Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698840832525.pdf (New Zealand)
“(g) income from a ﬁnancial arrangement that— 123 Part 1 cl 123 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) would be included in the attributable CFC amount for the accounting period but for sec­ tion EX 20B(8)(a); and is included in the item removed passive under subsection (9)(a)(iv): “(ii) “(h) gains on a share that is not revenue account property under this Act in the form of— “(i) “(ii) an increase in the fair value of the share: a gain on the derecognition, as deﬁned in NZIAS 39, of the share: 5 10 “(iii) a
 foreign exchange gain on the share: income derived from another CFC that, if appropriate audited accounts were prepared, could be consolidated with the CFC for the purposes of this section, if both companies are subject to the laws of the same country 15 or territory under which— “(i) the company is liable to income tax on its income because of its domicile, residence, place of incor­ poration, or centre of management: “(ii) persons holding income interests in the company 20 are liable for the income tax on its income and the country or territory is the source of 80% or more of that income: income of the CFC from a supply, made for the purposes of increasing the amount given by subsection (10) or 25 (11), to another CFC that— “(i) could not be consolidated with the CFC for the purposes of this section: is not subject with the CFC to laws of the same country or territory meeting the requirements of 30 paragraph (i)(i) and (ii): “(ii) if the applicable standard is generally accepted account­ ing practice without IFRS, income from a liability, other than income derived in the normal course of business from a sale or supply of services, in the form of— “(i) “(ii) a reduction in the liability: a gain on the disposal or other derecognition of the liability: “(iii) a foreign exchange gain on the liability: 35 “(i) “(j) “(k) 124 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 124 “(l) if the applicable standard is generally accepted account­ ing practice without IFRS, income from an asset that is not a ﬁnancial asset under NZIAS 32 and not rev­ enue account property as deﬁned in section YA 1 (Def­ initions) in the form of— “(i) “(ii) “(iii) a foreign exchange gain on the asset.
an increase in the fair value of the asset: a gain on the disposal of the asset: 5 “Deﬁned in this Act: accounting period, associated non­attributing active CFC, attributable CFC amount, CFC, company, dividend, ﬁnancial arrangement, ﬁ­ 10 nance lease, group of companies, IFRS, income, life insurance policy, non­at­ tributing active CFC, operating lease, premium, revenue account property, roy­ alty”.

Subsection (1) applies for the 2009–10 and later income years.
(2) 124 Heading and section EX 22 replaced (1) The heading before section EX 22 and section EX 22 are re­ placed by the following: “Non­attributing Australian CFCs “EX 22 Non­attributing Australian CFCs “Criteria “(1) A CFC is a non­attributing Australian CFC for an account­ ing period if— “(a) at all times in the accounting period the CFC is— “(i) “(ii) resident in Australia; and subject under Australian law to income tax on its income; and 15 20 25 “(iii) treated as being resident in a country other than Australia under no agreement between the gov­ ernment of Australia and the government of an­ 30 other country or territory that would be a double tax agreement if between the government of New Zealand and the government of the other country or territory; and “(b) the CFC’s liability for income tax has not been reduced 35 by— 125 Part 1 cl 125 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) an exemption from income tax for income de­ rived from business activities carried on outside Australia: a special allowance, relief, or exemption with re­ spect to offshore banking units.
“No attributed CFC income or loss “(2) Sections CQ 2(1)(g) (When attributed CFC income arises) and DN 2(g) (When attributed CFC loss arises) provide that no attributed CFC income or attributed CFC loss arises from a non­attributing Australian CFC.

“CFCs with interest in FIF: look­through approach “(3) This section does not prevent FIF income or FIF loss arising under section EX 58 from an interest of a non­attributing Aus­ tralian CFC in a FIF.
5 10 “Deﬁned in this Act: accounting period, attributed CFC income, attributed CFC 15 loss, CFC, double tax agreement, FIF, FIF income, FIF loss, income tax, non­ attributing Australian CFC, resident in Australia”.

Subsection (1) applies for the 2009–10 and later income years.

(2) 125 Section EX 23 repealed (1) (2) Section EX 23 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
126 Change of CFC’s balance date (1) Section EX 25(3)(d) is replaced by the following: “(d) whether the change would postpone liability to income tax on attributed CFC income or on attributed repatri­ ation.” 20 25 (2) (3) In section EX 25, in the list of deﬁned terms, “FDP” is omitted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 30 come years.

127 Attributing interests in FIFs In section EX 29(1)(b), “EX 32 to EX 37” is replaced by “EX 31 to EX 43”.
126 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 131 128 Exemption for ASX­listed Australian companies (1) In section EX 31(2)(c)(i), “if subparagraph (ii) does not apply” is replaced by “if subparagraphs (ii) and (iii) do not apply”.
In section EX 31(2)(c)(ii), “earlier in the year; and” is replaced by “earlier in the year; or”and the following is added: “(iii) at the beginning of the ﬁnal month of the preced­ ing income year if, in the ﬁrst month of an income year, the shares are cancelled under a scheme of arrangement entered into under Part 5.1 of the Corporations Act 2001 (Aust); and”.

In section EX 31, in the list of deﬁned terms, “cancellation” is inserted.
(2) (3) 5 10 129 CFC rules exemption In section EX 34(b), “the person has” is replaced by “the per­ son has, under sections EX 14 to EX 17,”.
15 130 Grey list company owning New Zealand venture capital (1) (2) company: 10­year exemption In section EX 37(e), the words before subparagraph (i) are replaced by the following: “(e) at all times in the year, the grey list company holds more 20 than 50% of the voting interests in a company resident in New Zealand (the resident company) that, for 12 months or more, has—”.
Section EX 37(f) is replaced by the following: “(f) the year begins less than 10 years after the grey list com­ 25 pany ﬁrst held more than 50% of the voting interests in the resident company; and”.

(3) In section EX 37, in the list of deﬁned terms, “voting interest” is inserted.

131 Exemption for employee share purchase scheme of grey 30 list company Section EX 38(g) is replaced by the following: “(g) the share purchase agreement includes a restriction on the disposal of the shares; and”.
127 Part 1 cl 132 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 132 Limits on choice of calculation methods (1) In section EX 46(6)(b)(iii), “charities):” is replaced by “char­ ities); and” and the following is inserted: “(iv) is not a superannuation scheme:”.
(2) (3) (4) (5) (6) (7) Section EX 46(6)(d) is replaced by the following: “(d) the share is a non­ordinary share described in subsection (10).” 5 Section EX 46(7)(b) is replaced by the following: “(b) the FIF is a foreign investment vehicle and the person is— “(i) a portfolio investment entity or an entity eligible to be a portfolio investment entity: a life insurance company.” Section EX 46(7)(b) is replaced by the following: “(b) “(ii) the FIF is a foreign PIE equivalent and the person is— 15 a portfolio investment entity or an entity that “(i) qualiﬁes for PIE status: a life insurance company.” “(ii) 10 Section EX 46(8)(a) is replaced by the following: “(a) the share is a non­ordinary share described in subsection 20 (10):”.
The heading to section EX 46(10) is replaced by “Certain non­ ordinary shares”.

