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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Cases of entry into and exit from FIF rules

EX 67: FIF rules first applying to interest on or after 1 April 2007

You could also call this:

“New rules for foreign investments starting to make money from 1 April 2007”

This section talks about what happens when your rights in a Foreign Investment Fund (FIF) change. If your rights weren’t making you any FIF income or loss before, but now they are, here’s what you need to know:

You’re treated as if you sold your interest in the FIF just before it started making income or loss. Then, you’re treated as if you bought it back right away. The price for this pretend sale and purchase is the market value of your interest at that time.

If you have to pay tax because of this pretend sale, you can pay it off over three years. You can pay at least one-third in the first year, half of what’s left in the second year, and the rest in the third year.

You won’t have to pay any extra fees or interest if you make a mistake in guessing how much tax you need to pay in advance because of this pretend sale.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515729.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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EX 66B: Entities ceasing to be FIFs, or

“Rules for when a foreign investment stops being a foreign investment fund”

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EX 67B: Revaluation of inherited interests in grey list companies, or

“Rules for inherited overseas investments in certain companies”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Cases of entry into and exit from FIF rules

EX 67FIF rules first applying to interest on or after 1 April 2007

  1. This section applies when a person has rights in a FIF that—

  2. for the period ending on a day (the preceding day) are—
    1. not an attributing interest:
      1. an attributing interest for which the person does not have FIF income or loss:
        1. rights for which the person is a share supplier in a returning share transfer; and
        2. for the period beginning on the day (the application day) following the preceding day are an attributing interest for which the person has FIF income or loss.

          1. The person is treated as having—

          2. disposed of the interest immediately before the application day to an unrelated person; and
            1. reacquired it immediately at the start of the application day; and
              1. received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal.

                1. A person who is liable to pay an amount of income tax (the amount of tax) because of the disposals in an income year, and related acquisitions, treated as occurring under this section—

                2. may satisfy the liability by paying the Commissioner at least—
                  1. one third of the amount of tax in the income year following the income year in which the disposals are treated as occurring; and
                    1. one half of the balance of the amount of tax remaining owing after payment made under subparagraph (i), in the second income year following the income year in which the disposals are treated as occurring; and
                      1. the balance of the amount of tax remaining owing after payments made under subparagraphs (i) and (ii), in the third income year following the income year in which the disposals are treated as occurring:
                      2. is not liable to pay any penalty or interest for which the person would otherwise be liable for an inaccuracy in an estimate, or shortfall in the payment, of provisional tax to the extent to which the inaccuracy or shortfall arises because of the disposals.

                        Compare
                        Notes
                        • Section EX 67(1) heading: substituted, on , by section 400(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(1): substituted, on , by section 400(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(3): amended, on , by section 400(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(3)(a)(i): amended, on , by section 400(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(3)(a)(ii): amended, on , by section 400(2)(c) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(3)(a)(iii): amended, on , by section 400(2)(d) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section EX 67(3)(b): amended, on , by section 400(2)(e) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).