Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Changing calculation method

EX 62: Limits on changes of method

You could also call this:

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

You must use the same method to calculate your FIF income or loss for an attributing interest in a FIF unless you’re allowed to change. You can change if:

  • It’s not practical to continue with the same method
  • You’re a natural person and your total FIF interests are worth $250,000 or less
  • You’re changing to or from the attributable FIF income method for the first time
  • There’s been a significant change that affects your ability to use the attributable FIF income method

To change methods, you need to notify the Commissioner and give reasons. The notice must be given before the end of the income year or accounting period for which the change will take effect.

You can change more than once between the fair dividend rate method and comparative value method if you’re a natural person or a trust that meets certain conditions.

You could change to the fair dividend rate method from some other methods in your 2008-09 or 2009-10 tax return, depending on when you filed your 2008-09 return.

You could also change to the fair dividend rate method from certain other methods in your return for the first income year starting on or after 1 July 2011.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515703.

Topics:
Money and consumer rights > Taxes
Business > Fair trading
Previous

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

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

Next

EX 63: Consequences of changes in method, or

“What happens when you change how you calculate your foreign investment income”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Changing calculation method

EX 62Limits on changes of method

  1. Once a person uses a particular calculation method to calculate FIF income or loss for an attributing interest in a FIF for a particular period, they must use the same method for interests in the FIF for the next period unless they are allowed to change under subsections (2) to (9).

  2. The person may change if it is not practical to continue with the same method because—

    1. in the case of the attributable FIF income method, section EX 46(3)(a) and (b) prevent its continued use or it is impossible to obtain enough information to continue to use it:
      1. in the case of the comparative value method,—
        1. section EX 46(6) prevents its continued use:
          1. it is impossible to find out the end-of-year market value of the interest:
            1. in the case of the deemed rate of return method, the person is required by section EX 47 to use the comparative value method:
              1. in the case of the fair dividend rate method, it is impossible to find out the start-of-year market value of the interest except by an independent valuation:
                1. in the case of the cost method, section EX 46(9) prevents its continued use.

                  1. The person may also change by notice to the Commissioner if—

                  2. the notice complies with subsection (4); and
                    1. either—
                      1. the person is a natural person and the $250,000 threshold in subsection (5) is not exceeded; or
                        1. the change is to, or from, the attributable FIF income method and within subsections (6) and (7).

                        2. The notice of an election to change under subsection (3) must—

                        3. give the reasons for the change; and
                          1. comply with the Commissioner’s notice requirements; and
                            1. be given before the end of the first income year or accounting period for which the change is to take effect, unless the Commissioner agrees to a retrospective notice; and
                              1. in the case of a natural person relying on the $250,000 threshold test in subsection (3)(b)(i), be given before the end of the year or period that is before the one from the end of which the change takes effect.

                                1. A natural person may make an election under subsection (3) if the total market value of their attributing interests in FIFs is $250,000 or less at the end of the income year or accounting period before the year or period from the end of which the change takes effect.

                                2. A person may make an election under subsection (3) to change to or from the attributable FIF income method if—

                                  1. this is the first time they have chosen to change to or from the attributable FIF income method for an attributing interest in the FIF, other than a change from the branch equivalent method:
                                    1. subsection (7) allows them to make another election.

                                      1. A person may change more than once to, or from, the attributable FIF income method if—

                                      2. there has been a change in circumstances, such as a significant change in shareholding, that significantly changes their ability to obtain enough information to use the attributable FIF income method; and
                                        1. altering their income tax liability is not the principal purpose or effect of the change.

                                          1. A person may change more than once from the fair dividend rate method to the comparative value method and from the comparative value method to the fair dividend rate method if the person is a natural person or the trustee of a trust that—

                                          2. has no gifting settlor who is not a natural person or deceased person; and
                                            1. at all times in the income year, is a complying trust for a distribution made at the time; and
                                              1. is—
                                                1. at all times in the income year, mainly for the benefit of a natural person for whom the gifting settlors of the trust have natural love and affection, or had natural love and affection when alive:
                                                  1. mainly for the benefit of an organisation or trust with income that is exempt income under section CW 41 or CW 42 (which relate to the income of charities); and
                                                  2. is not a superannuation scheme.

                                                    1. A person may change to the fair dividend rate method from the branch equivalent method or the accounting profits method in the person's return of income for—

                                                    2. the 2008–09 tax year, if the person has not furnished a return for that tax year before the date on which the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 receives the Royal assent; or
                                                      1. the 2009–10 tax year, if the person has furnished a return for the 2008–09 tax year before the date on which that Act receives the Royal assent.

                                                        1. A person may change to the fair dividend rate method from the accounting profits method, the branch equivalent method, or the deemed rate of return method in the person's return of income for the first income year beginning on or after 1 July 2011.

                                                        Compare
                                                        Notes
                                                        • Section EX 62(1): amended (with effect on 1 April 2008), on , by section 182(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                        • Section EX 62(2)(a): repealed, on , by section 153(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62(2)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(2)(b): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 50(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                                        • Section EX 62(2)(c): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(2)(d): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(4) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(2)(e): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(5) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(2)(g): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(6) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(3)(b)(ii): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(7) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(6) heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(8) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(6): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(8) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(6)(a): repealed, on , by section 153(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62(6)(b): amended, on , by section 153(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62(7) heading: amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(9) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(7): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(9) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(7)(a): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(9) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(8)(a): substituted, on , by section 398 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                        • Section EX 62(8)(b): substituted, on , by section 398 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                        • Section EX 62(8)(c): substituted, on , by section 398 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                        • Section EX 62(8)(d): substituted, on , by section 398 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                        • Section EX 62(9) heading: added (with effect on 1 April 2008), on , by section 182(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                        • Section EX 62(9): added (with effect on 1 April 2008), on , by section 182(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                        • Section EX 62(10) heading: inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(10) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62(10): inserted (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 41(10) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 41(11)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                                        • Section EX 62 list of defined terms branch equivalent method: inserted, on , by section 153(4)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62 list of defined terms gifting settlor: inserted, on , by section 153(4)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62 list of defined terms return: inserted (with effect on 1 April 2008), on , by section 182(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                        • Section EX 62 list of defined terms return of income: inserted (with effect on 1 April 2008), on , by section 182(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                                        • Section EX 62 list of defined terms settlor: repealed, on , by section 153(4)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EX 62 list of defined terms tax year: inserted (with effect on 1 April 2008), on , by section 182(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).