In section EX 46(10), the words before paragraph (a) are re­ placed by the following: 25 “(10) For the purposes of subsections (6)(d) and (8)(a), a non­ (8) (9) (10) (11) a ﬁxed­rate foreign equity:”.

ordinary share in a foreign company is—”.

Section EX 46(10)(a) is replaced by the following: “(a) In section EX 46, in the list of deﬁned terms, “foreign PIE” is 30 omitted and “foreign investment vehicle” is inserted.
In section EX 46, in the list of deﬁned terms, “foreign in­ vestment vehicle” is omitted and “foreign PIE equivalent” and “PIE” are inserted.

In section EX 46, in the list of deﬁned terms, “ﬁxed­rate for­ 35 eign equity” is inserted.

(12) Subsections (4), (8), (10), and (11) apply for the 2009–10 and later income years.
128 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 135 133 Section EX 47 replaced Section EX 47 is replaced by the following: “EX 47 Method required for certain non­ordinary shares A person must calculate FIF income or loss for an income year from an attributing interest that is a non­ordinary share 5 described in section EX 46(10) using— the comparative value method; or “(a) the deemed rate of return method, if use of the com­ “(b) parative value method is not practical because the per­ son cannot determine the market value of the attributing 10 interest at the end of the income year.
“Deﬁned in this Act: attributing interest, comparative value method, deemed rate of return method, fair dividend rate method, FIF income, FIF loss, income year, market value, share”.

134 Comparative value method (1) Section EX 51(5), other than the heading, is replaced by the following: 15 “(5) Opening value is the market value of the person’s interest in the FIF at the end of the previous income year, calculated using the exchange rate applying under section EX 57 for that 20 previous year.
The value is zero if the person did not hold the interest then or was then applying another calculation method to it.” Section EX 51(7)(b) is replaced by the following: “(b) is not a non­ordinary share described in section EX 25 46(10):”.
(2) 135 Fair dividend rate method: usual method (1) Section EX 52(2), other than the heading, is replaced by the following: “(2) The person’s total FIF income for the income year from the 30 attributing interests in FIFs (the FDR interests) for which the person uses the fair dividend rate method is calculated using the formula in subsection (3).” In section EX 52(5), the words before paragraph (a) are re­ placed by the following: (2) 35 129 Part 1 cl 135 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(5) Opening value is the total of the market values of the FDR interests that—”.
(3) After section EX 52(5), the following is inserted: “Exclusion for certain managed funds “(5B) Subsection (5)(b) does not apply if— “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and “(b) the FIF is a foreign investment vehicle.” Section EX 52(5B)(b) is replaced by the following: “(b) Section EX 52(6), other than the heading is replaced by the following: the FIF is a foreign PIE equivalent.” (4) (5) “(6) The quick sale adjustment is required only if, in the income 5 10 year, the person disposes of or reduces an FDR interest to 15 which this section applies after acquiring it or increasing it.
The quick sale adjustment is zero in any other case.” Section EX 52(7)(a) and (b) are replaced by the following: “(a) the total of the amounts (the peak holding method amount) calculated for each FDR interest using the for­ 20 mula in subsection (8): the total of the amounts (the quick sale gain amount) calculated for each FDR interest using the formula in subsection (12), treating a negative total as being zero.” “(b) In section EX 52(13),— (a) (b) in paragraph (a), “during the income year” is omitted: in paragraph (c), “during the year” is omitted.
(8) After section EX 52(14B), the following is inserted: 25 “Treatment of attributing interests subject to returning share transfer 30 “(14C) If an attributing interest in a FIF is an original share subject to a returning share transfer, for the purposes of a person using the fair dividend rate method to calculate FIF income or loss, the attributing interest is treated as held by the share supplier.” In section EX 52, in the list of deﬁned terms, “FIF loss”, “for­ 35 eign investment vehicle”, “life insurance”, “original share”, “portfolio investment entity”, “returning share transfer”, “share”, and “share supplier” are inserted.
(9) 130 (6) (7) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 136 (10) In section EX 52, in the list of deﬁned terms, “foreign invest­ ment vehicle” is omitted and “foreign PIE equivalent” is in­ serted.

(11) Subsections (4) and (10) apply for the 2009–10 and later income years.
5 136 Fair dividend rate method for unit­valuing funds and (1) others by choice Section EX 53(2), other than the heading, is replaced by the following: “(2) The total FIF income for the income year of the fund or person 10 (the interest holder) from the attributing interests in FIFs (the FDR interests) for which the fund or person uses the fair divi­ dend rate method is the total of the amounts calculated using the formula in subsection (3) for each unit valuation period.” In section EX 53(5), the words before paragraph (a) are re­ 15 placed by the following: (2) “(5) Opening value is the total of the market values of the FDR interests that—”.
(3) After section EX 53(5), the following is inserted: “Exclusion for certain managed funds “(5B) Subsection (5)(b) does not apply if— “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and the FIF is a foreign investment vehicle.” “(b) In section EX 53(5B)(b), “foreign investment vehicle” is re­ placed by “foreign PIE equivalent”.
Section EX 53(8), other than the heading, is replaced by the following: (4) (5) 20 25 “(8) The quick sale adjustment is required only if, in the income 30 year, the person disposes of or reduces an FDR interest to which this section applies after acquiring it or increasing it.
The quick sale adjustment is zero in any other case.” Section EX 53(9)(a) and (b) are replaced by the following: “(a) the total of the amounts (the peak holding method 35 amount) calculated for each FDR interest using the for­ mula in subsection (10): (6) 131 Part 1 cl 137 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) the total of the amounts (the quick sale gain amount) calculated for each FDR interest using the formula in subsection (14), treating a negative total as being zero.” (7) In section EX 53(15),— (a) in paragraph (a), “during the unit valuation period” is 5 omitted: in paragraph (c), “during the period” is omitted.
(b) (8) After section EX 53(16B), the following is inserted: “Treatment of attributing interests subject to returning share transfer 10 (9) “(16C) If an attributing interest in a FIF is an original share subject to a returning share transfer, for the purposes of a person using the fair dividend rate method to calculate FIF income or loss, the attributing interest is treated as held by the share supplier.” In section EX 53, in the list of deﬁned terms, “FIF loss”, “for­ 15 eign investment vehicle”, “life insurance”, “original share”, “portfolio investment entity”, “returning share transfer”, “share”, and “share supplier” are inserted.
In section EX 53, in the list of deﬁned terms, “foreign invest­ ment vehicle” is omitted and “foreign PIE equivalent” is in­ 20 serted.

