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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration treated as paid by person

EW 41: Consideration when person enters rules: accrued entitlement

You could also call this:

“How to calculate money owed to you when financial rules start applying”

This law applies to you if you’re involved in a financial arrangement and you’re supposed to receive money from it. It covers different situations that might happen:

You might be someone from another country who starts doing business in New Zealand. Or you could be from overseas, become part of a financial deal after 1 April 2008, then become a temporary resident in New Zealand. In this case, you need to work out your income or spending from the arrangement for a tax year.

The law also applies if you’re from another country and become a permanent New Zealand resident. It matters if you weren’t already doing business in New Zealand before you moved here.

If you’re a temporary resident, this law affects you when your financial arrangement is no longer exempt from certain rules. This can happen when you become a permanent resident.

Lastly, if you stop using the financial arrangement for personal reasons, it might no longer be exempt from these rules.

In all these cases, the law says you’re treated as if you just got the right to receive the money. The value of this right is based on what it would be worth if you sold it at that time.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515333.

Topics:
Money and consumer rights > Taxes
Immigration and citizenship > Visas
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EW 40: Consideration when person exits from rules: accrued obligation, or

“Calculating what you owe when you leave a financial arrangement”

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EW 42: Consideration when acquisition for no, or inadequate, consideration, or

“How to calculate value when you get something for free or less than it's worth in a financial arrangement”

Part E Timing and quantifying rules
Financial arrangements rules: Consideration treated as paid by person

EW 41Consideration when person enters rules: accrued entitlement

  1. This section applies to a person who is a party to a financial arrangement if, when the person has an accrued entitlement to receive consideration under the arrangement, 1 or more of the following situations arise:

  2. the person is a non-resident who becomes a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
    1. the person is a non-resident who—
      1. becomes a party to the arrangement after 1 April 2008; and
        1. becomes a transitional resident after becoming a party to the arrangement; and
          1. must calculate and allocate income or expenditure under the arrangement for an income year under the financial arrangements rules:
          2. the person is a non-resident who—
            1. becomes a New Zealand resident who is not a transitional resident; and
              1. is not, immediately before becoming a New Zealand resident, a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
              2. the person is a transitional resident for whom the arrangement ceases to be an excepted financial arrangement described in section EW 5(17):
                1. the person is a transitional resident who becomes a New Zealand resident who is not a transitional resident, resulting in the arrangement ceasing to be an excepted financial arrangement described in section EW 5(17):
                  1. the person stops using the arrangement for a private or domestic purpose, resulting in the arrangement ceasing to be an excepted financial arrangement described in any of section EW 5(18) to (20).

                    1. The person is treated as having acquired the accrued entitlement immediately after the situation arose and as having paid the market value that the accrued entitlement had at that time.

                    Compare
                    Notes
                    • Section EW 41(1)(ab): inserted (with effect on 1 April 2008), on , by section 64(1) (and see section 64(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                    • Section EW 41 list of defined terms financial arrangements rules: inserted (with effect on 1 April 2008), on , by section 64(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).