposes of this Part or any of Parts IV, XIIa, and XIIc or sections 398a and 413a of this Act.
“Credits and Debits Incorrectly Recorded
“394ZZJ Determinations by Commissioner as to credits and debits arising to dividend withholding payment credit account
“(1)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend withholding payment credit account is not the correct amount that should have been recorded in respect of the credit or debit, the Commissioner shall determine the amount of the credit or debit properly arising to the account.
“(2)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend withholding payment credit account should not have been so recorded, the Commissioner shall determine accordingly.
“(3)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s dividend withholding payment credit account should not have been recorded as arising at the time it was recorded as arising, the Commissioner shall determine the time at which the credit or debit properly arose to the account.
“(4)
Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s dividend withholding payment credit account should have been so recorded, the Commissioner shall determine—
“(a)
The amount of the credit or debit so arising; and
“(b)
The time at which the credit or debit arose to the account.
“(5)
Where the Commissioner makes a determination under any of subsections (1) to (4) of this section then, except in so far as the company establishes on objection that any credit or debit was correctly recorded, or not recorded as the case may be, in the dividend withholding payment account,—
“(a)
The relevant credit or debit in the account shall be deemed to have arisen, or not to have arisen, or shall be deemed to have been the amount determined by the Commissioner under subsection (1) of this section, as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen:
“(b)
The company shall make such other corrections in respect of any credits or debits or balances arising to its dividend withholding payment account or imputation credit account or branch equivalent tax account, whether for the imputation year to which the determination related subject of the determination was made or for any subsequent year, as may be necessary or as may be directed by the Commissioner as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
“(6)
As soon as is convenient after a determination is made under any of subsections (1) to (4) of this section (hereafter in this section and in section 19 of this Act referred to as a determination of incorrect entry), the Commissioner shall cause notice of the determination to be given to the company in respect of whose dividend withholding payment credit account the determination is made.
“(7)
Any such notice may be included in a notice of assessment made pursuant to section 29(1) of this Act or a notice of determination of loss made pursuant to section 29(2) of this Act.
“(8)
An omission to give the notice referred to in subsection (6) of this section shall not invalidate the determination of incorrect entry.
“Transitional
“394zzk Dividend paid before 1 February 1989
“(1)
A company that may under section 394zt of this Act elect to be a dividend withholding payment company may, on or before the 31st day of March 1989, elect to be a dividend withholding payment company retrospective to such date (not being earlier than the 1st day of April 1988 and not being a date on which the company was not resident in New Zealand) as the company determines, and the provisions of this Part of this Act shall apply accordingly, with any necessary modifications, as if the election had been made on that date.
“(2)
Subject to subsection (1) of this section, a dividend withholding payment account company may, on or before the 31st day of March 1989, determine that a dividend withholding payment credit shall be retrospectively attached to any dividend paid by the company during the period commencing on the 1st day of April 1988 and ending with the 31st day of January 1989, and to the extent that the company so determines it shall, for the purposes of this Part and Part XIIa of this Act, be deemed to have paid a dividend with a dividend withholding payment credit attached.
“(3)
Where a company has determined that a dividend withholding payment credit shall be attached to a dividend in accordance with subsection (1) of this section—
“(a)
The amount of any dividend withholding payment credit so attached shall, for the purposes of section 394zw of this Act, be a debit to the company’s dividend withholding payment account arising on the date the company paid the dividend:
“(b)
The company shall complete at the time of the determination under subsection (1) of this section the company dividend statement required to be completed in accordance with sections 394h and 394zza of this Act:
“(c)
Any statement to be given by the company in accordance with section 394zzb of this Act shall be given to the shareholder at the time the company makes the determination under subsection (1) of this section.
“(4)
Any ratio change declaration required by section 394zy of this Act in respect of any dividend paid on or before the 31st day of January 1989 whose dividend withholding payment ratio diners from that of the benchmark dividend may, whether or not the company makes a determination in respect of the dividend under subsection (2) of this section, be delivered to the Commissioner not later than the 7th day of February 1989.
“394zzl Accounting for dividend withholding payment where dividend received before enactment of Income Tax Amendment Act (No. 5) 1988, etc.
“(1)
Where a foreign withholding payment dividend has been paid to a company during the period commencing with the 1st day of April 1988 and ending with the day before the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent,—
“(a)
The company is not liable to make a dividend withholding payment deduction in respect of any such dividend; but
“(b)
The company is liable to pay dividend withholding payment to the Commissioner in accordance with this Part of this Act in respect of any such dividend, as if the proper deductions had been made; and
“(c)
The company may, pursuant to sections 394zm(2) and 394zzq of this Act, reduce the amount of any dividend withholding payment payable in accordance with this section by any amount of credit balance existing in the company’s branch equivalent tax account as at the 31st day of December 1988.
“(2)
Notwithstanding anything in section 394zn of this Act, any amount of dividend withholding payment payable in respect of any foreign withholding payment dividend derived during the quarters ending on the 30th day of June 1988, the 30th day of September 1988, and the 31st day of December 1988 shall be paid not earlier than the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent and not later than the 14th day of February 1989, and the provisions of that section shall apply accordingly.
Part “PART XIIc “Branch Equivalent Tax Accounts
“394zzm Interpretation
“(1)
In this Part of this Act, unless the context otherwise requires,—
“‘Branch equivalent tax account’ means the account to be maintained by a branch equivalent tax account company or a branch equivalent tax account person pursuant to section 394zzn(3) or section 394zzs(3) of this Act:
“‘Branch equivalent tax account company’ means a company that, having made an election under subsection (1) of section 394zzn of this Act, is required by subsection (3) of that section to maintain a branch equivalent tax account:
“‘Branch equivalent tax account person’ means a person (not being a company other than a company to which section 204 of this Act applies) who, having made an election under subsection (1) of section 394zzs of this Act, is required by subsection (3) of that section to maintain a branch equivalent tax account.
“Terms defined in sections 394a and 394zk of this Act have the meanings so defined.
“(2)
Every reference in this Part of this Act to an income year in relation to a taxpayer shall, where the taxpayer furnishes a return of income under section 15 of this Act for an accounting year ending with an annual balance date other than the 31st day of March, be deemed to be a reference to the accounting year corresponding with that income year, and in every such case this Part of this Act shall, with any necessary modifications, apply accordingly.
“(3)
For the purposes of this Part of this Act, the balance of a branch equivalent tax account at any time shall be ascertained by calculating the difference in amount between the aggregate of credits and the aggregate of debits to the account existing at that time, and the account shall have—
“(a)
A credit balance to the extent that credits exceed debits:
“(b)
A debit balance to the extent that debits exceed credits.
“Branch Equivalent Tax Accounts of Companies
“394zzn Company may elect to maintain branch equivalent tax account
“(1)
A company resident in New Zealand (not being a company to which section 204 of this Act applies) may at any time during an imputation year elect to maintain a branch equivalent tax account for that imputation year.
“(2)
A company that so elects shall notify the Commissioner of that fact in writing within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.
“(3)
A company that makes an election under subsection (1) of this section shall maintain a branch equivalent tax account—
“(a)
For the imputation year in which the election is made; and
“(b)
Subject to this section, for every subsequent imputation year.
“(4)
A company that has made an election under subsection (1) of this section may, during any imputation year subsequent to that in which the election was made, elect that the company shall cease to be a branch equivalent tax account company, and, subject to subsection (5) of this section, any company that so elects shall, as from the commencement of the imputation year succeeding that in which the election to so cease is made, cease to be a company required to maintain a branch equivalent tax account.