(10) (11) Subsections (4) and (10) apply for the 2009–10 and later income years.

137 Cost method (1) In section EX 56(3)(ac)(ii), “income year; or” is replaced by 25 “income year; and” and the following is added: “(iii) the interest was not an attributing interest for the income year before the relevant income year; or”.
In section EX 56(15), the formula is replaced by the following: 0.05 × peak holding differential × average cost.

In section EX 56, in the list of deﬁned terms, “close of trading 30 spot exchange rate” is omitted.

(2) (3) 138 Additional FIF income or loss if CFC owns FIF (1) (2) In section EX 58(1)(a), “EX 8” is replaced by “EX 14”.
Section EX 58(6) is replaced by the following: 132 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 139 “Non­attributing Australian CFCs “(6) This section applies whether or not the CFC is a non­attribut­ (3) (4) ing Australian CFC under section EX 22 for the period.” Section EX 58(7) is repealed.

Subsections (2) and (3) apply for the 2009–10 and later in­ 5 come years.
(1) 139 Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method Section EX 59(1)(c) is replaced by the following: “(c) the fair dividend rate method:”.
(2) After section EX 59(1), the following is inserted: 10 “Exclusion for interests in grey list companies “(1B) Subsection (1)(c) does not apply if— “(a) “(b) the FIF is a grey list company; and the person holds a direct income interest of 10% or more 15 in the FIF at the beginning of the income year in which the period falls.
“Application of rule for certain managed funds “(1C) Subsection (1B) does not apply if— “(a) the FIF is a foreign PIE equivalent.” the person is a portfolio investment entity, an entity eli­ 20 gible to be a portfolio investment entity, or a life insur­ ance company; and “(b) the FIF is a foreign investment vehicle.” Section EX 59(1C)(b) is replaced by the following: “(b) In section EX 59, in the list of deﬁned terms, “company”, “di­ rect income interest”, “foreign investment vehicle”, “grey list company”, “life insurance”, and “portfolio investment entity” are inserted.
In section EX 59, in the list of deﬁned terms, “foreign invest­ 30 ment vehicle” is omitted and “foreign PIE equivalent” is in­ serted.

Subsections (3) and (5) apply for the 2009–10 and later in­ come years.
25 (3) (4) (5) (6) 133 Part 1 cl 140 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 140 Sections EY 1 to EY 5 replaced (1) “EY 1 What this subpart does Sections EY 1 to EY 5 are replaced by the following: “Two bases “(1) This subpart provides for the taxation of life insurers on 2 sep­ 5 arate bases, the policyholder base and the shareholder base.

Sections EY 2 and EY 3 describe the apportionment of in­ come, expenditure, or loss to the 2 bases.
Section LA 8B (General rules particular to life insurers) provides some gen­ eral rules for tax credits relating to the 2 bases.

Also, Parts L 10 and O include tax credit rules and memorandum account rules speciﬁc to the 2 bases.

“(2) “Counting once Income, expenditure, or loss must be apportioned to either the policyholder base or the shareholder base.

There is no dou­ 15 ble–counting.


“Deﬁned in this Act: income, life insurer, memorandum account, tax credit “EY 2 Policyholder base “Policyholder base gross income “(1) A life insurer derives policyholder base gross income,— 20 “(a) “(b) “(c) for savings product policies that are not proﬁt participa­ tion policies, under section EY 15: for proﬁt participation policies, under section EY 17: under section EY 27(4).
“Policyholder base gross expenditure or loss “(2) A life insurer incurs policyholder base gross expenditure or loss,— “(a) for savings product policies that are not proﬁt participa­ tion policies, under section EY 16: for proﬁt participation policies, under section EY 18: under section EY 27(4): “(b) “(c) “(d) under section EZ 62 (Allowance of cancelled amount: “(e) spreading): under section LE 2B (Use of remaining credits by life insurer on policyholder base).
134 25 30 35 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 140 “Schedular policyholder base income “(3) A life insurer’s schedular policyholder base income is the amount given by subtracting their policyholder base gross ex­ penditure or loss for an income year, and any amount carried forward to the income year under subsection (5), from their 5 policyholder base gross income for the income year.
“Cap on subtracting: ring fencing policyholder base gross expenditure or loss “(4) Despite subsection (3), the total amount that is subtracted under subsection (3), including an amount carried forward 10 to the current year under subsection (5), is no more than the amount of the life insurer’s policyholder base gross income for the income year.
“Excess allocations: carrying forward and re­instating next year 15 “(5) Any excess not able to be subtracted in the current year be­ cause of subsection (4) is treated as–– “(a) policyholder base gross expenditure or loss for the next income year; and carried forward to the next income year.
“(b) “Exception “(6) Subsections (3) to (5) do not apply to a life insurer’s policy­ holder base gross income, or expenditure or loss to the extent to which the income, or expenditure or loss relates to a life fund PIE that is a multi­rate PIE.
“Deﬁned in this Act: income year, life fund PIE, life insurance, life insurer, multi­rate PIE, policyholder base gross expenditure or loss, policyholder base gross income, savings product policy, schedular policyholder base income “EY 3 Shareholder base “Shareholder base gross income 20 25 30 “(1) A life insurer derives shareholder base gross income,— “(a) “(b) for policies that are not proﬁt participation policies, under section EY 19: see also subsection (3), for reserves: for proﬁt participation policies, under sections EY 21 35 and EY 28: 135 Part 1 cl 140 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) for annuities, under section EY 30.
“Shareholder base gross expenditure or loss “(2) A life insurer incurs shareholder base gross expenditure or loss,— “(a) “(b) “(c) “(d) for policies that are not proﬁt participation policies, 5 under section EY 20: see also subsection (3), for reserves: for proﬁt participation policies, under section EY 22: for the period and policies described in section EY 29, under that section: for annuities, under section EY 30.
10 “Reserves “(3) Under sections EY 23 to EY 27, a life insurer calculates reserving amounts for life insurance policies, other than annu­ ities, that have a life risk component and are not proﬁt partici­ 15 pation policies.

