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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 67B: Revaluation of inherited interests in grey list companies

You could also call this:

“Rules for inherited overseas investments in certain companies”

This section applies to you if you inherited an interest in a foreign investment fund (FIF) before 1 April 2007. The FIF must have been a grey list company when you inherited it, and the cost of the interest to you must be zero.

If this applies to you, the law treats you as if you sold the interest and then bought it again right away. The price for both the sale and purchase is considered to be the market value of the interest at that time.

When figuring out how much tax you owe from this sale, the cost of the interest is treated as the lower of two amounts: either the market value when you inherited it, or the market value when you’re treated as selling it.

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

You won’t have to pay any extra penalties or interest if you make a mistake in estimating or fall short in paying your provisional tax because of these sales.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4465746.

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Money and consumer rights > Taxes
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EX 67: FIF rules first applying to interest on or after 1 April 2007, or

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

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EX 68: Measurement of cost, or

“How to calculate the cost of your overseas investments”

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

EX 67BRevaluation of inherited interests in grey list companies

  1. This section applies when—

  2. a person inherited, before 1 April 2007, an interest in a FIF that was a grey list company when the interest was inherited; and
    1. the cost of the interest for the person is equal to zero.

      1. The person is treated as having—

      2. disposed of the interest immediately before this section applied to the person and the interest; and
        1. reacquired the interest as soon as this section applied to the person and the interest; 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. For determining a tax liability of the person arising from the disposal, the cost of the interest for the person at the time of the inheritance is treated as being the lesser of—

            2. the market value of the interest at the time of the inheritance:
              1. 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 a disposal in an income year, and related acquisition, treated as occurring under this section—

                2. may satisfy the liability by paying to the Commissioner—
                  1. at least one third of the amount of tax in the income year following the income year in which the disposal is treated as occurring; and
                    1. at least 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 disposal is 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 disposal is 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.

                        Notes
                        • Section EX 67B: inserted, on , by section 47 of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).