“(5)
An election under subsection (4) of this section shall be of no effect unless the company furnishes, within the time provided for in section 394j of this Act, the annual imputation return required in respect of the imputation year in which the election is made.
“394zzo Branch equivalent tax account of company
“(1)
Every branch equivalent tax account company shall record in its branch equivalent tax account for any imputation year—
“(a)
The opening balance of the account for that year, in accordance with subsection (2) of this section:
“(b)
Credits as they arise in accordance with section 394zzp(1) and (2) of this Act:
“(c)
Debits as they arise in accordance with section 394zzp(3) to (6) of this Act.
“(2)
The opening balance of the branch equivalent tax account of a company for any imputation year shall be—
“(a)
For the imputation year during which the company commences to be a branch equivalent tax account company, nil:
“(b)
For any subsequent imputation year, the amount of the closing balance of the branch equivalent tax account of the company for the immediately preceding imputation year, and such amount shall be—
“(i)
A credit arising to the account where the closing balance is a credit balance:
“(ii)
A debit arising to the account where the closing balance is a debit balance.
“394zzp Credits and debits arising to branch equivalent tax account of company
“(1)
There shall from time to time arise as credits to be recorded in the branch equivalent tax account of a branch equivalent tax account company amounts calculated in accordance with the following formula:
_eqn34.JPG)
where—
a
is the amount of income tax payable by the company for any income year of the company (being an income year commencing on or after the 1st day of April 1988); and
b
is the amount of any foreign tax credit allowed in accordance with section 245k or section 245l of this Act in calculating the income tax payable by the company for that income year; and
c
is the amount that is the lesser of—
“(i)
The amount of any attributed foreign income derived by the company during that income year; or
“(ii)
The taxable income of the company for that income year; and
d
is the taxable income referred to in paragraph (ii) of item c of this formula.
“(2)
Any credit referred to in subsection (1) of this section shall arise on the date on which the company files a return of income for the income year of the company referred to in that subsection (being an income year commencing on or after the 1st day of April 1988).
“(3)
There shall arise as debits to be recorded in the branch equivalent tax account of a branch equivalent tax account company the following amounts:
“(a)
The amount of any credit balance in the account that the company elects in accordance with section 394zzq. of this Act to use to reduce an amount of dividend withholding payment payable by the company under section 394zm of this Act:
“(b)
The amount of any credit balance in the account that the company elects in accordance with section 394zzq of this Act to be a credit to the company’s imputation credit account:
“(c)
An amount equal to any refund of income tax to the extent that the refund is attributable to income tax paid in relation to attributed foreign income derived in respect of an income interest in a controlled foreign company:
“(d)
Except in the case of a company specified in subsection (5) of this section the amount of any particular credit in the company’s branch equivalent tax account where, since the date on which the credit arose and before that credit is cancelled out by a subsequent debit in accordance with subsection (6)(d) of this section (which period is referred to in subsection (6) of this section as the shareholding continuity period), the same persons cease to hold, in the same proportions, whether directly or through any one or more interposed companies, shares in the company carrying between them the right to receive not less than 75 percent of the profits that may be distributed by the company:
“(e)
The amount of any credit balance of the branch equivalent tax account where, during the imputation year, the company ceases to be resident in New Zealand.
“(4)
The debits referred to in subsection (3) of this section shall arise—
“(a)
In the case of a debit referred to in paragraph (a) of that subsection, on the date by which the company is required by section 394zn of this Act to pay to the Commissioner the dividend withholding payment that is reduced by the relevant amount of the credit balance:
“(b)
In the case of a debit referred to in paragraph (b) of that subsection, on the date the company elects in accordance with section 394zzq of this Act to credit the company’s imputation credit account:
“(c)
In the case of a debit referred to in paragraph (c) of that subsection, on the date the refund is paid:
“(d)
In the case of a debit referred to in paragraph (d) of that subsection, on the date there ceases to be the continuity of shareholding referred to in that paragraph:
“(e)
In the case of a debit referred to in paragraph (e) of that subsection, on the date on or on the expiry of which the company ceases to be resident in New Zealand.
“(5)
Subsection (3)(d) of this section shall not apply to—
“(a)
Any company any of whose shares are quoted on the official list of the New Zealand Stock Exchange:
“(b)
Any statutory producer board (as defined in section 197e of this Act):
“(c)
Any wholly-owned subsidiary of a statutory producer board (as so defined):
“(d)
Any co-operative company registered under the Cooperative Companies Act 1956, the Co-operative Dairy Companies Act 1949, the Co-operative Freezing Companies Act 1960, or the Co-operative Forestry Companies Act 1978:
“(e)
Any private company (as defined in section 2 of the Companies Act 1955) that is included in a specified group (as defined in section 191(4) of this Act) where shares of any member of the specified group are quoted on the official list of the New Zealand Stock Exchange, and either—
“(i)
The company continues throughout the relevant shareholding continuity period to be in a specified group of which the member with the snares so quoted also continues to be a member; or
“(ii)
During the relevant shareholding continuity period,—
“(A)
The failure to meet the continuity of shareholding requirement was by reason only of the fact that the quoted shares of the other company that was a member of the specified group had been sold in the ordinary course of trading on the share market; and
“(B)
Not more than 10 percent of those shares in that other company had been acquired by any one person (including any nominee of that person as defined in section 7(1) of this Act) or by any 2 or more persons who are associated persons.
“(6)
For the purposes of paragraph (d) of subsection (3) of this section,—
“(a)
The provisions of section 191(1) of this Act that apply in determining the prescribed proportion of title to profits held by any person shall, with any necessary modifications, apply for the purpose of determining the extent of the rights of any person to receive profits that may be distributed by the company as if references to an income year were references to the relevant shareholding continuity period; and for the purposes of this paragraph,—
“(i)
The reference to paid-up capital in subsection (4)(a) of section 191 of this Act shall be read as a reference to the right to receive profits that may be distributed:
“(ii)
The proviso to subsection (4) of that section shall not apply, and the provisions of subsections (7c) and (7d) of that section shall apply, in determining any particular proportion of shares held:
“(b)
Where during any shareholding continuity period shares are transferred in accordance with a matrimonial agreement, the shares of the transferee shall be deemed to be held by the transferor for the remainder of that period:
“(c)
Where a shareholder dies during any shareholding continuity period, shares held by or on behalf of the trustee of the estate of the deceased shareholder, or by or on behalf of the persons entitled to those shares as beneficiaries under the will or intestacy of the deceased shareholder, shall be deemed to be held by the deceased shareholder for the remainder of that period:
“(d)
A credit to a branch equivalent tax account that is subject to the continuity of shareholding requirement referred to in that paragraph shall cease to be subject to that requirement to the extent that, before the required continuity of shareholding ceases, any debit to the account sufficient to cancel out the amount of the credit arises subsequent to that credit arising, and for this purpose—
“(i)
Any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit is no longer subject to the requirement; and
“(ii)
The amount of any debit shall be offset against the amount of any credit in the order in which the credits arise:
“(e)
The continuity of shareholding requirement referred to in that paragraph shall apply only in respect of any credit arising after the date on which the Income Tax Amendment Act (No. 5) 1988 receives the Royal assent.
“394zzq Transfer of credit to company’s imputation credit account, or use of credit to reduce dividend withholding payment
“(1)
A branch equivalent tax account company may elect that all or part of any credit balance in its branch equivalent tax account at the time of the election shall be a credit to the company’s imputation credit account and a debit to its branch equivalent tax account.