The reserving amounts may be shareholder base gross income derived, or expenditure or loss incurred, as provided by the relevant section.
“Deﬁned in this Act: shareholder base, shareholder base gross expenditure or loss, shareholder base 20 gross income life insurance, life insurer, proﬁt participation policy, “EY 4 Apportionment of income of particular source or nature, and of tax credits “Default basis “(1) For each class of life insurance policies, income of a particu­ 25 lar source or nature, and tax credits received, are apportioned between the policyholder base and shareholder base–– “(a) in the same proportion as the policyholder base gross in­ come relating to the particular source, nature or credits bears to the life insurer’s total gross gains relating to 30 the particular source, nature, or credits, in the case of the policyholder base: in the same proportion as the shareholder base gross in­ come relating to the particular source, nature, or credits bears to the life insurer’s total gross gains relating to 35 the particular source, nature, or credits, in the case of the shareholder base.
“(b) 136 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 142 “More equitable or reasonable basis “(2) For a class of life insurance policies, the life insurer may use a basis of apportionment that is different from the one described in subsection (1), if that basis is actuarially determined and is more equitable and reasonable than the basis described in 5 subsection (1).
“Deﬁned in this Act: actuarially determined, life insurance policy, policyholder base, shareholder base, shareholder base gross income, tax credit”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
10 (2) 141 Section EY 6 replaced (1) “EY 6 Actuarial advice and guidance Section EY 6 is replaced by the following: The Commissioner may seek the advice of the Government Actuary or any other actuary on any matter that is required to 15 be actuarially determined, or any related matter.

(2) “Deﬁned in this Act: actuarially determined, actuary, Commissioner”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
142 Meaning of life reinsurance (1) Section EY 12(1) is replaced by the following: “Meaning “(1) Life reinsurance— 20 “(a) means a contract of insurance between a life insurer and another person (person C) under which the life insurer 25 is secured, fully or partially, against a risk by person C: “(b) does not include a contract that— “(i) “(ii) secures against ﬁnancial risk unless, in the con­ tract, it is incidental to securing against life risk: is, or is part of, a tax avoidance arrangement.
30 “‘Fully’ and ‘partially’ “(1B) The words ‘fully’ and ‘partially’ describe the extent to which the life insurer is secured against life risk; they do not describe the term for which the reinsurance is provided.” Section EY 12(4) is replaced by the following: (2) 35 137 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(4) “Other deﬁnitions In this Act, — “life ﬁnancial reinsurance is a contract that may be life rein­ surance under section EY 12(1)(a), but is not included under section EY 12(1)(b) “ﬁnancial risk–– “(a) means risk, whether or not speciﬁc to a party to the rele­ vant arrangement relating to risk, that is contingent on a valuation or disposal of ﬁnancial arrangements, or con­ tingent on proﬁtability or creditworthiness, or contin­ 10 gent on a variable such as future expenditure: 5 “(b) does not include life risk “life reinsurer means a person in the position of person C. “Relationship with subject matter “(5) Section EZ 63 (Reinsurance transition: life ﬁnancial reinsur­ 15 (3) (4) ance may be life reinsurance) overrides this section.” In section EY 12, in the list of deﬁned terms, “life ﬁnancial reinsurance” and “ﬁnancial risk” are inserted.
Subsections (1) to (3) apply for income years beginning on and after 1 April 2009.
20 143 Section EY 15 to EY 47 replaced (1) Sections EY 15 to EY 47 are replaced by the following: “Policyholder base “Non­participation policies “EY 15 Policyholder base income: non­participation policies 25 “What is included “(1) For an income year, subject to subsection (2), a life insurer has policyholder base gross income equal to income they de­ rive that,–– “(a) “(b) does not relate to policies that are proﬁt participation does not relate to life risk; and 30 “(c) policies; and is accounted for by the life insurer, in accordance with generally accepted accounting practice, as investment 138 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 income relating to a savings product policy that is not an annuity.
“Certain income: basis of apportionment “(2) Despite subsection (1), if an amount of investment income meets the requirements of subsection (1)(a) to (c), but may 5 also be shareholder base gross income under section EY 19, ignoring section EY 19(2)(e), then the investment income is only accounted for as policyholder base gross income to the extent provided by the formula— income × average surrender value average savings assets.
“(3) income is the income described in subsection (2): “Deﬁnition of items in formula In the formula,— “(a) “(b) average surrender value is, for the savings product policies to which the income relates, the average sur­ render value of the policies for the income year: average savings assets is, for the savings product poli­ cies to which the income relates, the average market value of assets held by the life insurer for the policies for the income year.
“(c) “More equitable or reasonable basis “(4) For income described in subsection (2), the life insurer may use a basis of apportionment that is different from the one de­ scribed in subsections (2) and (3), if that basis is actuarially determined and is more equitable and reasonable than the basis described in subsections (2) and (3).
“Deﬁned in this Act: generally accepted accounting practice, income year, life insurer, policyholder base gross income, proﬁt participation policy, savings product policy, shareholder base gross income, surrender value 10 15 20 25 “EY 16 Policyholder base gross expenditure or loss: non­participation policies For an income year, a life insurer has policyholder base gross expenditure or loss to the extent to which they incur expend­ 30 139 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill iture or loss in deriving their policyholder base gross income under section EY 15.
“Deﬁned in this Act: policyholder base gross expenditure or loss, policyholder base gross income “Proﬁt participation policies 5 “EY 17 Policyholder base gross income: proﬁt participation policies “What is included “(1) For an income year, a life insurer has policyholder base gross income to the extent to which they have an amount for proﬁt 10 participation policies calculated using the formula— asset base gross income × (1 + liabilities proportion × gate) (1 + gate).
“Deﬁnition of items in formula In the formula,— “(a) asset base gross income is the amount of annual gross income that the life insurer would have for the policies’ 15 asset base, if the life insurer is treated as having no as­ sets other than the asset base, and amounts under sec­ tion EY 28 are ignored: liabilities proportion is the proportion of the policies’ asset base that is attributed to policy liabilities, using an 20 average of policy liabilities over the income year, and an average of the asset base’s value over the year: gate is the proportion of a policyholder’s share of proﬁts from the asset base that is used in the formula that calcu­ lates a transfer to the beneﬁt of the life insurer’s share­ 25 holders from the proﬁts of the asset base, as described in the deﬁnition of proﬁt participation policy.
“(b) “(c) “Deﬁned in this Act: amount, annual gross income, asset base, income year, life insurer, policy liabilities, policyholder base gross income, proﬁt participation policy 30 “(2) 140 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 “EY 18 Policyholder base gross expenditure or loss: proﬁt participation policies For an income year, a life insurer has policyholder base gross expenditure or loss to the extent to which, for proﬁt participa­ tion policies, they would have expenditure or loss under sec­ 5 tion EY 17, treating the item asset base gross income as being the annual total deduction for the policies’ asset base, if the life insurer is treated as having no assets other than the asset base.
“Deﬁned in this Act: amount, annual total deduction, asset base, income year, life insurer, policyholder base gross expenditure or loss, proﬁt participation pol­ 10 icy “Shareholder base “Non­participation policies “EY 19 Shareholder base gross income: non­participation policies “What this section applies to “(1) This section applies to amounts derived by a life insurer to the extent to which the amounts do not relate to proﬁt participation policies.
“Income “(2) For an income year, a life insurer has shareholder base gross 15 20 income equal to— “(a) an amount of income they derive, to the extent to which the income–– relates to life risk, other than for annuities; and “(i) “(ii) is not described in paragraphs (b) to (e): the life risk component of premiums they derive: fees and commissions they derive: life reinsurance claims they derive: investment income they derive that is not accounted for 30 as policyholder base gross income under section EY 15(2): 25 “(b) “(c) “(d) “(e) 141 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(f) income not otherwise accounted for in this subpart, for the income year.
“Deﬁned in this Act: income year, life reinsurance, policyholder base gross income, proﬁt participation policy, shareholder base gross income “EY 20 Shareholder base gross expenditure or loss: 5 non­participation policies “What this section applies to “(1) This section applies to amounts incurred by a life insurer to the extent to which the amounts do not relate to proﬁt participation policies.
10 “Expenditure or loss “(2) For an income year, a life insurer has shareholder base ex­ penditure or loss equal to— “(a) relates to life risk, other than for annuities; and is not described in paragraphs (b) to (e): an amount of expenditure or loss they incur, to the ex­ tent to which the expenditure or loss–– “(i) “(ii) the life risk component of claims they incur: fees and commissions they incur: life reinsurance premiums they incur: expenditure or loss to the extent to which it is incurred in deriving shareholder base gross income described in section EY 19(2)(e): expenditure or loss not otherwise accounted for in this subpart, for the year.
“(b) “(c) “(d) “(e) “(f) “Deﬁned in this Act: income year, life reinsurance, proﬁt participation policy, shareholder base gross expenditure or loss, shareholder base gross income “Proﬁt participation policies “EY 21 Shareholder base gross income: proﬁt participation policies “What is included “(1) For an income year, a life insurer has shareholder base gross income to the extent to which they have an amount for proﬁt participation policies calculated using the formula— 142 15 20 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 adjusted asset base gross income × (1 − liabilities proportion) × gate (1 + gate).
“(2) “Deﬁnition of items in formula In the formula,— “(a) adjusted asset base gross income is the amount of an­ nual gross income that the life insurer would have for the proﬁt participation policies’ asset base, if the life in­ 5 surer is treated as having no assets other than the asset base, section CX 55 (Proceeds from certain disposals by portfolio investment entities, New Zealand Superannu­ ation Fund, or life insurers) is ignored, and amounts under section EY 28 are ignored: liabilities proportion is the proportion of the proﬁt par­ ticipation policies’ asset base that is attributed to policy liabilities, using an average of policy liabilities over the income year, and an average of the asset base’s value over the year: gate is the proportion of a policyholder’s share of proﬁts from the asset base that is used in the formula that calcu­ lates a transfer to the beneﬁt of the life insurer’s share­ holders from the proﬁts of the asset base, as described in the deﬁnition of proﬁt participation policy.
10 15 20 “(b) “(c) “Deﬁned in this Act: amount, annual gross income, asset base, income year, life insurer, policy liabilities, proﬁt participation policy, shareholder base gross income “EY 22 Shareholder base gross expenditure or loss: proﬁt participation policies For an income year, a life insurer has shareholder base gross expenditure or loss to the extent to which, for proﬁt participa­ tion policies, they would have expenditure or loss under sec­ tion EY 21, treating the item adjusted asset base gross in­ come as being the annual total deduction for the policies’ asset 30 base, if the life insurer is treated as having no assets other than 25 143 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill the asset base, and section DB 23 (Cost of revenue account property) is ignored.
“Deﬁned in this Act: amount, annual total deduction, asset base, income year, life insurer, proﬁt participation policy, shareholder base gross expenditure or loss 5 “Reserves: non­participation policies “EY 23 Reserving amounts for life insurers: non­participation policies “Reserves “(1) As provided by subsection (3), sections EY 24 to EY 27 10 apply to calculate a life insurer’s reserving amounts for life insurance policies, other than annuities, that have a risk com­ ponent and that are not proﬁt participation policies.
“Actuarial determination “(2) All reserving amounts must be actuarially determined, for each 15 class of policies.

