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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Attributing interests in FIFs

EX 30: Direct income interests in FIFs

You could also call this:

“Owning shares or having rights in a foreign company”

You have a direct income interest in a foreign company if you own any of its shares, have any decision-making rights, can receive or use any of the company’s income for the current accounting period, or can receive or use any of the company’s net assets if they are given out.

Your direct income interest is the percentage of the total that you own. If the percentages are different for different categories, your direct income interest is the highest one.

When figuring out your direct income interest for shares, you need to look at the available subscribed capital per share. This is calculated using something called the slice rule.

For decision-making rights, if the percentages are different for different types of rights, you use the highest percentage.

When working out your direct income interest for income rights, we assume that the income is given out on the last day of the accounting period, your entitlement doesn’t change during that time, and some special types of interest payments count as income distribution.

In this law, ‘company’ includes some other types of entities listed in a special schedule.

If a partnership has any of these rights, each partner is treated as owning a share of those rights based on how much of the partnership they own.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515512.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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EX 29: Attributing interests in FIFs, or

“Rules for determining if you have a taxable interest in a foreign investment”

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Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Attributing interests in FIFs

EX 30Direct income interests in FIFs

  1. A person has a direct income interest in a foreign company at any time if they hold—

  2. any of the shares in the foreign company:
    1. any of the shareholder decision-making rights for the company:
      1. a right to receive, or to apply, any of the income of the company for the accounting period in which the time falls:
        1. a right to receive, or to apply, any of the value of the net assets of the company, if they are distributed.

          1. The person’s direct income interest is the percentage of the total that the person holds.

          2. However, if the percentage varies between the different categories, the person’s direct income interest is the highest.

          3. When the direct income interest in the category in subsection (1)(a) is calculated, the percentage is the total of the available subscribed capital per share calculated under the slice rule of the shares held as a percentage of the total available subscribed capital per share calculated under the slice rule of all shares in the company.

          4. When the direct income interest in the category in subsection (1)(b) is calculated, if the percentage varies between the rights described in the different paragraphs of the definition of shareholder decision-making rights in section YA 1 (Definitions), the highest percentage is taken.

          5. When the direct income interest in the category in subsection (1)(c) is calculated, it is assumed that—

          6. the income is distributed on the last day of the accounting period; and
            1. the person’s entitlement is unchanged during the period; and
              1. a payment of interest on a debenture subject to section FA 2 (Recharacterisation of certain debentures) or FA 2B (Stapled debt securities) is a distribution of income.

                1. In this section, and in defined terms referred to in this section, company includes an entity listed in schedule 25, part A (Foreign investment funds).

                2. In this section, if a partnership holds any rights, each partner is treated as holding a share of those rights in proportion to the partner’s interest in the partnership.

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                Notes
                • Section EX 30(6)(c): amended (with effect on 1 April 2008), on , by section 167 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).