FZ 8Transition period for amendments to interest apportionment rules

1. This section gives the effect, for an excess debt entity meeting the requirements of subsection (2), of the amendments (the affected amendments) to section FE 5 (Thresholds for application of interest apportionment rules) made by section 20(1), (2), and (6) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 and to section FE 6 (Apportionment of interest by excess debt entity) made by section 21(5) and (6) of that Act.

2. An excess debt entity meets the requirements of this subsection if, using the method of calculating debt percentages as amended by the provisions referred to in subsection (1),—

3. the excess debt entity is a company described in section FE 2(1)(cb) (When this subpart applies) or is controlled by a group of persons that act in concert and are each described in section FE 2(a) to (db); and
4. the debt percentage of the excess debt entity’s New Zealand group is greater than 60% on the date given by subsection (5) (the transition date); and
5. the debt percentage of the excess debt entity’s New Zealand group on the transition date is greater than 100% of the debt percentage of the excess debt entity’s worldwide group on the transition date.

6. For an excess debt entity meeting the requirements of subsection (2), the affected amendments apply as varied by subsection (4) for a period of 5 income years (the transition period) consisting of the first income year beginning on or after 1 July 2018 and the 4 following income years.

7. For the period from the transition date to the end of the transition period, in determining whether the excess debt entity is required to apportion its interest expenditure under subpart FE (Interest apportionment on thin capitalisation) and in determining the apportionment of the excess debt entity’s interest expenditure under section FE 6,—

8. the method of calculating debt percentages is applied as amended; and
9. the threshold value for the debt percentage of the excess debt entity’s New Zealand group for the income year is 60%; and
10. the threshold value for the ratio of the debt percentage of the excess debt entity’s New Zealand group for the income year to the debt percentage of the excess debt entity’s worldwide group is the lesser of 110% and the corresponding ratio calculated for the transition date.

11. For the purposes of this section, the transition date is whichever the excess debt entity elects, in a return of income for the first income year beginning on or after 1 July 2018, of—

12. the date (the introduction date) on which the Taxation (Neutralising Base Erosion and Profit Shifting) Bill is introduced:
13. the date that is the last measurement date under section FE 8 (Measurement dates) preceding the introduction date.

Notes

• Section FZ 8: inserted, on 1 July 2018, by section 36 of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).