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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Definitions

EZ 32D: Value of asset fraction: CFC with excessive debt funding and loan entered before 21 June 2012

You could also call this:

“Calculating income for CFCs with pre-2012 excessive debt funding”

This section applies to you if you have a controlled foreign company (CFC) that has too much debt funding according to section EX 20D. It’s specifically for CFCs that entered into a financial arrangement before 21 June 2012 to get funds. This old funding arrangement affects how you calculate the CFC’s income.

To work out the ‘apportioned funding income’ for your CFC, you need to add up two amounts:

  1. The first amount is calculated using a formula from section EX 20B(4B)(b). For this calculation, you use the funding income from the old funding arrangements and the ‘cost fraction’ from section EX 20D(10) as the ‘asset fraction’.

  2. The second amount is also calculated using the formula from section EX 20B(4B)(b), but this time you use the funding income from any financial arrangements that aren’t the old ones.

This section overrides section EX 20B(4B)(b), which means you should use this method instead of the one described there.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4886688.

Topics:
Money and consumer rights > Taxes
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EZ 32C: Treatment in section EX 20C of currency effects on CFC's borrowing, or

“Old rule about currency effects on foreign company borrowing no longer applies”

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EZ 32E: Change in section EX 20B for income of CFC insurer: interest on terminal tax, or

“Interest waived on certain CFC insurer terminal tax debts from 2009 to 2012”

Part E Timing and quantifying rules
Terminating provisions: Definitions

EZ 32DValue of asset fraction: CFC with excessive debt funding and loan entered before 21 June 2012

  1. This section applies when a CFC is excessively debt funded under section EX 20D (Adjustment of cost fraction for excessively debt funded CFC) and entered before 21 June 2012 a financial arrangement (an old funding arrangement) that provides funds for the CFC.

  2. The amount of the item apportioned funding income for the CFC is the sum of—

  3. an amount calculated using the formula in section EX 20B(4B)(b) (Net attributable CFC income or loss) with—
    1. a value for the item funding income that is the amount of funding income relating to the old funding arrangements of the CFC; and
      1. a value for the item asset fraction that is the amount of the item cost fraction calculated under section EX 20D(10):
      2. an amount calculated using the formula in section EX 20B(4B)(b) with a value for the item funding income that is the amount of funding income relating to financial arrangements of the CFC that are not old funding arrangements.

        1. This section overrides section EX 20B(4B)(b).

        Notes
        • Section EZ 32D: inserted (with effect on 30 June 2009), on (applying for income years beginning on or after 1 July 2009), by section 64(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
        • Section EZ 32D(2)(a): amended (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on , by section 99(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
        • Section EZ 32D(2)(b): amended (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), on , by section 99(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
        • Section EZ 32D(3) heading: amended (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), by section 99(2)(a) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
        • Section EZ 32D(3): amended (with effect on 30 June 2009 and applying for income years beginning on or after 1 July 2009), by section 99(2)(b) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).