“(3) “Positive and negative amounts: shareholder base gross income, or expenditure or loss If a reserving amount calculated under sections EY 24 to EY 27 is a positive amount, the life insurer has that amount 20 of shareholder base gross income, treated as derived.
If a re­ serving amount calculated under sections EY 24 to EY 27 is a negative amount, the life insurer has that amount of share­ holder base gross expenditure or loss, treated as incurred in deriving shareholder base gross income.

25 “Which reserve can be used when?
“(4) For an income year, for a relevant class of policies, a life in­ surer has a reserving amount under— “(a) section EY 24, for outstanding claims reserves (the outstanding claims reserving amount): 30 “(b) section EY 25, for premium smoothing reserves (the premium smoothing reserving amount) if, for the relevant policies, the insurer chooses to calculate a premium smoothing reserving amount and for a period that begins, continues or ends in the income year (the 35 PSR period),— 144 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 “(i) “(ii) the premium payable is level or substantially level; or a material mismatch occurs between the life risk component and the amount of premium payable: “(c) section EY 26, for unearned premium reserves (the 5 unearned premium reserving amount) if, for the rele­ vant class of policies, the life insurer chooses to not cal­ culate a premium smoothing reserving amount: “(d) section EY 27, for capital guarantee reserves (the cap­ ital guarantee reserving amount).
10 “Choice “(5) Despite subsection (4)(b) and (c), a life insurer may not change between calculating a premium smoothing reserving amount and an unearned premium reserving amount for a class of policies once a choice has been made as to which reserving 15 amount will be used for the class of policies.

