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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Ownership measurement concession

EX 26: Use of quarterly measurement

You could also call this:

“Measuring company interests every three months for tax purposes”

When you’re figuring out how much control or income you have in a foreign company, you can make things easier by using a simple rule. You can treat your interest in the company as staying the same throughout a three-month period, even if it changes. This means you only need to look at what your interest is at the end of the three months.

However, there are some rules to stop people from taking advantage of this. These rules are called anti-avoidance rules, and they’re found in sections GB 9 to GB 16.

If you want to, you can choose not to use this simple rule when you’re working out your income or loss from a foreign company. But if you decide not to use it, you need to tell the tax department. You have to fill out a form that the Commissioner of Inland Revenue asks for. Once you decide not to use the simple rule, you can’t change your mind later. Your choice will apply for the year you make it and for future years too.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515495.

Topics:
Money and consumer rights > Taxes
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EX 25: Change of CFC’s balance date, or

“Rules for changing a foreign company's financial year”

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EX 27: Anti-avoidance rule: stapled stock, or

“Rule for treating foreign company rights linked to NZ company as owned by the NZ company”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Ownership measurement concession

EX 26Use of quarterly measurement

  1. In order to simplify the process of calculating a person’s control interest or income interest in a foreign company, the person is treated as holding at all times during a quarter the same interest, including a zero interest, as the interest they hold at the end of the quarter.

  2. The concession in subsection (1) is overridden by the anti-avoidance rules in sections GB 9 to GB 16 (which relate to arrangements involving CFCs).

  3. A person may choose not to apply the concession in subsection (1) when calculating their attributed CFC income or loss from a foreign company.

  4. An election under subsection (3)—

  5. must be in the form required by the Commissioner; and
    1. is irrevocable; and
      1. applies in the income year in which it is made and later.

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