Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Terminating provisions

HZ 10: What happens when election is made under section HZ 9?

You could also call this:

“Special tax rules apply when a debt funding company is chosen”

When someone called an originator makes a choice under section HZ 9, some special rules apply. This happens when the originator’s choice is about a special company that deals with debt funding. These rules come into effect if this special company has any financial arrangements that were given to it by one of its originators.

From the year the choice is made and in the years after, you need to think about these arrangements differently. You should act as if the originator, not the special company, owned these financial arrangements all along. This means the originator is treated as if they paid for the arrangement and received any money from it. The special company is treated as if it never paid for or received money from the arrangement.

There’s also a special rule about calculating taxes for these financial arrangements. Usually, companies need to do a calculation called a base price adjustment. But in this case, the special company doesn’t have to do this calculation.

It’s important to know that section HR 10 can change these rules. This section talks about what happens when the special company stops being a see-through debt funding company.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS179943.

Topics:
Money and consumer rights > Taxes
Previous

HZ 9: Elections to treat existing debt funding special purpose vehicles as transparent, or

“Choosing to make existing debt funding vehicles tax-transparent”

Next

HZ 11: Protection from non-compliance: Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020, or

“Protection from penalties for certain securities rule breaches due to tax law changes”

Part H Taxation of certain entities
Terminating provisions

HZ 10What happens when election is made under section HZ 9?

  1. This section applies when—

  2. an originator makes an election under section HZ 9 that relates to a debt funding special purpose vehicle; and
    1. immediately before the election is made, the debt funding special purpose vehicle holds a financial arrangement or an excepted financial arrangement that was transferred to the debt funding special purpose vehicle by 1 of its originators.

      1. For the purposes of calculating the income tax liability of the debt funding special purpose vehicle and its originators for the income year in which the election is made and later income years (the post-disposal periods),—

      2. the relevant originator is treated for the post-disposal periods as if they had acquired and held the financial arrangement or excepted financial arrangement, not the debt funding special purpose vehicle:
        1. the relevant originator is treated for the post-disposal periods as if they had paid any consideration originally paid by the debt funding special purpose vehicle for or under the financial arrangement or excepted financial arrangement, and the debt funding special purpose vehicle is treated as not having paid that consideration:
          1. the relevant originator is treated for the post-disposal periods as if they had received any consideration originally received by the debt funding special purpose vehicle for or under the financial arrangement or excepted financial arrangement, and the debt funding special purpose vehicle is treated as not having received that consideration:
            1. the debt funding special purpose vehicle is, for the financial arrangement, a party that is not required to calculate a base price adjustment, despite section EW 29 (When calculation of base price adjustment required).

              1. Section HR 10 (What happens when vehicle stops being transparent debt funding special purpose vehicle?) overrides this section.

              Notes
              • Section HZ 10: inserted, on , by section 227(1) (and see section 227(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).