If an individual policy of a class does not meet the relevant requirements de­ scribed in subsection (4)(b)(i) and (ii), then a life insurer has an unearned premium reserving amount.
“Deﬁned in this Act: actuarially determined, amount, income year, life insur­ 20 ance policy, life insurer, life risk, proﬁt participation policy, shareholder base gross expenditure or loss, shareholder base gross income “EY 24 Outstanding claims reserving amount: non­participation policies not annuities “Calculation of reserving amount “(1) For an income year (the current year), a life insurer has, in the circumstances described in section EY 23(4)(a), a reserv­ ing amount for each class of policies calculated using the for­ mula— opening outstanding claims reserve − closing out­ standing claims reserve.
“(2) “Deﬁnition of items in formula in subsection (1) In the formula in subsection (1),— “(a) opening outstanding claims reserve is— 25 30 145 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) the amount of the life insurer’s closing outstand­ ing claims reserve for the class of policies, for the income year before the current year; or the amount of the life insurer’s outstanding claims reserve calculated under subsections 5 (3) and (4) for the class of policies and the beginning of the current year, if the life insurer has no closing outstanding claims reserve for the income year before the current year: “(b) closing outstanding claims reserve is the amount of 10 the life insurer’s outstanding claims reserve calculated under subsections (3) and (4) for the class of policies and the end of the current year.
“Outstanding claims reserve calculation “(3) A life insurer’s outstanding claims reserve is calculated for the 15 relevant policies using the formula— life risk claims incurred + life risk claims reported + risk margin.
“Deﬁnition of items in formula in subsection (3) In the formula in subsection (3),— “(a) life risk claims incurred is the total of the present values of the life risk component of claims that have 20 occurred prior to the end of the income year but were not reported to the life insurer for that year.
The life risk component must take into account the probability of the claims being paid, and future expenses for admin­ istering the claims, but the present values of relevant life 25 reinsurance claims must be subtracted from the total: life risk claims reported is the total of the present values of the life risk component of claims reported but not yet paid.
The life risk component must take into ac­ count the probability of the claims being paid, and fu­ 30 ture expenses for administering the claims, but the pre­ sent values of relevant life reinsurance claims must be subtracted from the total: risk margin is the total appropriate margin for the life risk component of claims described in paragraph (a) 35 or (b), to the extent to which the margin is actuarially “(b) “(c) “(4) 146 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 determined, reﬂects the inherent uncertainty in the rele­ vant best estimate assumptions, and is not already in­ cluded in the life risk component of the claims.
“Deﬁned in this Act: amount, best estimate assumptions, income year, life in­ surer, life reinsurance, life risk, present value 5 “EY 25 Premium smoothing reserving amount: non­participation policies not annuities “Calculation of reserving amount “(1) For an income year (the current year), a life insurer has, in the PSR period described in section EY 23(4)(b), a reserving 10 amount for a class of policies calculated using the following formula: opening premium smoothing reserve − closing premium smoothing reserve.
“(2) “Deﬁnition of items in formula in subsection (1) In the formula in subsection (1),— “(a) opening premium smoothing reserve is–– “(i) “(ii) 15 the amount of the life insurer’s closing premium smoothing reserve for the class of policies, for the income year (the prior year) before the current year; or the amount of the life insurer’s premium smooth­ 20 ing reserve calculated under subsections (3) to (6) for the class of policies, calculated at the be­ ginning of the current year, if the insurer has no closing outstanding premium smoothing reserve for the prior year: 25 “(b) closing premium smoothing reserve is the amount of the life insurer’s premium smoothing reserve calculated under subsections (3) to (6) for the class of policies, calculated at the start of the year.
“Premium smoothing reserve calculation 30 “(3) A life insurer’s premium smoothing reserve is calculated using the formula— 147 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill future life risk claims + future costs + (future proﬁt carrier × proﬁt margin) − future life risk premiums.
“(4) “Deﬁnition of items in formula in subsection (3) In the formula in subsection (3),— “(a) “(b) “(c) future life risk claims is the total of the present values of the future life risk component of claims for the relevant policies’ PSR period described in section EY 5 23(4)(b).
The future life risk component must take into account the probability of claim, and the probability of the relevant policies being in force, but the present values of relevant future life reinsurance claims must be subtracted from the total: future costs is the total of the present values of the costs of administration and claims management for the future life risk component of claims: future proﬁt carrier is the insurer’s choice of either the future life risk component of claims or future life 15 risk component of premiums for the relevant policies’ PSR period described in section EY 23(4)(b), but cal­ culating the relevant future life risk component by not subtracting any amount on account of life reinsurance.
The choice between claims or premiums must be made 20 on the basis that the use of the chosen proﬁt carrier gives a reasonable match between emerging proﬁts and ser­ vices provided by the life insurer: 10 “(d) proﬁt margin is the amount calculated under subsec­ “(e) 25 tion (5): future life risk premiums is the total of present values of the future life risk component of premiums for the relevant policies’ PSR period described in section EY 23(4)(b).
The future life risk component must take into account the probability of the relevant policies being 30 in force, but the present values of relevant future life reinsurance premiums must be subtracted from the total.
“Proﬁt margin “(5) For the purposes of the item proﬁt margin in subsection (4), an amount is calculated for the relevant policies using the 35 following formula, using the method described in subsection 148 “(6) “(7) “(8) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 (8), and adjusted for the spreading requirement in subsection (9): future life risk premiums – future life risk claims – future costs future proﬁt carrier “Deﬁnition of items in formula in subsection (5) In the formula in subsection (5),— “(a) “(b) “(c) “(d) future life risk premiums is the item future life risk 5 premiums in subsection (4)(e): future life risk claims is the item future life risk claims in subsection (4)(a): future costs is the item future costs in subsection (4)(b): future proﬁt carrier is whichever future proﬁt carrier that the life insurer chooses under the item future proﬁt carrier in subsection (4)(c).
10 “Best estimate assumptions for PSR In actuarially determining an item described in subsection 15 (4) for the formula in subsection (3), the actuary must use best estimate assumptions.

