FH 15Definitions

1. In this Act,—

   act together, for 2 persons (the holders) that each have rights or interests (the rights and interests) in a person or other entity and for the ownership or control of the rights and interests, means—

   1. the holders are associated under section YB 4 (Two relatives):
   2. a holder typically acts in the way preferred by the other holder, because of the other holder’s preference:
   3. the holders have entered into an arrangement that has an effect on the value or control of the rights or interests that is more than incidental and does not arise from a restriction on the sale of the rights or interests:
   4. the actions of the holders relating to the interests are legally controlled, are typically controlled, or are expected to be controlled, by a third person or group of persons (the co-ordinator) that does not meet the requirements of subsection (2):
   5. the holders and a co-ordinator that does not meet the requirements of subsection (2) enter an arrangement affecting the ownership or control of the rights and interests and having an effect on the value or control of the rights and interests that is more than incidental:
   6. the holders agree with a co-ordinator that does not meet the requirements of subsection (2) that the co-ordinator can act on behalf of the holders in relation to the rights and interests

   branch mismatch report means the report OECD (2017), Neutralising the Effects of Branch Mismatch Arrangements, Action 2: Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris

   control group means a group of persons in which, for each member and each other member,—

   1. the members are—
      1. consolidated, or required to be consolidated, for accounting purposes:
      2. members of a group of companies for which an applicable financial reporting standard requires the preparation of group financial statements for an accounting period:
   2. the members are companies, or limited partnerships that are treated as companies under section YB 16B (Limited partnerships treated as companies), or a combination of them that are associated under section YB 2 (Two companies):
   3. 1 of the members is a company and the other person has, or is a member of a group of persons acting together that has,—
      1. a voting interest in the company of 50% or more, applying the general aggregation rule in section YB 3(3):
      2. if a market value circumstance exists for the company, a market value interest in the company of 50% or more, applying the general aggregation rule in section YB 3(3):
   4. the members are associated under section YB 4 (Two relatives):
   5. the members are associated under sections YB 5 to YB 11 (which relate to a trustee or settlor of a trust):
   6. 1 of the members is a partnership, or is a limited partnership, and the other member,—
      1. if the partnership is a limited partnership, is a general partner or is a limited partner that has a partnership share of more than 50% in a right, obligation, or other property, status, or thing of the limited partnership, applying the general aggregation rule in section YB 12(3) (Partnership and partner):
      2. if the partnership is not a limited partnership, is a partner that has a partnership share of more than 50% in a right, obligation, or other property, status, or thing of the partnership, applying the general aggregation rule in section YB 12(3):
   7. 1 of the members, or a group consisting of 1 of the members and persons that are related to or act together with that member, effectively controls the other member:
   8. a person or group of persons, together with persons who are related to or act together with the person or a person in the group, effectively controls each of the 2 members

   deducting branch, for a person, means a branch, permanent establishment, or other activity, of the person in a country or territory, such that expenditure or loss attributed by the person to the branch, permanent establishment, or activity is recognised by the tax law of the country or territory as giving rise to a deduction against income of the person or other tax relief

   entity means a person, or a relationship that is treated as a person by the tax law of a country or territory outside New Zealand

   financial instrument means—

   1. a financial arrangement:
   2. a share:
   3. an annuity:
   4. a farm-out arrangement:
   5. a share-lending arrangement:
   6. a loan in New Zealand currency described in section EW 5(10) (What is an excepted financial arrangement?)

   hybrid entity, for 2 countries or territories, means a person or other entity that is—