“(2)
A company shall make an election under subsection (1) of this section by recording the amount in respect of which it makes the election—
“(a)
As a debit in the company’s branch equivalent tax account; and
“(b)
As a credit in its imputation credit account.
“(3)
A branch equivalent tax account company may elect that all or part of any credit balance in its branch equivalent tax account at the time of the election shall be used for the purpose of reducing, so far as the liability extends, the amount of any dividend withholding payment deduction required to be made by the company under sections 394zl and 394zm of this Act.
“(4)
A company shall make an election under subsection (3) of this section by recording the amount in respect of which it makes the election as a debit in its branch equivalent tax account.
“394zzr Determinations by Commissioner as to credits and debits arising to branch equivalent tax account
“(1)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account is not the correct amount that should have been recorded in respect of the credit or debit, the Commissioner shall determine the amount of the credit or debit properly arising to the account.
“(2)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account should not have been so recorded, the Commissioner shall determine accordingly.
“(3)
Where the Commissioner considers that any amount recorded as a credit or a debit arising to a company’s branch equivalent tax account should not have been recorded as arising at the time it was recorded as arising, the Commissioner shall determine the time at which the credit or debit properly arose to the account.
“(4)
Where the Commissioner considers that any amount that has not been recorded as a credit or debit arising to a company’s branch equivalent tax account should have been so recorded, the Commissioner shall determine—
“(a)
The amount of the credit or debit so arising; and
“(b)
The time at which the credit or debit arose to the account.
“(5)
Where the Commissioner makes a determination under any of subsections (1) to (4) of this section then, except in so far as the company establishes on objection that any credit or debit was correctly recorded, or not recorded as the case may be, in the branch equivalent tax account,—
“(a)
The relevant credit or debit shall be deemed to have arisen, or not to have arisen, or to have been the amount determined by the Commissioner under subsection (1) of this section, as the case may require, effective on the date on which the debit or credit originally arose, or is determined by the Commissioner as having arisen:
“(b)
The company shall make such other corrections in respect of any credits or debits or balances recorded as arising to its branch equivalent tax account or imputation credit account or dividend withholding payment account, whether for the imputation year in which the incorrect record the subject of the determination was made or for any subsequent year, as may be necessary or as may be directed by the Commissioner as a consequence of the determination in relation to the amount incorrectly recorded, or not recorded.
“(6)
As soon as is convenient after a determination is made under any of subsections (1) to (4) of this section (hereafter in this section and in section 19 of this Act referred to as a determination of incorrect entry), the Commissioner shall cause notice of the determination to be given to the company in respect of whose branch equivalent tax account the determination is made.
“(7)
Any such notice may be included in a notice of assessment made pursuant to section 29(1) of this Act or a notice of determination of loss made pursuant to section 29(2) of this Act.
“(8)
An omission to give the notice referred to in subsection (6) of this section shall not invalidate the determination of incorrect entry.
“Branch Equivalent Tax Accounts of Persons
“394zzs Person may elect to maintain branch equivalent tax account
“(1)
A person resident in New Zealand (not being a company other than a company to which section 204 of this Act applies) may at any time during an income year of that person elect to maintain a branch equivalent tax account for that year.
“(2)
A person who so elects shall notify the Commissioner of that fact in writing within 21 days after the date of the election, or within such further time as the Commissioner may allow in any case or class of cases.
“(3)
A person who makes an election under subsection (1) of this section shall maintain a branch equivalent tax account—
“(a)
For the income year in which the election is made; and
“(b)
Subject to this section, for every subsequent income year.
“(4)
A person who has made an election under subsection (1) of this section may, during any income year subsequent to that in which the election was made, elect to cease to be a branch equivalent tax account person, and, subject to subsection (5) of this section, any person who so elects shall, as from the commencement of the income year succeeding that in which the election to so cease is made, cease to be a person required to maintain a branch equivalent tax account.
“(5)
An election made under subsection (4) of this section shall be of no effect unless the person furnishes, within the time provided for in section 394zzw(3) of this Act, the annual branch equivalent tax account return required in respect of the income year in which the election is made.
“394zzt Branch equivalent tax account of person
“(1)
Every branch equivalent tax account person shall record in the person’s branch equivalent tax account for any income year of that person—
“(a)
The opening balance of the account for that year, in accordance with subsection (2) of this section:
“(b)
Credits as they arise in accordance with section 394zzu(1) and (2) of this Act:
“(c)
Debits as they arise in accordance with section 394zzu(3) to (5) of this Act.
“(2)
The opening balance of the branch equivalent tax account of a person for any income year shall be—
“(a)
For the income year during which the person commences to be a branch equivalent tax account person, nil:
“(b)
For any subsequent income year, the amount of the closing balance of the branch equivalent tax account of the person for the preceding income year, and such amount shall be—
“(i)
A credit arising to the account where the closing balance is a credit balance:
“(ii)
A debit arising to the account where the closing balance is a debit balance.
“394zzu Credits and debits arising to branch equivalent tax account of person
“(1)
There shall arise from time to time as credits to be recorded in the branch equivalent tax account of a branch equivalent tax account person amounts calculated in accordance with the following formula:
_eqn35.JPG)
where—
a
is the amount of income tax payable by the person for any income year of the person (being an income year commencing on or after the 1st day of April 1988); and
b
is the aggregate of the amounts of any rebates of income tax deducted in accordance with section 57 of this Act in respect of income tax and national superannuitant surcharge payable by the person for that income year; and
c
is any foreign tax credit allowed in accordance with section 245k or section 245l of this Act in calculating the income tax payable by the person for that income year; and
d
is the amount that is the lesser of—
“(i)
The amount of any attributed foreign income derived by the person during that income year; or
“(ii)
The taxable income of the person for that income year; and
e
is the taxable income referred to in paragraph (ii) of item d of this formula.
“(2)
Any such credit shall arise on the date on which the person files a return of income for the income year of the person in which the attributed foreign income referred to in item d of the formula stated in subsection (1) of this section was derived.
“(3)
There shall arise as debits to be recorded in the branch equivalent tax account of a branch equivalent tax account person for any income year the following amounts:
“(a)
Any of the credit balance of the account that the person elects in accordance with section 394zzv of this Act shall be a credit against income tax payable by the person:
“(b)
An amount equal to any refund of income tax to the extent that the refund is attributable to income tax paid in relation to attributed foreign income derived in respect of an income interest in a controlled foreign company:
“(c)
In the case of a company (being a person that is a company to which section 204 of this Act applies) whose shares are not quoted on the official list of the New Zealand Stock Exchange, and subject to subsection (5) of this section, the amount of any particular credit in the branch equivalent tax account where, since the date on which the credit arose and before that credit is cancelled out by a subsequent debit in accordance with subsection (5)(e) of this section (which period is referred to in subsection (5) of this section as the shareholding continuity period), the same persons cease to hold, in the same proportions, whether directly or through any one or more interposed companies, shares in the company carrying between them the right to receive not less than 75 percent of the profits that may be distributed by the company:
“(d)
The amount of the credit balance of the branch equivalent tax account where, during the income year, the person ceases to be resident in New Zealand.
“(4)
The debits referred to in subsection (3) of this section shall arise—
“(a)
In the case of a debit referred to in paragraph (a) of that subsection, on the date the person makes the election in accordance with section 394zzv of this Act:
“(b)
In the case of a debit referred to in paragraph (b) of that subsection, on the date the refund is paid:
“(c)
In the case of a debit referred to in paragraph (c) of that subsection, on the date there ceases to be the continuity of shareholding referred to in that paragraph:
“(d)
In the case of a debit referred to in paragraph (d) of that subsection, on the date the person ceases to be resident in New Zealand.
