RE 18BCapital value increase under inflation-indexed instruments: RWT cap

1. For an interest payment under an inflation-indexed instrument, the payer is obliged, in addition to withholding under section RE 12, to withhold and pay to the Commissioner the lesser of the following amounts of tax:

2. the net amount of the interest payment (the current coupon payment) remaining after the withholding of RWT under section RE 12:
3. the amount given by the formula in subsection (2).

4. The formula for the purposes of subsection (1)(b) is:

   $CV\; increase\; \times \; tax\; rate.$

   Where:

5. In the formula in subsection (2),—

6. CV increase is the amount calculated under the formula in subsection (4), if it is positive:
7. tax rate is the basic rate set out in schedule 1, part D, clause 3 or 4 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).

8. The formula for the purposes of subsection (3)(a) is:

   $CV\; current\; coupon\; payment\; -\; CV\; previous\; coupon\; payment.$

   Where:

9. In the formula in subsection (4),—

10. CV current coupon payment is an amount that is or will be payable for the money lent under the instrument, to the extent to which the amount has accrued at the time of the current coupon payment and the amount is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand:
11. CV previous coupon payment is—
    1. an amount that is or will be payable for the money lent under the instrument, to the extent to which the amount has accrued at the time of the interest payment before the current coupon payment and the amount is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; or
    2. the face value of the instrument, if there has been no interest payment before the current coupon payment.