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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration when anti-avoidance provision applies

EW 52B: Excepted financial arrangements involving pre-1990 forest land emissions units

You could also call this:

“Rules for temporary transfers of pre-1990 forest land emissions units”

This section talks about a special kind of agreement involving pre-1990 forest land emissions units. Here’s what you need to know:

You might have a pre-1990 forest land emissions unit that you need to give to someone else for a while, but you’ll get a similar unit back later. This is called a security assignment.

Even though you’ve given your unit away temporarily, the law says you can still be treated as if you’re holding onto it. This continues until you get a unit back or until the agreement ends.

If you get a unit back when you’re supposed to, it’s treated as if it’s the same as the original unit you gave away. The value of both units is considered to be the same as what your original unit was worth when the agreement started.

If you don’t get a unit back when you’re supposed to, the law says you’ve given your unit away completely. The value of the unit is considered to be what it was worth in the market just before the agreement started.

These rules override some other parts of the law about how to value these kinds of agreements.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS223632.

Topics:
Environment and resources > Climate and energy
Business > Industry rules
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Part E Timing and quantifying rules
Financial arrangements rules: Consideration when anti-avoidance provision applies

EW 52BExcepted financial arrangements involving pre-1990 forest land emissions units

  1. This section applies to an arrangement that is an excepted financial arrangement under section EW 5(11C) and under which—

  2. the holder (the unit holder) of a pre-1990 forest land emissions unit (the original unit) is required to make an assignment of the original unit (the security assignment) to a person who is not an associated person (the lender); and
    1. the lender is required to make a later assignment (the security return) of a New Zealand emissions unit (the returned unit) to the unit holder.

      1. The unit holder is treated as continuing to hold a pre-1990 forest land emissions unit for the period beginning with the day on which the arrangement begins and ending with the day given by subsection (3) for the security assignment, subject to subsections (4) and (5).

      2. Subsection (4) applies if the security return occurs on or before the day that is the earlier of—

      3. the day on which the security return is required under the arrangement:
        1. the day on which the arrangement comes to an end.

          1. If the unit holder receives a returned unit under the arrangement on or before the day given by subsection (3),—

          2. the returned unit is treated as being the original unit; and
            1. the unit holder is treated as continuing to hold the original unit for the period beginning with the day on which the arrangement begins and ending with the day of the security return; and
              1. the original unit and the returned unit are treated as having a value for the unit holder equal to the cost of the original unit for the unit holder immediately before the arrangement begins; and
                1. the original unit and the returned unit are treated as having a value for the lender of—
                  1. the cost of the original unit for the unit holder immediately before the arrangement begins, for the security assignment and the security return:
                    1. zero, for an assignment of the original unit other than the security return.

                    2. If the unit holder does not receive a returned unit under the arrangement on or before the day given by subsection (3),—

                    3. the original unit is treated as being assigned to the lender on the day of the security assignment; and
                      1. the unit holder is treated as ceasing to hold the original unit from the day of the security assignment; and
                        1. the original unit is treated as having a value for the unit holder and the lender at the time of the security assignment equal to the market value of the original unit for the unit holder immediately before the arrangement begins.

                          1. Subsections (4)(c) and (d) and (5)(c) override sections EA 1(4)(c) and ED 1 (which relate to the valuation of excepted financial arrangements).

                          Notes
                          • Section EW 52B: inserted (with effect on 1 April 2018), on , by section 64(1) (and see section 64(2) for application) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).