“(5)
For the purposes of paragraph (c) of subsection (3) of this section,—
“(a)
That paragraph shall not apply to a private company (as defined in section 2 of the Companies Act 1955) that is included in a specified group (as defined in section 191(4) of this Act) where shares of any member of the specified group are quoted on the official list of the New Zealand Stock Exchange, and either—
“(i)
The company continues throughout the relevant shareholding continuity period to be in a specified group of which the member with the shares so quoted also continues to be a member; or
“(ii)
During the relevant shareholding continuity period,—
“(A)
The failure to meet the continuity of shareholding requirement was by reason only of the fact that the quoted shares of the other company that was a member of the specified group had been sold in the ordinary course of trading on the share market; and
“(B)
Not more than 10 percent of those shares in that other company had been acquired by any one person (including any nominee of that person as defined in section 7(1) of this Act) or by any 2 or more persons who are associated persons:
“(b)
The provisions of section 191(1) of this Act that apply in determining the prescribed proportion of title to profits held by any person shall, with any necessary modifications, apply for the purpose of determining the extent of the rights of any person to receive profits that may be distributed by the company as if references to an income year were references to the relevant shareholding continuity period; and for the purposes of this paragraph,—
“(i)
The reference to paid-up capital in subsection (4)(a) of section 191 or this Act shall be read as a reference to the right to receive profits that may be distributed:
“(ii)
The proviso to subsection (4) of that section shall not apply, and the provisions of subsections (7c) and (7d) of that section shall apply, in determining any particular proportion of shares held:
“(c)
Where during any shareholding continuity period shares are transferred in accordance with a matrimonial agreement, the shares of the transferee shall be deemed to be held by the transferor for the remainder of that period:
“(d)
Where a shareholder dies during any shareholding continuity period, shares held by or on behalf of the trustee of the estate of the deceased shareholder, or by or on behalf of the persons entitled to those snares as beneficiaries under the will or intestacy of the deceased shareholder, shall be deemed to be held by the deceased shareholder for the remainder of that period:
“(e)
A credit to a branch equivalent tax account that is subject to the continuity of shareholding requirement referred to in that paragraph shall cease to be subject to that requirement to the extent that, before the required continuity of shareholding ceases, any debit to the account sufficient to cancel out the amount of the credit arises subsequent to that credit arising, and for this purpose—
“(i)
Any amount of debit may be taken into account only once for the purpose of ascertaining whether any credit is no longer subject to the requirement; and
“(ii)
The amount of any debit shall be offset against the amount of any credit in the order in which the credits arise.
“394zzv Debit election to offset income tax payable in respect of foreign dividend
“(1)
Where for any income year the assessable income of a branch equivalent tax account person includes the amount of any dividend derived in respect of an income interest in a controlled foreign company, the person may elect that all or any part of the credit balance (if any) in the person’s branch equivalent tax account at the time of the election shall be credited in payment of any income tax payable by the person in respect of those dividends for that income year.
“(2)
A person shall make an election under this section by recording the amount in respect of which the election is made as a debit in the person’s branch equivalent tax account.
“(3)
Where a person has made an election under this section in respect of the income tax payable for any income year, the amount of credit balance in respect of which the election is made shall be credited in payment of any income tax payable by the person for that income year to the extent that the Commissioner is satisfied that—
“(a)
The amount credited does not exceed the amount of income tax payable for the income year that is attributable to the dividends referred to in subsection (1) of this section; and
“(b)
The person has made a proper election in accordance with this section; and
“(c)
The person has paid the income tax payable under an assessment that gives rise to a credit to the person’s branch equivalent tax account.
“394zzw Annual and other returns for branch equivalent tax account persons
“(1)
Every branch equivalent tax account person shall furnish to the Commissioner an annual branch equivalent tax account return in the prescribed form for each income year in respect of which the person is required to maintain such an account.
“(2)
The annual return shall show—
“(a)
The opening and closing balances of the account for the income year:
“(b)
The amount and source of all credits and debits that have arisen during the income year in accordance with section 394zzu of this Act:
“(c)
Such further information as may be prescribed or as may be required by the Commissioner.
“(3)
Every person liable to furnish an annual return under this section in respect of any income year shall furnish the return not later than the time allowed in accordance with section 17 of this Act for the furnishing of a return of income in respect of the income year.
“(4)
The Commissioner may require a branch equivalent tax account person to furnish, within such time as the Commissioner may allow, a branch equivalent tax account return in respect of any period specified by the Commissioner.
“(5)
A branch equivalent tax account person who ceases to be resident in New Zealand shall furnish to the Commissioner, not later than the last day on which the company or person is so resident, a branch equivalent tax account return in respect of the period commencing on the first day of the income year and ending with the last day on which the person is resident in New Zealand.
“(6)
A return required to be furnished under subsection (4) or subsection (5) of this section shall, except as the Commissioner may otherwise specify, contain the information referred to in subsection (2) of this section as if the references in that section to an income year were,—
“(a)
In the case of a return required to be furnished under subsection (4) of this section, references to the period specified by the Commissioner:
“(b)
In the case of a return required to be furnished under subsection (5) of this section, references to the period referred to in that subsection.
“Limit on Refund of Income Tax
“394zzx Refund of income tax not to exceed amount of credit balance
“(1)
Where, in relation to a branch equivalent tax account company or a branch equivalent tax account person,—
“(a)
The company or person becomes entitled to a refund of income tax in accordance with section 409 of this Act; and
“(b)
The refund of income tax relates to an excess of income tax paid by the company or person in respect of attributed foreign income derived from an income interest in a controlled foreign company; and
“(c)
The refund of income tax, if made, would result in a debit balance to the branch equivalent tax account of the company or person,—
the amount of the refund of income tax otherwise payable shall be reduced to the extent necessary to ensure that the refund does not result in a debit balance in the branch equivalent tax account of the company or person.
“(2)
Where this section applies to reduce the amount of a refund of income tax paid to a company or person, the amount of income tax not refunded shall be retained by the Commissioner and shall not be available for credit in payment of any tax payable by the company or person.
“(3)
Nothing in this section shall apply to limit the amount of any refund of tax paid by a company or person in respect of income derived by the company or person in the income year ending on the 31st day of March 1988 or in any previous income year.”
(2)
This section shall be deemed to have come into force on the 1st day of April 1988, and shall apply on and after that date.
56 Refund of excess tax
Section 409 of the principal Act is hereby amended by inserting, at the beginning of both subsection (1) and subsection (2), the words “Subject to sections 394m, 394zo, and 394zzx of this Act,”
.
57 Tax paid in excess may be set off against additional tax when assessment re-opened
Section 410 of the principal Act is hereby amended by inserting, at the beginning of subsection (1), the words “Subject to sections 394m, 394zo, and 394zzx of this Act,”
.
58 Interest on tax overpaid
(1)
Section 413a(1) of the principal Act (as inserted by section 20(1) of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by adding to the definition of the term “residual income tax”
the following paragraphs:
“(h)
The amount of any imputation credit or dividend withholding payment credit deducted from or set off against that income tax in accordance with section 394ze or section 394zp of this Act:
“(i)
The amount of any credit deducted from or set off against that income tax in accordance with section 394zzv(3) of this Act:”.