   1. recognised in 1 of the countries or territories (the resident jurisdiction) as being a resident of the resident jurisdiction and subject to taxation under the taxation law of the resident jurisdiction; and
   2. not recognised in the other country or territory (the overseas jurisdiction) as being a person, or other entity, subject to taxation under the taxation law of the overseas jurisdiction in relation to income with a source in the overseas jurisdiction

   hybrid mismatch, for a payment in a tax year by a payer in a country or territory (the payer jurisdiction) means an amount of a deduction for the payment that would be denied by the payer jurisdiction if the payer jurisdiction had legislation having an effect corresponding to that of subpart FH

   hybrid mismatch legislation means—

   1. this subpart:
   2. legislation of a country or territory outside New Zealand having an intended effect corresponding to the effect of this subpart or a provision in this subpart

   hybrid mismatch report means the publication OECD (2015), Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 – 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris

   mismatch amount means an amount, arising from a mismatch situation under a provision of this subpart, for which a deduction is denied or assessable income is increased under section FH 5, FH 6, FH 8, FH 9, or FH 10

   mismatch situation means a situation in which differences between the taxation law of New Zealand and the taxation law of another country or territory in the tax treatment of entities or deducting branches may give rise to adjustments to deductions or income under sections FH 5, FH 6, FH 8, FH 9, or FH 10

   related, for 2 persons, means a relationship under which—

   1. the 2 persons are companies, or limited partnerships that are treated as companies under section YB 16B, or a combination of them—
      1. that are associated under section YB 2 (Two companies):
      2. for which a group of persons exists whose total voting interests in each company, determined under section YB 2, are 25% or more:
      3. if a market value circumstance exists for either company, for which a group of persons exists whose total market value interests in each company, determined under section YB 2, are 25% or more:
   2. 1 of the persons is a company and the other person is not a company and the 2 persons are associated under section YB 3 (Company and person other than company):
   3. the 2 persons are associated under section YB 4 (Two relatives):
   4. the 2 persons are associated under sections YB 5 to YB 11 (which relate to a trustee or settlor of a trust):
   5. 1 of the persons is a limited partnership and the other person is a general partner, or is a limited partner and the 2 persons are associated under section YB 12 (Partnership and partner):
   6. 1 of the persons is a partnership and the other person is a partner and the 2 persons would be associated under section YB 12(2) if the partnership were a limited partnership and the partner were a limited partner:
   7. 1 of the persons, or a group consisting of the person and persons who act together with the person, controls the other person:
   8. a person or group of persons, together with persons who are related to or act together with the person or a person in the group, controls each of the persons

   structured arrangement, for a person, means an arrangement to which the person or a member of the person’s control group is a party—

   1. for which—
      1. a transaction under or involving the arrangement has a price that assumes the existence of a hybrid mismatch:
      2. the facts or circumstances indicate that the arrangement is intended to rely on or produce a hybrid mismatch; and
   2. under which the person, or a member of the person’s control group, can reasonably be expected to be aware of—
      1. a tax benefit for the person that arises from the hybrid mismatch:
      2. the existence of the hybrid mismatch

   surplus assessable income means an amount, arising from a mismatch situation and determined under section FH 12, against which a mismatch amount from the mismatch situation may be set off under section FH 12.

2. A co-ordinator meets the requirements of this subsection for rights or interests in a person or entity held separately by 2 holders if—

3. the co-ordinator manages an investment fund through which 1 of the holders has the holder’s rights or interests in the person or entity; and
4. the co-ordinator manages another investment fund through which the other holder has the holder’s rights or interests in the person or entity; and
5. the 2 funds do not act together in relation to the rights and interests of the holders.

Notes

• Section FH 15: inserted, on 1 July 2018, by section 35(1) (and see section 35(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
• Section FH 15(1) control group paragraph (b): amended (with effect on 26 August 2024), on 29 March 2025, by section 64(1) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
• Section FH 15(1) hybrid mismatch: replaced (with effect on 1 July 2018), on 30 March 2022, by section 106(1) (and see section 106(3) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
• Section FH 15(1) hybrid mismatch legislation paragraph (b): amended (with effect on 1 July 2018), on 30 March 2022, by section 106(2) (and see section 106(3) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
• Section FH 15(1) mismatch amount: amended (with effect on 1 July 2018), on 18 March 2019, by section 200(1) (and see section 200(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
• Section FH 15(1) mismatch situation: amended (with effect on 1 July 2018), on 18 March 2019, by section 200(2) (and see section 200(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
• Section FH 15(1) related paragraph (a): amended (with effect on 26 August 2024), on 29 March 2025, by section 64(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).