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Tax Administration Act 1994

Determinations - Determinations relating to calculation of FIF income using fair dividend rate method

91AAO: Determination on type of interest in FIF and use of fair dividend rate method

You could also call this:

"How the government decides what type of interest you have in a foreign investment fund"

Illustration for Tax Administration Act 1994

The Commissioner can decide if a type of financial arrangement is a type of attributing interest in a FIF. You can use the fair dividend rate method to calculate FIF income from the interest for some types of attributing interests. The Commissioner's decision is based on rules in the Income Tax Act 2007, which you can find on the New Zealand legislation website. The Commissioner considers things like the assets of a FIF and the compliance costs for you. They also think about arrangements that affect the assets of a FIF and interests held in a FIF. The Commissioner's decision applies to income years specified in the decision. The Commissioner must notify you of their decision within 30 days and publish it as soon as possible. You can find more information about the fair dividend rate method in section EX 46 of the Income Tax Act 2007 and section YA 1 of the Income Tax Act 2007. The Commissioner's decision can be extended, limited, varied, cancelled, or revoked. You can choose if you want the Commissioner's decision to apply to you for an income year that started before the decision was made.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM353676.

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Part 5Determinations
Determinations relating to calculation of FIF income using fair dividend rate method

91AAODetermination on type of interest in FIF and use of fair dividend rate method

  1. For the purposes of section EX 46 of the Income Tax Act 2007, the Commissioner may determine that a type of financial arrangement or excepted financial arrangement is—

  2. a type of attributing interest in a FIF for which a person may use the fair dividend rate method to calculate FIF income from the interest; or
    1. a type of attributing interest in a FIF for which a person may not use the fair dividend rate method to calculate FIF income from the interest.

      1. In making a determination, the Commissioner may take into account the following:

      2. the principle that the fair dividend rate method should not be used for an attributing interest in a FIF that is economically equivalent to a loan denominated in New Zealand dollars:
        1. the extent to which the assets of a FIF—
          1. are loans, fixed-rate foreign equity as defined in section YA 1 of the Income Tax Act 2007, or arrangements with a fixed economic return:
            1. are denominated in New Zealand dollars:
              1. have a value in New Zealand dollars that is substantially unaffected by variations in currency exchange rates:
              2. the compliance costs incurred by a person required to use the fair dividend rate method:
                1. arrangements affecting the assets of a FIF and interests held directly or indirectly in a FIF.

                  1. A determination may be made for income years specified in the determination.

                  2. A determination does not apply for a person and an income year beginning before the date of the determination unless the person chooses that the determination apply for the income year.

                  3. Subsection (3D) applies to a multi-rate PIE that calculates and pays its income tax liability under the quarterly calculation option as set out in section HM 43 of the Income Tax Act 2007.

                  4. A determination does not apply for the multi-rate PIE for a quarter beginning before the date of the determination unless the PIE chooses that the determination apply for the quarter and all following quarters in the income year.

                  5. A determination may provide for the extension, limitation, variation, cancellation, or revocation of an earlier determination.

                  6. The Commissioner must:

                  7. notify the making of a determination within 30 days of the date of the determination, in a publication chosen by the Commissioner; and
                    1. publish the determination in a publication of the department as soon as possible.

                      Notes
                      • Section 91AAO: inserted, on , by section 193 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).
                      • Section 91AAO(1): amended (with effect on 1 April 2008), on , by section 651(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section 91AAO(2): replaced (with effect on 1 April 2007), on , by section 228(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section 91AAO(2)(b)(i): replaced (with effect on 30 June 2009), on (applying for all income years beginning on or after 1 July 2009), by section 651(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section 91AAO(2)(b)(i): amended (with effect on 30 June 2009), on , by section 149(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                      • Section 91AAO(3): replaced (with effect on 1 April 2007), on , by section 228(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section 91AAO(3B): inserted (with effect on 1 April 2007), on , by section 228(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section 91AAO(3C): replaced, on (applying for 2010–11 and later income years), by section 651(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section 91AAO(3D): replaced, on (applying for 2010–11 and later income years), by section 651(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section 91AAO(5): replaced (with effect on 1 April 2007), on , by section 228(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section 91AAO(5)(a): amended, on , by section 149(2)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                      • Section 91AAO(5)(a): amended, on , by section 149(2)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).