(2)
Section 413a(2) of the principal Act (as so inserted) is hereby amended by omitting the expression “subsection (3)”
, and substituting the expression “subsections (3) and (3a)”
.
(2)
Section 413A(2) of the principal Act (as so inserted) is hereby further amended by inserting, after subsection (3), the following subsection:
“(3A)
This section shall not apply to provisional tax paid by a company in respect of any income year, in excess of the amount of residual income tax in relation to that company and that income year, to the extent that any refund of that provisional tax is retained by the Commissioner, at any time after the company becomes entitled to the refund, pursuant to section 394m or section 394zzx of this Act.”
59 Keeping of business records
(1)
Section 428 of the principal Act (as substituted by section 41(1) of the Income Tax Amendment Act (No. 2) 1982) is hereby amended by repealing subsection (1), and substituting the following subsection:
“(1)
For the purposes of this section, the term ‘records’ includes—
“(a)
Books of account (whether contained in a manual, mechanical, or electronic format) recording receipts or payments or income or expenditure:
“(b)
Vouchers, bank statements, invoices, receipts, and such other documents as are necessary to verify the entries in the books of account referred to in paragraph (a) of this subsection:
“(c)
Accounts (whether contained in a manual, mechanical, or electronic format) to be maintained pursuant to Part XIIa or Part XIIb or Part XIIc of this Act, and any statement to be retained pursuant to section 394h or section 394zza of this Act.”
(2)
Section 428(3) of the principal Act (as so substituted) is hereby amended by inserting, after paragraph (ca) (as inserted by section 34(10) of the Income Tax Amendment Act (No. 2) 1985), the following paragraph:
“(cb)
Is a company that is an imputation credit account company or a dividend withholding payment account company or a branch equivalent tax account person (as those terms are respectively defined in sections 394a, 394zk, and 394zzm of this Act),—”.
(3)
Section 428(3) of the principal Act (as so substituted) is hereby further amended by inserting, after paragraph (f) (as inserted by section 34(11) of the Income Tax Amendment Act (No. 2) 1985), the expression “; and”
, and the following paragraphs:
“(g)
Every foreign withholding payment dividend (as defined in section 394zk of this Act) received by the person; and
“(h)
Every credit and debit to the imputation credit account or the dividend withholding payment account or the branch equivalent tax account of the person (as those accounts are respectively defined m sections 394a, 394zk, and 394zzm of this Act), and the amount of any imputation credit (as denned in the said section 394a) or any dividend withholding payment credit (as defined in the said section 394zk) attached to dividends paid by the person,—”.
(4)
Section 428 of the principal Act (as so substituted) is hereby amended by inserting, at the beginning of subsection (5), the words “Except in the case of a company that is a person referred to in subsection (3)(cb) of this section,”
.
60 Rate of excess retention tax for year of assessment commencing on 1 April 1991 and for subsequent years
(1)
Clause 11 of the First Schedule to the principal Act is hereby amended by omitting the expression “35c”
, and substituting the expression “33c”
.
(2)
This section shall apply with respect to the year of assessment commencing on the 1st day of April 1991 and every subsequent year.
61 New Eighteenth Schedule inserted in principal Act
(1)
The principal Act is hereby amended by inserting, after the Seventeenth Schedule (as inserted by section 29 of this Act), the Eighteenth Schedule set out in the Third Schedule to this Act.
(2)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1988 and in every subsequent year.
62 Date for payment of winding-up distribution tax extended to 30 September 1989
(1)
Section 27 of the Income Tax Amendment Act (No. 3) 1988 is hereby amended by omitting the expression “31st day of May 1989”
, and substituting the expression “30th day of September 1989”
.
(2)
Section 28 of the Income Tax Amendment Act (No. 3) 1988 is hereby amended by omitting from both subsection (1) and subsection (3) the expression “31st day of March 1989”
, and substituting in each case the expression “30th day of September 1989”
.
Part V Miscellaneous Provisions
63 Interpretation
(1)
Section 2 of the principal Act is hereby amended by inserting in the definition of the term “salary or wages”
, after paragraph (c), the following paragraph:
“(ca)
Any basic grant and any independent circumstances grant, made pursuant to regulations made under section 193 of the Education Act 1964; and”.
(2)
Section 336n(1) of the principal Act (as inserted by section 34 of the Income Tax Amendment Act (No. 2) 1985) is hereby consequentially amended—
(a)
By inserting in the definition of the term “employee”
, after the expression “(c),”
, the expression “(ca),”
:
(b)
By inserting in the definition of the term “employer”
, after the expression “(c),”
, the expression “(ca),”
:
(c)
By inserting in the definition of the term “employment”
, after the expression “(c),”
, the expression “(ca),”
.
(3)
Section 374a of the principal Act (as inserted by section 17(1) of the Income Tax Amendment Act (No. 2) 1986) is hereby consequentially amended by omitting from the definition of the term “employment”
the expression “(ba) and (c)”
, and substituting the expression “(ba), (c), and (ca)”
.
(4)
Section 374e(1) of the principal Act (as so inserted) is hereby consequentially amended by omitting from paragraph (a) of the definition of the term “employment”
the expression “(ba) and (c)”
, and substituting the expression “(ba), (c), and (ca)”
.
(5)
This section shall apply with respect to tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
64 Incomes wholly exempt from tax
(1)
Section 61(37) of the principal Act is hereby amended by inserting, after the words “scholarship or bursary”
, the words “other than a basic grant or an independent circumstances grant made pursuant to regulations made under section 193 of the Education Act 1964”
.
(2)
This section shall apply with respect to tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
65 Items included in assessable income
(1)
Section 65(2) of the principal Act is hereby amended by inserting, after paragraph (d), the following paragraph:
“(da)
All basic grants and independent circumstances grants made pursuant to regulations made under section 193 of the Education Act 1964:”.
(2)
This section shall apply with respect to tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
66 Retiring allowances payable to employees
(1)
Section 68(1) of the principal Act (as amended by section 25 of the Income Tax Amendment Act (No. 4) 1986) is hereby amended by repealing the definition of the term “employment or service”
and substituting the following definition:
“‘Employment’ includes any employment of the taxpayer which—
“(a)
Was with any company which consisted wholly or substantially of the same shareholders or was under the control of the same persons as the company from whose employment the taxpayer received a redundancy payment; or
“(b)
Was with the same employer, whether or not the business of the employer was the same; or
“(c)
Was with the same business, whether or not a change of ownership of the business had occurred; or
“(d)
Was, in the opinion of the Commissioner, substantially the same employment as that from which the taxpayer received a redundancy payment:”.
(2)
Section 68(2a) of the principal Act (as inserted by section 5(6) of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by omitting the words “only to the extent of 5 percent of the specified sum”
, and substituting the following words “to the following extent only:
“(a)
Where the amount of the payment does not exceed the specified sum, 5 percent of the amount of the payment; or
“(b)
Where the amount of the payment equals or exceeds the specified sum, 5 percent of the specified sum.”
(3)
Section 68(3a) of the principal Act (as inserted by section 5(7) of the Income Tax Amendment Act (No. 3) 1988) is hereby amended—
(a)
By omitting from paragraph (a) the words “or service”
:
(b)
By omitting from paragraph (b) the words “After that retirement, or the termination of that employment or service”
, and substituting the word “Subsequently”
:
(c)
By omitting from paragraph (b), after the words “other employment”
, the words “or service”
:
(d)
By inserting in paragraph (c), after the words “termination of that”
, the word “subsequent”
.
(4)
Section 5(9) of the Income Tax Amendment Act (No. 3) 1988 is hereby amended by inserting after the words “bonus, gratuity,”
the words “redundancy payment,”
.