All possible policy discontinu­ ances must be considered, and future costs must exclude the costs of acquiring policies.
“Best estimate assumptions for proﬁt margin In actuarially determining an item described in subsection (6) for the formula in subsection (5), the actuary must use–– best estimate assumptions from the end of the prior year, “(a) if the item is being used for calculating the item closing premium smoothing reserve in subsection (2), and 25 a premium smoothing reserving amount was calculated in the prior year; or 20 “(b) best estimate assumptions from the current year if the item is being used for calculating the item closing pre­ mium smoothing reserve in subsection (2), and the 30 relevant policy is ﬁrst entered into in the current year, or no premium smoothing reserving amount was calcu­ lated in the prior year.
149 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Best estimate assumptions for proﬁt margin: change “(9) The effect of a change in best estimate assumptions must be spread evenly over the remaining PSR period described in section EY 23(4)(b), for the relevant policies.
“Special grouping rule for the purposes of best estimate assumptions 5 “(10) For the purposes of determining best estimate assumptions and proﬁt margins under this section, policies may be grouped to­ gether if the policies have in common,–– “(a) substantially the same contractual terms and conditions, 10 other than their PSR periods described in section EY 23(4)(b); and substantially the same assumptions for pricing their life risk.
“(b) “Deﬁned in this Act: actuarially determined, best estimate assumptions, life 15 reinsurance, life risk, present value “EY 26 Unearned premium reserving amount: non­participation policies not annuities “Calculation of reserving amount “(1) For an income year (the current year), a life insurer has, in the 20 circumstances described in section EY 23(4)(c), a reserving amount for each class of policy calculated using the formula— opening unearned premium reserve − closing unearned premium reserve.
“Deﬁnition of items in formula In the formula,— “(a) 25 opening unearned premium reserve is— “(i) the amount of the life insurer’s closing unearned premium reserve for the class of policies, for the income year before the current year; or the amount of the life insurer’s unearned pre­ mium reserve under subsection (3) for the class 30 of policies, calculated at the beginning of the cur­ rent year, if the life insurer has no closing un­ “(ii) “(2) 150 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 earned premium reserve for the income year be­ fore the current year: “(b) closing unearned premium reserve is the amount of the life insurer’s unearned premium reserve under sub­ section (3) for the class of policies, calculated at the 5 end of the current year.
“Unearned premium reserve “(3) A life insurer’s unearned premium reserve is the amount of the premium, for the relevant policies, that the life insurer ac­ counts for in the current year or any prior year, to the extent 10 to which the amount relates to life risk in income years after the current year, but subtracting relevant life reinsurance pre­ miums.
“Deﬁned in this Act: amount, income year, life insurer, life reinsurance, life risk 15 “EY 27 Capital guarantee reserving amount: non­participation policies not annuities “Calculation of reserving amount “(1) For an income year (the current year), a life insurer has for each class of policies, in the circumstances described in sec­ 20 tion EY 23(4)(d), a reserving amount calculated using the for­ mula— opening capital guarantee reserve − closing capital guarantee reserve.
“(2) “Deﬁnition of items in formula In the formula,— “(a) opening capital guarantee reserve is— “(i) “(ii) 25 the amount of the life insurer’s closing capital guarantee reserve for the class of policies, for the income year before the current year; or the amount of the life insurer’s capital guaran­ tee reserve under subsection (3) for the class of 30 policies, calculated at the beginning of the cur­ rent year, if the life insurer has no closing capital guarantee reserve for the income year before the current year: 151 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) closing capital guarantee reserve is the amount of the life insurer’s capital guarantee reserve under subsec­ tion (3) for the class of policies, calculated at the end of the current year.
“Capital guarantee reserve “(3) A life insurer’s capital guarantee reserve is the net amount of credits and debits on account of a risk­linked provision for fu­ ture obligations in relation to a guarantee, for the class of poli­ cies, by the life insurer that capital invested will be returned or that a minimum return on capital will be paid.
5 10 “Reﬂex in policyholder base “(4) For the income year, if the reserving amount under this section is positive, the life insurer has that amount of policyholder base gross expenditure or loss.

For the income year, if the reserving amount under this section is negative, the life insurer has that 15 amount of policyholder base gross income.
“Deﬁned in this Act: amount, income year, life insurer, pay, policyholder base gross expenditure or loss, policyholder base gross income “Shareholder base other proﬁt: proﬁt participation policies 20 “EY 28 Shareholder base other proﬁt: proﬁt participation policies “Calculation of income “(1) For an income year, a life insurer has shareholder base gross income to the extent to which they have an amount for proﬁt 25 participation policies calculated using the formula— other proﬁt × gate (1 + gate) – previous negative amount.
“Deﬁnition of items in formula in subsection (1) In the formula in subsection (1),— “(a) other proﬁt is the amount calculated for the income year under subsections (5) to (11): “(b) gate is the proportion of a policyholder’s share of proﬁts from the asset base that is used in the formula that calcu­ 30 “(2) 152 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 lates a transfer to the beneﬁt of the life insurer’s share­ holders from the proﬁts of the asset base, as described in the deﬁnition of proﬁt participation policy: “(c) previous negative amount is the amount from the pre­ vious year described in subsections (3) and (4).
5 “Formula in subsection (1): negative amounts and positive amounts If for an income year, the formula in subsection (1) calcu­ lates a positive amount, that amount is included in the life in­ surer’s shareholder base gross income, and if it is a negative 10 amount, then that amount is not included in the life insurer’s shareholder base gross expenditure or loss, but see subsec­ tion (4).
“(3) “Negative amounts: carry forward “(4) The amount by which the amount calculated using the formula 15 in subsection (1) for an income year is less than zero is car­ ried forward to the next year, to be used under this section in the formula as the item previous negative amount in that next year.
“Other proﬁt “(5) For the purposes of the item other proﬁt in subsection (2), an amount is calculated for the income year (the current year) for proﬁt participation policies using the formula— (premiums − premiums estimate) − (claims − claims estimate) − (closing policy liabilities − estimated closing policy liabilities).
“(6) “Deﬁnition of items in formula in subsection (5) In the formula in subsection (5),— “(a) premiums is the amount of premiums for policies for the current year, but subtracting relevant life reinsur­ ance premiums: “(b) premiums estimate is the total amount of valuation 20 25 premiums described in subsection (7) that the life in­ 30 surer expected, using best estimate assumptions, to re­ ceive in the current year for policies that are in force at the start of the current year, or are ﬁrst entered into in 153 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) “(d) “(e) “(f) the current year, after subtracting relevant life reinsur­ ance premiums: claims is the amount of claims for the current year, but subtracting relevant life reinsurance claims: claims estimate is the amount of claims that the life 5 insurer expected, using best estimate assumptions, to receive in the current year for policies that are in force at the start of the current year, or are ﬁrst entered into in the current year, but ignoring surrenders and after subtracting relevant life reinsurance claims: closing policy liabilities is the total amount of policy li­ abilities for policies determined at the end of the current year for vested beneﬁts after the previous year’s bonus declaration: estimated closing policy liabilities is the total esti­ 15 mated policy liabilities at the end of the current year for policies in force at the start of the current year and expected to be in force at the end of the current year, tak­ ing into account vested beneﬁts after the previous year’s bonus.
The estimated policy liabilities must not take 20 into account any future bonus declarations, and must use best estimate assumptions.
10 “(7) “Deﬁnition of valuation premiums In this section, valuation premiums means the amount of pre­ miums payable for a policy, actuarially determined by refer­ 25 ence to the premium formula used when the policy was ﬁrst entered into, or, if the premium formula is unavailable, by ref­ erence to mortality, expense, and other assumptions applicable to premiums for similar policies at the start of the income year beginning on or after 1 April 2009.
The valuation premiums 30 must not include any allowance for future bonus declarations or future shareholder proﬁts.

“Valuation premiums: no unjustiﬁable change “(8) The amount of the valuation premium for a policy must not change, unless signiﬁcant changes to the policy justify chang­ 35 ing the valuation premium.
154 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 “(9) “Deﬁnition of policy liabilities In this section, and in sections EY 17 and EY 21, policy liabilities means, for a policy, an amount that is the present value of future mortality and maturity claims, plus the pre­ sent value of future expenditure or loss plus the present value 5 of future tax payments less the present value of future valu­ ation premiums.
The amount of policy liabilities must not in­ clude any allowance for surrenders or the payment of surren­ der values and relevant life reinsurance premiums and claims must be subtracted.

