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RF 12E: When non-resident financial arrangement income treated as paid
or “When income from overseas financial arrangements is considered paid”
You could also call this:

“Calculating additional income from overseas loans in the first year”

This section talks about how to adjust money amounts in the first year when someone lends money to a person who doesn’t live in New Zealand. It’s about making sure all the money that should be counted as income is included.

If you’re lending money to someone outside New Zealand, in the first year you need to add some extra money to your income. This extra money is what you would have earned if the loan had always been treated as income from lending to a non-resident.

To work out how much extra money to add, you use a simple maths formula. You take the total amount of money the borrower has paid for the loan and subtract the total interest they’ve paid to all non-residents.

The total amount paid by the borrower is counted from when they first got the loan until the end of the year before this first income year. The total interest is counted from when the loan started until the due date for the non-resident financial arrangement income in this income year.

This adjustment helps make sure that all the income from the loan is properly accounted for, even if it wasn’t treated as non-resident financial arrangement income before.

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Next up: RF 12G: Choosing to treat income as non-resident financial arrangement income

or “Choosing to categorise certain income as non-resident financial arrangement income”
Next

Part R General collection rules
Withholding tax on non-resident passive income (NRWT)

RF 12FAdjustments: first year additional amounts

  1. This section applies for the first income year in which a lender derives non-resident financial arrangement income under a financial arrangement. It increases the lender’s income by adding an amount that the lender would have derived if the financial arrangement had always given rise to non-resident financial arrangement income.

  2. The amount is calculated using the formula—

    total accrual income − total interest.

    Where:

    • In the formula,—

    • total accrual income is the total expenditure incurred by the borrower under the arrangement to the extent to which the arrangement is held by a non-resident person for the period that—
      1. starts on the date on which the borrower became party to the arrangement; and
        1. ends on the last day of the income year that precedes the first income year:
        2. total interest is the total interest paid by the borrower to all non-residents for the period that—
          1. starts on the date on which the borrower became party to the arrangement; and
            1. ends on the NRFAI due date for the borrower’s income year.

            Notes
            • Section RF 12F: inserted, on , by section 279 (and see section 5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).