(5)
This section shall apply to any payment made in a lump sum by way of a bonus, gratuity, redundancy payment, or retiring allowance on or after the 1st day of October 1988.
67 Depreciation allowances, etc., on motorcars
(1)
Section 110 of the principal Act is hereby amended by repealing subsection (3a) (as substituted by section 4(2) of the Income Tax Amendment Act (No. 3) 1986) as from the commencement of that subsection, and substituting the following subsection:
“(3a)
Where and to the extent that, in any income year ending on or before the 31st day of March 1987, any taxpayer has incurred expenditure in excess of the specified cost in the acquisition, on or after the 23rd day of October 1974, of any motorcar, the amount of that expenditure shall,—
“(a)
For the purpose of determining the amount of any deduction allowable under this Act in respect of that motorcar; or
“(b)
For the purpose of section 117 of this Act; or
“(c)
For the purpose of calculating the amount of any loss incurred by the taxpayer on the disposal, loss, or destruction of that motorcar,—
in relation to any income year commencing on or after the 1st day of April 1987 be deemed to have been an amount calculated in accordance with the following formula:
_eqn36.JPG)
where—
x
is the amount of the expenditure incurred by the taxpayer in the acquisition of that motorcar, reduced by any amount that is deemed to be a deduction allowed in respect of depreciation of that motorcar in terms of the proviso to section 117(2) of this Act; and
y
is the specified cost in relation to that motorcar, reduced by any amount that is deemed to be a deduction allowed in respect of depreciation of that motorcar in terms of the proviso to section 117(2) of this Act; and
z
is the sum of the amounts of the allowances by way of depreciation in respect of that motorcar in respect of each of the income years ending on or before the 31st day of March 1987, being the allowances that would, if the whole of the travel in that motorcar in each of those income years, were travel undertaken wholly and exclusively in the production of the assessable income of the taxpayer, have been allowed as a deduction in calculating the assessable income of the taxpayer in those income years, notwithstanding the amount (if any) of the allowance by way of depreciation that is allowed as a deduction by the Commissioner in any income years, not being—
“(i)
Depreciation that is allowable under section 114b of this Act; or
“(ii)
Any amount that is deemed to be a deduction allowed in respect of depreciation of that motorcar in terms of the proviso to section 117(2) of this Act; and
w
is the sum of the amounts of the allowances by way of depreciation in respect of that motorcar in respect of each of the income years ending on or before the 31st day of March 1987, being—
“(i)
Any amount that is deemed to be a deduction allowed in respect of depreciation of that motorcar in terms of the proviso to section 117(2) of this Act; and
“(ii)
The allowances that would, if the whole of the travel in that motorcar in each of those income years were travel undertaken wholly and exclusively in the production of the assessable income of the taxpayer, nave been allowed as a deduction in calculating the assessable income of the taxpayer in those income years, notwithstanding the amount (if any) of the allowance by way of depreciation that is allowed as a deduction by the Commissioner in any income years,—
but not being depreciation that is allowable under section 114b of this Act.”
(2)
The Income Tax Amendment Act (No. 3) 1986 is hereby consequentially amended by section 4(2).
68 Expenditure on improvements in relation to aquaculture
(1)
Section 128c(3) of the principal Act (as inserted by section 12 of the Income Tax Amendment Act (No. 4) 1986) is hereby amended by omitting the words “or by any other taxpayer”
.
(2)
This section shall apply to the tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
69 Determination of specified exemption
(1)
Section 336ba(1) of the principal Act (as inserted by section 3(1) of the Income Tax Amendment Act 1985 and amended by section 11 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by repealing paragraph (b), and substituting the following paragraphs:
“(b)
Where in respect of any period in the income year (whether that period is a part or the whole of the income year) the national superannuation received by the national superannuitant was at 50 percent of the married rate of national superannuation, an amount of exemption calculated in accordance with the following formula:
_eqn37.JPG)
where—
c
is the amount remaining after deducting from $12,012 an amount equal to the other income, in relation to the income year, of the spouse of the national superannuitant; and
d
is the number of pay days (as so defined) in respect of which that national superannuation was payable to the national superannuitant in respect of the income year; and
e
is the number of pay days (as so defined) in the income year:
“Provided that in no case shall item c be an amount less than $6,006:
“(ba)
Where in respect of any period in the income year (whether that period is a part or the whole of the income year) the national superannuation received by the national superannuitant was at 50 percent of the married rate of national superannuation by reason of the spouse of the national superannuitant not being entitled to receive national superannuation, an amount of the exemption calculated in accordance with the following formula:
_eqn38.JPG)
where—
i
is an amount remaining after deducting from $12,012 an amount equal to the taxable income (not including any amount of national superannuation), for the income year, of the spouse of the national superannuitant, reduced by the amount of every pension of the same type as a specified foreign social security pension received by the said spouse in respect of the income year; and
j
is the number of pay days (as so defined) in respect of which that national superannuation was payable to the national superannuitant in respect of the income year; and
h
is the number of pay days (as so defined) in the income year:
“Provided that in no case shall item i be an amount less than $6,006”.
(2)
Section 336ba(1) of the principal Act (as so inserted and amended) is hereby further amended by omitting from paragraph (c) the words “by reason of the spouse of the national superannuitant not being entitled to receive national superannuation or,”
.
(3)
This section shall apply to the national superannuitant surcharge in respect of the other income of every national superannuitant for the income year that commences on the 1st day of April 1989 and for every subsequent year.
70 Family support credit of tax
(1)
Section 374d(2) of the principal Act (as inserted by section 17(1) of the Income Tax Amendment Act (No. 2) 1986) is hereby amended by repealing item y, and substituting the following item:
“y
is an amount equal to the sum of $1,872 in respect of each child who is 16 years or 17 years or 18 years of age, or the eldest child where the eldest child is below 16 years of age, increased by the sum of $832 for each additional child (if any), being in each case a child in respect of whom the person is entitled to receive a family benefit throughout the eligible period, that first-mentioned sum or, as the case may be, the amount to which the first-mentioned sum is so increased being diminished by—
“(i)
Where the specified income of the person in relation to the specified period does not exceed the sum of $16,000, nil:
“(ii)
Where the specified income of the person in relation to the specified period exceeds the sum of $16,000 but does not exceed the sum of $27,000, 18 cents for every complete dollar of that excess:
“(iii)
Where the specified income of the person in relation to the specified period exceeds the sum of $27,000, the amount of $1,980 increased by 30 cents for every complete dollar of that excess; and”.
(2)
Section 374d(3) of the principal Act (as so inserted) is hereby amended by repealing item y, and substituting the following item:
“y
is an amount equal to the sum of $1,872 in respect of each child who is 16 years or 17 years or 18 years of age or the eldest child where the eldest child is below 16 years of age, increased by the sum of $832 for each additional child (if any), being in each case a child in respect of whom the person is entitled to receive a family benefit throughout the eligible period, that first-mentioned sum or, as the case may be, the amount to which the first-mentioned sum is so increased being diminished by—
“(i)
Where the specified income of the eligible person, or the specified income of the other person, or the aggregate of the specified incomes of the eligible person and the other person, as the case may be, in relation to the specified period does not exceed the sum of $16,000, nil:
“(ii)
Where the specified income of the eligible person, or the specified income of the other person, or the aggregate of the specified incomes of the eligible person and the other person, as the case may be, in relation to the specified period exceeds $16,000 but does not exceed $27,000, 18 cents for every complete dollar of that excess:
“(iii)
Where the specified income of the eligible person, or the specified income of the other person, or the aggregate of the specified incomes of the eligible person and the other person, as the case may be, in relation to the specified period exceeds $27,000, the amount of $1,980 increased by 30 cents for every complete dollar of that excess; and”.
