Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 51B: Increases or decreases in value

You could also call this:

“Ignoring value changes made to avoid interest and thin capitalisation rules”

This law applies when there’s a change in value that affects calculations related to interest and thin capitalisation. If you do something on purpose to change a value, or if you make an arrangement that changes a value, and this goes against what the law intends, the change in value will be ignored. This means the calculation will be done as if the value hadn’t changed. This rule is in place to make sure people don’t try to get around the rules about interest and thin capitalisation.

When the law talks about interest and thin capitalisation, it’s referring to a part of the law called subpart FE. This part of the law deals with how companies manage their debt and equity, especially when they’re operating across different countries.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS66100.

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Part G Avoidance and non-market transactions
Avoidance: specific

GB 51BIncreases or decreases in value

  1. This section applies when there is an increase or decrease in a value that affects, or would affect, the result of a calculation (the affected calculation) under subpart FE (Interest apportionment on thin capitalisation) and the increase or decrease is—

  2. caused by an action or omission that has, or would have, a purpose or effect of defeating the intent and application of subpart FE:
    1. produced by an arrangement that has an effect of defeating the intent and application of subpart FE.

      1. The effect on the affected calculation of the increase or decrease in the value is disregarded for the purposes of subpart FE.

      Notes
      • Section GB 51B: inserted, on , by section 38(1) (and see section 38(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).