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

You could also call this:

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

This section talks about how you calculate your income from foreign investments that you’ve held for a long time. It applies to you if:

You have an investment in a foreign company. You owned this investment on 2 July 1992. From 1 April 1993, you used special methods to work out your income from this investment. You were treated as if you bought the investment again on 1 April 1993 at a higher price. You get money from this investment that would normally count as income.

If all of these things apply to you, you might need to pay tax on some extra income. Here’s how you work it out:

First, add up all the money you’ve made from this investment that would normally be income. Then, subtract all the income you’ve already paid tax on from this investment. If the result is more than zero, that’s your extra income.

If you sell only part of your investment, you need to split this calculation between the part you sold and the part you kept. You should do this based on how much each part is worth when you sell.

Remember, this is just a simple explanation. If you’re dealing with foreign investments, it’s a good idea to talk to an expert who can help you understand exactly how this applies to you.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515697.

Topics:

Money and consumer rights > Taxes

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

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

EX 62: Limits on changes of method, or

“Rules for changing how you calculate your foreign investment fund income”

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

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

This section applies at any time if a person—
has an attributing interest in a FIF for a period; and
held the interest on 2 July 1992; and
calculated their FIF income from the interest in the period starting on 1 April 1993 under the comparative value method or the deemed rate of return method; and
was treated as having reacquired the interest on 1 April 1993 for an uplifted cost under section CG 23(1)(d) of the Income Tax Act 1994 or EZ 7 of the Income Tax Act 2004; and
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.

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

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.

Compare

2004 No 35 s EX 49

Notes

Section EX 61(4) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).