(3)
This section shall apply in respect of the income year that commences on the 1st day of April 1989 and every subsequent income year.
71 Director-General to deliver credit of tax
(1)
Section 374I of the principal Act (as inserted by section 17(1) of the Income Tax Amendment Act (No. 2) 1986) is hereby amended by inserting, after subsection (3), the following subsections:
“(3a)
Notwithstanding subsections (2) and (3) of this section, any person entitled to payment of a credit of tax under subsection (2) or subsection (3) of this section may notify the Director-General of Social Welfare or the Secretary for War Pensions, as the case may be, not to pay the credit of tax to that person, and the Director-General or the Secretary, as the case may be, shall, as soon as practicable, cease to pay the credit of tax accordingly.
“(3b)
Any notification given under subsection (3a) of this section by any person may be cancelled by that person at any time, and the Director-General or the Secretary, as the case may be, shall thereupon recommence payment of the credit of tax as soon as practicable.”
(2)
Section 374g of the principal Act (as so inserted) is hereby consequentially amended by omitting from subsection (8) the expression “section 374i(2) and (3)”
, and substituting the expression “section 374i(2), (3), (3a), and (3b)”
.
(3)
This section shall apply with respect to the tax on income derived in the income year commencing on the 1st day of April 1989 and in every subsequent year.
72 Interpretation
(1)
Section 375 of the principal Act (as substituted by section 17 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by repealing paragraph (c) of the definition of the term “residual income tax”
.
(2)
This section shall be deemed to have come into force on the 7th day of November 1988 and shall apply to all provisional tax due and payable on or after that date.
73 Estimated provisional tax
(1)
Section 382 of the principal Act (as substituted by section 17 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by adding the following subsection:
“(6)
Where a taxpayer fails to furnish to the Commissioner a statement required pursuant to subsection (2) of this section, the taxpayer shall be deemed to have furnished a statement showing an estimate of the residual income tax to which the taxpayer will be liable in that income year equal to the amount of provisional tax, if any, paid by the taxpayer on or before the day on which the final instalment of provisional tax becomes due and payable.”
(2)
This section shall come into force on the 7th day of March 1989 and shall apply to all provisional tax due and payable on or after that date.
74 Interest on tax overpaid
(1)
Section 413a(1) of the principal Act (as inserted by section 20 of the Income Tax Amendment Act (No. 3) 1988) is hereby amended by inserting in the definition of the expression “residual income tax”
, after the words “Part Xa of this Act”
, the words “and any amount of credit of tax paid to that person under section 374h, or section 374i, or section 374ia, or applied in relation to that person under section 374j of this Act”
.
(2)
Section 413a(1) of the principal Act, (as so inserted) is hereby amended by repealing paragraph (c) of the definition of the term “residual income tax”
, and substituting the following paragraph:
“(c)
The amount of any credit of tax to which the person is entitled, in relation to that income year, under section 374d or section 374e of this Act:”.
(3)
Section 413a(5) of the principal Act (as so inserted) is hereby amended by repealing item a, and inserting the following item:
“a
is the amount of the balance that remains to be refunded by the Commissioner, at the commencement of the day that is, in relation to the taxpayer and the income year, the due date for payment of the third instalment of provisional tax, after deducting from the amount of the provisional tax paid, in respect of the income derived by the taxpayer in that income year, in accordance with Part XII of this Act, on or before the day that is, in relation to the taxpayer and the income year, the due date for payment of the third instalment of provisional tax, the amount of the income tax of the taxpayer in relation to that income year; and”.
(4)
This section shall apply with respect to the tax on income derived in the income year that commenced on the 1st day of April 1988 and in every subsequent year.
75 Transitional provisions in relation to provisional tax
(1)
For the purposes of subsection (2) of this section, the term “trustee income”
has the same meaning as in section 226 of the principal Act (as substituted by section 11 of this Act).
(2)
Subsection (3) of this section shall not apply in respect of any income that is, in relation to any person (being a company) who is a trustee of a trust and to any income year, trustee income.
(3)
Notwithstanding section 377(1) of the principal Act (as substituted by section 17 of the Income Tax Amendment Act (No. 3) 1988), the amount of provisional tax payable by a person (that is a company) in respect of the income derived in the income year ending with the 31st day of March 1989 shall be an amount equal to the residual income tax payable by that person in respect of the income derived in the income year ending with the 31st day of March 1988 multiplied by the following factor:
_eqn39.JPG)
(4)
Notwithstanding section 377(1) of the principal Act (as so substituted), any person (being a natural person) who derived, in the income year that commenced on the 1st day of April 1988, provisional income exceeding the sum of $100,000, may elect to pay an amount of provisional tax, in respect of the income derived in the income year that commenced on the 1st day of April 1989, equal to the amount of the residual income tax (as defined in section 375 of the principal Act (as so substituted)) payable by that person in respect of the income derived in the income year first mentioned in this subsection.
(5)
Notwithstanding anything in the principal Act, in respect of the income derived (by a person that is a company) in the income year ending with the 31st day of March 1989, and the income derived in the income year ending with the 31st day of March 1990, and in respect to any instalment of provisional tax to which section 381 of the principal Act (as so substituted) applies, section 381 (as so substituted) shall apply as if the expression “the amount equal to 120 percent of the residual income tax which the taxpayer is liable to pay in respect of the income derived in the year immediately preceding the preceding income year”
in both places where it occurs in the said section 381 were the expression “the amount equal to 120 percent of the residual income tax which the taxpayer was liable to pay in respect of the income derived in the year immediately preceding the preceding income year multiplied by the fraction 28/48”
.
(6)
Notwithstanding anything in the principal Act, where a taxpayer is—
(a)
A natural person who derived provisional income exceeding $100,000 in the income year ending with the 31st day of March 1988; and
(b)
A taxpayer to whom section 381 of the principal Act (as so substituted) applies,—
section 381 (as so substituted) shall, in relation to the income year ending with the 31st day of March 1990, apply as if the expression “120 percent”
in both places where it occurs in the said section 381 were the expression “110 percent”
.
(7)
The Income Tax Amendment Act (No. 3) 1988 is hereby consequentially amended by repealing sections 22(1) and 22(2).
(8)
This section shall be deemed to have come into force on the 7th day of November 1988 and shall apply to all provisional tax due and payable on or after that date.
76 Tenth Schedule
(1)
The Tenth Schedule to the principal Act (as substituted by section 44(1) of the Income Tax Amendment Act 1986) is hereby amended by repealing paragraph (e), and substituting the following paragraph:
“(e)
Where the motor vehicle to which this Schedule applies is one of a number of vehicles each of which is available for the private use or enjoyment of the employee in that quarter,—
“(i)
If the employee primarily uses the same motor vehicle, an amount equal to 6 percent of, as appropriate, the cost price or market value of that motor vehicle, as determined in accordance with the foregoing paragraphs of this Schedule:
“(ii)
If the employee (not being an employee to which subparagraph (i) of this paragraph applies) is employed in a business engaged in the selling of motor vehicles and the motor vehicles available for the private use and enjoyment of the employee are trading stock of that business, an amount equal to 6 percent of the quotient obtained by dividing the sum of the cost price of those motor vehicles by the total number of those motor vehicles:
“(iii)
If the employee (not being an employee to which subparagraph (ii) of this paragraph applies) does not primarily use the same motor vehicle, an amount equal to 6 percent of the highest value of any of the values of the motor vehicles so used by the employee, the value of the motor vehicles being, as appropriate, the cost price or market value as determined in accordance with the foregoing paragraphs of this Schedule.”
