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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 26: Arrangements involving repatriation of commercial bills

You could also call this:

“Rules for handling commercial bills from overseas to prevent tax avoidance”

When you receive a commercial bill, which is a kind of loan, there are some special rules you need to know about. These rules apply in specific situations involving people from New Zealand and other countries.

If someone from another country has a commercial bill and gives it to you or another person in New Zealand, you need to be careful. This is especially true if the person from the other country wasn’t using the bill for business in New Zealand.

If you’re the person in New Zealand who gets the bill, and you cash it in, the money you get is counted as your income. This is true even if you don’t actually cash it in on the day it’s supposed to be cashed.

These rules are in place to make sure people don’t try to avoid paying certain taxes, like non-resident withholding tax or the approved issuer levy. The government wants to make sure everyone pays the right amount of tax, whether they live in New Zealand or not.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516967.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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Part G Avoidance and non-market transactions
Avoidance: specific

GB 26Arrangements involving repatriation of commercial bills

  1. This section applies when—

  2. a commercial bill has been issued by—
    1. a New Zealand resident who does not use the money lent in a business carried on through a fixed establishment outside New Zealand; or
      1. a non-resident who uses the money lent in a business carried on through a fixed establishment in New Zealand; and
      2. a non-resident who holds the bill transfers it to another person (the New Zealand transferee); and
        1. the non-resident did not become a party to the bill for the purpose of carrying on a business through a fixed establishment in New Zealand; and
          1. the New Zealand transferee is either—
            1. a New Zealand resident; or
              1. a non-resident who becomes a party to the commercial bill for the purpose of carrying on a business through a fixed establishment in New Zealand; and
              2. the transfer of the bill has the purpose of avoiding non-resident withholding tax (NRWT) or the approved issuer levy.

                1. If the New Zealand transferee redeems the commercial bill, the redemption payment is income of the New Zealand transferee.

                2. For the purposes of this section, the New Zealand transferee is treated as redeeming the bill on the scheduled redemption date even if it is not redeemed.

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