EX 20ERelative debt-asset ratio for CFC

1. This section determines the relative debt-asset ratio of a CFC for the purposes of section EX 20D(2)(b) by determining an amount (the group debt-asset ratio) for the CFC's group and comparing that amount with the debt-asset ratio of the CFC determined under section EX 20D(4).

2. For the purposes of subsections (3) to (8),—

3. the members of a CFC's group are—
   1. the CFC:
   2. if the interest holder is a company, the members of the worldwide group that the interest holder would have under sections FE 31B, FE 31C, and FE 32 (which relate to the determination of groups) if the interest holder were an excess debt outbound company:
   3. if the interest holder is a trustee, the members of the trustee's worldwide group under section FE 3(1)(b) (Interest apportionment for individuals):
   4. if the interest holder is a natural person, the person's worldwide group referred to in section FE 5(1C)(a) to (c) (Thresholds for application of interest apportionment rules):
4. the debts and assets of the CFC's group are determined under sections FE 8 to FE 11 and FE 18 (Measurement of debts and assets of worldwide group) as if the interest holder, if a company, were an excess debt outbound company.

5. The formula for the CFC's group debt-asset ratio is—

   $total\; group\; debts\; ÷\; (total\; group\; assets\; -\; total\; group\; non-debt\; liabilities).$

   Where:

6. The items in the formula in subsection (3) are defined in subsections (5), (6), and (6B).

7. Total group debts is the total amount, consolidated under generally accepted accounting practice for the CFC's group and the accounting period, of the outstanding balances of—

8. financial arrangements entered by the group's members, each of which—
   1. provides funds to a group member; and
   2. gives rise to an amount for which a group member would have a deduction:
9. fixed-rate foreign equity issued by a member of the group and held by a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method:
10. equity interests issued by a member of the group in relation to which the member makes deductible foreign equity distributions to a company that is a New Zealand resident, a CFC, or a FIF for which the interest holder uses the attributable FIF income method.

11. Total group assets is the total value, consolidated under generally accepted accounting practice for the accounting period, of the assets of the CFC's group.

12. Total group non-debt liabilities is the total value of the group’s non-debt liabilities determined under generally accepted accounting practice.

13. The formula for the CFC's relative debt-asset ratio is—

    $CFC’s\; debt-asset\; ratio\; ÷\; group\; debt-asset\; ratio.$

    Where:

14. In the formula in subsection (7),—

15. CFC's debt-asset ratio is the CFC's debt-asset ratio under section EX 20D(4):
16. group debt-asset ratio is the CFC's group debt-asset ratio under subsection (3).

Notes

• Section EX 20E: inserted (with effect on 30 June 2009), on 6 October 2009, by section 156(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
• Section EX 20E(3) formula: amended, on 1 July 2018, by section 13(1) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
• Section EX 20E(4): amended, on 1 July 2018, by section 13(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
• Section EX 20E(5)(b): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 22(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
• Section EX 20E(5)(c): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 22(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
• Section EX 20E(6B) heading: inserted, on 1 July 2018, by section 13(3) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
• Section EX 20E(6B): inserted, on 1 July 2018, by section 13(3) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
• Section EX 20E list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on 7 May 2012, by section 22(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
• Section EX 20E list of defined terms generally accepted accounting practice: inserted, on 1 July 2018, by section 13(4) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).