(2)
This section shall apply in respect of fringe benefits provided on or after the 1st day of January 1989.
SCHEDULES
FIRST SCHEDULE NEW FIFTEENTH, SIXTEENTH, AND SEVENTEENTH SCHEDULES TO PRINCIPAL ACT
Section 29
“FIFTEENTH SCHEDULE “Excluded Countries
Section 245p
1
Australia, excluding the Territory of Norfolk Island.
2
Canada.
3
Federal Republic of Germany.
4
French Republic, including the European and Overseas Departments, but excluding the Overseas Territories.
5
Japan.
6
United Kingdom of Great Britain and Northern Ireland.
7
United States of America, excluding its possessions and territories.
“SIXTEENTH SCHEDULE
“Part A “Features of the Taxation Law of Countries Specified in the Fifteenth Schedule
Section 245p
1
Any exemption from income tax for income derived from business activities carried on outside the country.
“Part B “Foreign Entities or Classes of Foreign Entities Rights in Relationto Which are Deemed to be Interests in Foreign Investment Funds
Section 245R
“SEVENTEENTH SCHEDULE “Transitional List of Low Tax Jurisdictions or Territories
Section 245y
Part A All Companies Resident in the Following Countries or Territories
1.
Andorra
2.
Angola
3.
Anguilla
4.
Antigua and Barbuda
5.
Bahamas
6.
Bahrain
7.
Barbados
8.
Bermuda
9.
British Channel Islands
10.
British Virgin Islands
11.
Campione
12.
Cayman Island
13.
Cook Islands
14.
Costa Rica
15.
Cyprus
16.
Djibouti
17.
Dominica
18.
Ecuador
19.
French Polynesia
20.
Greece
21.
Grenada
22.
Gibraltar
23.
Guatemala
24.
Hong Kong
25.
Isle of Man
26.
Jamaica
27.
Jordan
28.
Kuwait
29.
Lebanon
30.
Liberia
31.
Liechtenstein
32.
Luxembourg
33.
Macau
34.
Madeira
35.
Maldives
36.
Marshall Islands
37.
Monaco
38.
Montserrat
39.
Nauru
40.
Netherlands Antilles and/or Aruba 4L Nevis
42.
New Caledonia
43.
Norfolk Island
44.
Oman
45.
Palau
46.
Panama
47.
Puerto Rico
48.
Saint Helena
49.
Saint Kitts
50.
Saint Lucia
51.
Saint Vincent
52.
San Marino
53.
Seychelles
54.
Solomon Islands
55.
Sri Lanka
56.
Switzerland
57.
Turks and Caicos Islands
58.
United Arab Emirates
59.
Uruguay
60.
Vanuatu
61.
Venezuela
Part B Specified Companies Resident in the Following Countries or Territories
| 1. Belgium | (a)Companies that are regarded as Foreign Sales Corporations by the United States of America and which therefore qualify for reduced Belgian taxation: (b)Companies approved under Royal Decree No. 187 of 30 December 1982 as Coordination Centres (as defined by the original Royal Decree or by subsequent amending laws). |
| 2. Brunei | (a)Companies deriving income from sources outside Brunei. |
| 3. Ireland | (a)Companies obtaining relief or exemption from tax under Part V of the Corporation Tax Act 1976 or section 43 of the Finance Act 1980 (profits from trading within Shannon Airport): (b)Companies obtaining relief or exemption from tax under Part IV of the Corporation Tax Act 1976 or section 42 of the Finance Act 1980 (profits from exporting certain goods): (c)Companies certified by the Minister of Finance to provide international financial services or to carry on any other activities in the Custom House Docks area. |
| 4. Kenya | (a)Companies having income granted exemption from tax under paragraph 11, Schedule 1 of the Income Tax Act 1973. |
| 5. Malaysia | (a)Companies exempt from tax in relation to shipping: (b)Companies subject to tax at 5 percent in relation to inward reinsurance. |
| 6. Netherlands | (a)Companies exempt from tax under the Decree for the Avoidance of Double Taxation 1965 for foreign source business profits: (b)Companies that have obtained a participation exemption under article 13 of the Corporate Income Tax Act 1969 or under article 18 of the Corporate Income Tax Act 1969: (c)Companies that are regarded as Foreign Sales Corporations by the United States of America: (d)Companies that have obtained an advance ruling from the Ministry of Finance in relation to income earned with respect to intercompany loans. |
| 7. Philippines | (a)Companies that are regional headquarters companies: (b)Companies that operate as an Offshore Banking Unit or a Foreign Currency Deposit Unit: (c)Companies that receive interest on deposits with a Foreign Currency Unit, or other interest subject to reduced rates of tax under the National Internal Revenue Code. |
| 8. Singapore | (a)Companies subject to the concessionary rate of tax for insurance and reinsurance of risks outside Singapore: (b)Companies that operate Asian Currency Units which have income— (i)Taxed at a concessionary rate by virtue of section 43a, section 43b, or section 43c of the Income Tax Act: or (ii)Exempted from tax under the Income Tax (Income Arising from Syndicated Offshore Loans) Regulations 1984: (c)Companies that are exempt from tax on the income of a shipping enterprise: (d)Companies that derive any income to which section 43e of the Income Tax Act applies (headquarters companies): (e)Companies that are incorporated in Singapore but not managed and controlled from Singapore and that derive any income from sources outside Singapore.” |
SECOND SCHEDULE Enactments Amended
Section 33(2)
| Title of Act | Amendment |
|---|---|
| 1953, No. 10—The Primary Products Marketing Act 1953 (R.S. Vol. 4, p. 201) | By omitting from section 16 the words “and income tax, and from social security income tax”. |
| 1961, No. 5—The Dairy Board Act 1961 (Reprinted, 1976, Vol. 4, p. 3337) | By repealing section 57, and substituting the following section: “57 Exemption from land tax
The Board shall be exempt from land tax.” |
| 1963, No. 70—The Fishing Industry Board Act 1963 (Reprinted, 1976, Vol. 5, p. 3847) | By omitting from section 26 the words “and shall also be exempt from income tax”. |
| 1971, No. 33—The Apple and Pear Marketing Act 1971 | By omitting from section 39 the words “and income tax”. |
| 1977, No. 92—The Wool Industry Act 1977 | By omitting from section 58 the words “and income tax”. |
| 1982, No. 138—The Pork Industry Board Act 1982 | By omitting from section 29 the words “and income tax”. |
| 1987, No. 93—The New Zealand Horticulture Export Authority Act 1987 | By omitting from section 59 the words “and income tax”. |
THIRD SCHEDULE NEW EIGHTEENTH SCHEDULE INSERTED IN PRINCIPAL ACT
Section 61(1)
“EIGHTEENTH SCHEDULE “Statutory Producer Boards
Sections 197E(1), 394Q
New Zealand Apple and Pear Marketing Board
New Zealand Dairy Board
New Zealand Fishing Industry Board
New Zealand Horticulture Export Authority
New Zealand Meat Producers Board
New Zealand Pork Industry Board
New Zealand Wool Board.”
This Act is administered in the Inland Revenue Department.
Versions
Income Tax Amendment Act (No. 5) 1988
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