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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Definitions

EZ 50: Rules for non-market transactions

You could also call this:

“Rules for fair pricing in financial transactions between connected parties”

If you’re involved in buying, selling, or transferring financial arrangements, there are some special rules you need to know about.

If the tax commissioner thinks that people who are connected to each other are making deals that try to get around the old financial arrangement rules, they can step in. The commissioner can decide that the price for the deal should be what it would be if the people weren’t connected and were just making a normal business deal.

If you’re not from New Zealand but start using a financial arrangement for a business you’re running in New Zealand, it’s treated as if you just bought it. If you stop using it for that business, it’s treated as if you just sold it. If you move to New Zealand and you already have a financial arrangement, it’s treated as if you just bought or issued it when you became a resident. In all these cases, the price is set as if it was a normal business deal between unconnected people.

If you sell or transfer a financial arrangement for free or for less than it’s really worth, it’s treated as if you sold it for its true market value. This includes giving it away to shareholders. The market value is used for both the person selling and the person buying.

Remember, these rules are designed to make sure everyone is playing fair when it comes to financial arrangements.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516238.

Topics:
Money and consumer rights > Taxes
Business > Fair trading
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EZ 49: Determination of core acquisition price where consideration for property denominated in foreign currency, or

“Calculating the price in NZ dollars when buying items in foreign currency”

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EZ 51: Transitional adjustment when changing to financial arrangements rules, or

“How to adjust your taxes when switching to new financial arrangement rules”

Part E Timing and quantifying rules
Terminating provisions: Definitions

EZ 50Rules for non-market transactions

  1. Where the Commissioner, having regard to any connection between the parties to the issue or transfer of a financial arrangement and to any other relevant circumstances, is satisfied that the parties were dealing with each other in relation to the issue or transfer in a manner that has the effect of defeating the intent and application of the old financial arrangements rules, the Commissioner may, under section EZ 35 or EZ 37 or EZ 38 or EZ 42, deem the consideration for the issue or transfer to be equal to the consideration that might reasonably be expected for the issue or transfer if the parties to the issue or transfer were independent parties dealing at arm’s length with each other in relation to the issue or transfer.

  2. If at any time a person not resident in New Zealand—

  3. commences to hold, whether temporarily or otherwise, a financial arrangement, for the purposes of a business carried on through a fixed establishment in New Zealand, the person is deemed to have acquired the financial arrangement at that time; or
    1. ceases to hold, whether temporarily or otherwise, a financial arrangement for the purposes of a business carried on through a fixed establishment in New Zealand, the person is deemed to have disposed of the financial arrangement at that time; or
      1. being a holder or an issuer of a financial arrangement, becomes a New Zealand resident, the person is deemed to acquire or to issue the financial arrangement at the time at which the person becomes a New Zealand resident;—
          1. and that acquisition or that disposal is deemed to have been made for a consideration equal to the consideration that might reasonably be expected for the acquisition or disposal if the acquisition or disposal had been made at arm’s length.

        1. A financial arrangement is treated as having been sold and purchased or transferred and realised at its market value on the date of its sale or transfer if the sale or transfer, including a transfer by way of distribution to shareholders, is not for consideration in money or is for a consideration that is less than the market value of the financial arrangement.

        2. The market value of a financial arrangement is the market value for both seller and purchaser or transferor and transferee.

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