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Income Tax Act 2007

Recharacterisation of certain transactions - Interest apportionment on thin capitalisation - Debt percentage of New Zealand group

FE 15: Total group debt

You could also call this:

“Calculating the total debt owed by a New Zealand group”

In this part of the law, ‘total group debt’ means all the money that a New Zealand group owes. This includes:

Money that people or companies in the group have borrowed, if they can claim a tax deduction for it. However, the law doesn’t count deductions that are only because of changes in currency exchange rates.

It also includes some special types of investments that are similar to debt:

  • Fixed-rate foreign equity or fixed-rate shares that the group has issued and that New Zealand residents own.
  • Stapled debt securities that the group has issued, that New Zealand residents own, and that are linked to shares (but not shares of a proportional-stapling company).

If you’re not sure whether something counts as providing funds, you can check section 90A of the Tax Administration Act 1994.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516452.

Topics:
Money and consumer rights > Taxes
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FE 14: Consolidation of debts and assets, or

“How to calculate debt percentage for New Zealand groups”

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FE 16: Total group assets, or

“How to calculate the total value of assets for a New Zealand group”

Part F Recharacterisation of certain transactions
Interest apportionment on thin capitalisation: Debt percentage of New Zealand group

FE 15Total group debt

  1. In this subpart, for a New Zealand group, total group debt means the sum of the outstanding balances of—

  2. financial arrangements entered into by a natural person, or an excess debt entity, or another member of the New Zealand group, if the financial arrangement—
    1. provides funds to the natural person, the entity, or another member of the group; and
      1. gives rise to an amount for which the natural person, the entity, or another member of the group, would have a deduction; and
        1. the deduction is not denied under section FH 3 (Payments under financial instruments producing deduction without income) as an unrecognised amount under section FH 3(2) or under section FH 7 or FH 11 (which provide for the matching of deductions and income from multi-jurisdictional arrangements):
        2. fixed-rate foreign equity or fixed-rate shares that are—
          1. issued by the entity or another member of the New Zealand group; and
            1. held by a person resident in New Zealand:
            2. stapled debt securities—
              1. issued by the entity or another member of the New Zealand group; and
                1. held by a person resident in New Zealand; and
                  1. stapled to shares other than shares of a company that is a proportional-stapling company.

                  2. Subsection (1)(a)(ii) does not include a deduction for an amount that arises only from movement in currency exchange rates.

                  3. For a determination on whether a financial arrangement provides funds, see section 90A of the Tax Administration Act 1994.

                  Compare
                  Notes
                  • Section FE 15(1) heading: substituted (with effect on 30 June 2009), on , by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15(1): substituted (with effect on 30 June 2009), on , by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15(1)(a)(ii): amended, on , by section 29(1) (and see section 29(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                  • Section FE 15(1)(a)(iii): inserted, on , by section 29(2) (and see section 29(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                  • Section FE 15(2) heading: substituted (with effect on 30 June 2009), on , by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15(2): substituted (with effect on 30 June 2009), on , by section 215(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15 list of defined terms fixed-rate foreign equity: inserted (with effect on 30 June 2009), on , by section 215(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15 list of defined terms proportional-stapling company: inserted (with effect on 1 April 2008), on , by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15 list of defined terms resident in New Zealand: inserted (with effect on 1 April 2008), on , by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15 list of defined terms stapled: inserted (with effect on 1 April 2008), on , by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section FE 15 list of defined terms stapled debt security: inserted (with effect on 1 April 2008), on , by section 215(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).