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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Calculation of FIF income or loss

EX 51: Comparative value method

You could also call this:

“How to calculate FIF income or loss using the comparative value method”

When you use the comparative value method to work out your FIF income or loss from an attributing interest in a FIF, you need to use a special formula. The formula is: (closing value + gains) - (opening value + costs).

The closing value is how much your interest in the FIF is worth at the end of the income year. If you’ve sold your interest or are using a different method to calculate it, the value is zero.

Gains are all the money you’ve made from having or selling your interest during the income year. This includes any foreign tax that you can claim as a credit.

The opening value is how much your interest in the FIF was worth at the end of the last income year. If you didn’t have the interest then or were using a different method to calculate it, the value is zero.

Costs include all the money you (or someone else on your behalf) spent on buying or increasing your interest in the income year. It also includes any income tax you paid on the FIF’s income in other countries.

If you end up with a FIF loss for an attributing interest that isn’t a special kind of share, there’s a rule to stop you from having too much loss. If all your affected interests would result in a total FIF loss, each loss is reduced so that the total comes to zero.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515581.

Topics:

Money and consumer rights > Taxes

EX 50: Attributable FIF income method, or

“How to work out income or loss from foreign investments using a specific method”

EX 52A: Fair dividend rate method: use of different forms, or

“Rules for choosing between annual and periodic fair dividend rate methods”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Calculation of FIF income or loss

EX 51Comparative value method

If a person is using the comparative value method to calculate FIF income or loss from an attributing interest in a FIF, the FIF income or loss from that interest for the relevant income year is calculated using the formula—
$(closing value + gains) − (opening value + costs).$

Where:
The items in the formula are defined in subsections (3) to (6).
Closing value is the market value of the person’s interest in the FIF at the end of the income year. The value is zero if the person has disposed of the interest or is then applying another calculation method to it.
Gains is the total of all amounts that the person derives during the income year from holding or disposing of the interest. The amounts include any foreign withholding tax or other amount that the person is allowed as a credit under section LE 1 (Tax credits for imputation credits) or LJ 2 (Tax credits for foreign income tax).
Opening value is the market value of the person's interest in the FIF at the end of the previous income year, calculated using the exchange rate applying under section EX 57 for that previous year. The value is zero if the person did not hold the interest then or was then applying another calculation method to it.
Costs is the total for the income year of—
all expenditure, if any, that—
1. the person incurs in acquiring or increasing the interest:
2. another person incurs on behalf of the person referred to in subparagraph (i) in relation to the interest:
income tax on the income of the FIF—
1. for which the person is liable under the laws of a country or territory outside New Zealand; and
2. paid by the person in the income year.

Subsection (8) applies to a person who calculates under subsection (1) an amount of FIF loss for an attributing interest in a FIF (the affected interest) that is not a non-ordinary share described in section EX 46(10).
If, in the absence of this subsection, the person would have under subsection (1) a total FIF loss for the income year from all the person's affected interests, the FIF loss for the income year for the person from each affected interest is reduced to the extent necessary for the total FIF loss from the affected interests to be zero.

Compare

2004 No 35 s EX 44

Notes

Section EX 51(4): amended, on 1 April 2008, by section 393 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EX 51(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 176(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EX 51(6)(a): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 June 2014, by section 96(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EX 51(7) heading: substituted (with effect on 1 April 2009), on 6 October 2009, by section 176(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EX 51(7): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 36(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
Section EX 51(8) heading: substituted (with effect on 1 April 2009), on 6 October 2009, by section 176(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EX 51(8): substituted (with effect on 1 April 2009), on 6 October 2009, by section 176(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EX 51 list of defined terms direct income interest: repealed (with effect on 1 July 2011), on 7 May 2012, by section 36(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).