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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Relationship with other provisions in Act

EX 60: Top-up FIF income: deemed rate of return method

You could also call this:

“Extra income from foreign investments calculated using a set rate”

This section applies to you if you have an interest in a foreign investment fund (FIF) for a period, you’re using the deemed rate of return method to work out your FIF income or loss, and you get money from owning or selling the interest that would normally be income.

If this applies to you, you need to work out if you have any extra FIF income. You do this by adding up all the money you’ve made from the interest that would normally be income, and then taking away all the FIF income you’ve already counted (minus any FIF losses). If the result is more than zero, that amount is extra FIF income.

When you sell part of your interest, you need to treat the part you sold and the part you kept as if they were separate interests. If you need to split up the amounts, you should do it based on what each part was worth when you sold the part interest.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515692.

Topics:
Money and consumer rights > Taxes
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EX 59: Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method, or

“Rules for calculating income from foreign investments using specific methods”

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EX 61: Top-up FIF income: 1 April 1993 uplift interests, or

“Extra tax on long-held foreign investments with special income calculations”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Relationship with other provisions in Act

EX 60Top-up FIF income: deemed rate of return method

  1. This section applies at any time when a person—

  2. has an attributing interest in a FIF for a period; and
    1. is calculating the FIF income or loss from the interest using the deemed rate of return method; and
      1. derives in the period, from holding or disposing of the interest, an amount that would have been income if section EX 59(2) had not applied.

        1. The gain is FIF income to the extent to which the amount calculated using the following formula is positive:

          total income gains − total FIF income.

          Where:

          • In the formula,—

          • total income gains is the total of amounts, including the amount in question, derived by the person until that time from holding or disposing of the interest that would have been income if section EX 59(2) had not applied:
            1. total FIF income is the total of FIF income, reduced by the total of any FIF losses, derived by the person from the interest until, and including, the relevant period.

              1. If the person disposes of part of the interest, this section applies to the part disposed of and the part retained as if they were separate interests. If this means that an apportionment is necessary, it must be done on the basis of the respective market values at the time the part interest is disposed of.

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              Notes
              • Section EX 60(4) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).