10 “Policy liabilities: minimum “(10) For the purposes of this section and of sections EY 17 and EY 21, the minimum amount of policy liabilities for a policy is the current surrender value of the policy.
“Best estimate assumptions for other proﬁt 15 “(11) In actuarially determining the items premiums estimate and claims estimate under subsection (6), and policy liabilities for the purposes of this section, the actuary must use the same best estimate assumptions for each determination of policy li­ abilities.

The actuary may choose start­of­year best estimate 20 assumptions or end of year best estimate assumptions, but once a choice is made, it may not be changed.
“Deﬁned in this Act: actuarially determined, amount, best estimate assump­ tions, income year, life insurance policy, life insurer, life reinsurance, present value, policy liabilities, proﬁt participation policy, valuation premiums 25 “Transitional adjustments and annuities “EY 29 Transitional adjustments: life risk “When this section applies “(1) This section applies to a life insurance policy, other than an annuity, that is ﬁrst entered into before 1 April 2009, and for 30 which the life insurer has no policyholder base gross income, or expenditure or loss, if–– “(a) the policy meets the relevant requirements for the rele­ vant period described in subsection (2); and the amount of insurance cover does not increase for the 35 relevant income year by more than the greater of–– “(b) 155 Part 1 cl 143 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) 10% of the previous year’s insurance cover; and the percentage change in consumer price index for the previous income year.
“Requirements and periods for which this section applies “(2) This section applies to a policy to the extent to which, for the 5 relevant period, it is described by the following requirements: for a life insurance policy for which only 1 premium is “(a) ever payable, or for which the rate of premiums payable is always the same amount and cannot be changed, the period that–– “(i) starts on the ﬁrst day of the ﬁrst income year beginning on or after 1 April 2009; and “(ii) ﬁnishes on the day that the policy ceases to be in 10 force: “(b) “(c) for a life insurance policy for which the rate of premium 15 is guaranteed for a continuous period (the continuous guarantee period) that begins before 1 April 2009, the period that–– “(i) starts on the ﬁrst day of the ﬁrst income year beginning on or after 1 April 2009; and ends on the later of the day that is the last day of the continuous guarantee period that begins before 1 April 2009 or whichever day described in paragraph (c)(ii) is relevant: “(ii) 20 for a life insurance policy for which the premium may 25 vary each year, the period that–– “(i) starts on the ﬁrst day of the ﬁrst income year beginning on or after 1 April 2009; and ends on the day that is 5 years after the ﬁrst day of the ﬁrst income year beginning on or after 1 30 April 2009, or the day that the policy expires, if earlier.
“(ii) “When this section does not apply: once­only opt out “(3) This section does not apply to a class of policies after the life insurer irrevocably chooses in a notice received by the Com­ 35 missioner that this section does not apply for the class.
156 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 143 “Adjustment “(4) For the income year, a life insurer has an amount of share­ holder base gross expenditure or loss, treated as incurred in deriving their shareholder base gross income, calculated for the relevant class of policies using the formula— 5 premiums − total net reserving amounts − (1.2 × expected death strain).
“(5) “(b) “Deﬁnition of items in formula In the formula,— “(a) premiums is the life insurer’s total premiums for the income year for the policies, but subtracting relevant life reinsurance premiums: total net reserving amounts is the total of reserving amounts for the income year under sections EY 24 to EY 26, but treating amounts that are shareholder base gross income as negative amounts, and amounts that are shareholder base gross expenditure or loss as positive 15 amounts: expected death strain is the amount calculated under the expected death strain formula (life) in accordance with sections EZ 53 to EZ 60 (which relate to the transitional adjustment for expected death strain) for the 20 income year.
“(c) 10 “(6) “Negative amounts If subsection (4) gives a negative amount for a policy, it is ignored for that policy.

“Deﬁned in this Act: amount, Commissioner, income year, life insurer, share­ 25 holder base gross expenditure or loss, shareholder base gross income “EY 30 Annuities “When this section applies “(1) This section applies to a life insurance policy that is an annuity.
“(2) “Negative and positive amounts If the formula in subsection (3) gives a negative amount, the life insurer has that amount of shareholder base gross expend­ 30 157 5 10 Part 1 cl 144 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill iture or loss, treated as incurred in deriving shareholder base gross income.

If the formula in subsection (3) gives a posi­ tive amount, the life insurer has that amount of shareholder base income, treated as derived.
“Adjustment “(3) For the income year, a life insurer has an amount of share­ holder base gross income, expenditure or loss calculated for the relevant annuities using the formula— closing actuarial reserves − (0.99 × expected death strain).
“(4) “Deﬁnition of items in formula In the formula,— “(a) “(b) closing actuarial reserves is the life insurer’s closing actuarial reserves (active annuities), calculated in ac­ cordance with section EZ 59(2) (Meaning of actuarial reserves): expected death strain is the amount calculated under 15 the expected death strain formula (active annuities) in accordance with sections EZ 53 to EZ 60 (which re­ late to the transitional adjustment for expected death strain) for the income year.
“Deﬁned in this Act: amount, income year, life insurer, shareholder base gross 20 income or loss”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 144 Policyholder income formula: FDR adjustment (1) Section EY 43B(1)(a) and (b) are replaced by the following: property is an attributing interest in a FIF held by a life “(a) insurer or by a multi­rate PIE that the life insurer has invested in, directly or indirectly; and the life insurer or the multi­rate PIE uses the fair divi­ dend rate method for the property; and”.

“(b) 25 30 (2) Section EY 43B(2) is replaced by the following: “When has life insurer indirectly invested in multi­rate PIE?
“(2) For the purposes of subsection (1), a life insurer is treated as investing indirectly in a multi­rate PIE (PIE A) when a multi­ 158 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 145 rate PIE has invested in PIE A and the investment may be traced through an unbroken chain of investments in multi­rate PIEs to a direct investment by the life insurer in a multi­rate PIE.” In section EY 43B, in the list of deﬁned terms, “portfolio in­ 5 vestment­linked life fund” is omitted, and “multi­rate PIE” and “PIE” are inserted.
Subsections (1) to (3) apply for the 2009–10 income year.
(3) (4) 145 Policyholder income formula: PILF adjustment (1) In section EY 43C(1), the words before paragraph (a) and para­ 10 graph (a) are replaced by the following: “(1) This section applies for the purposes of section EY 42(5C) to property that supports only actuarial reserves for a life fund PIE to the extent to which the property is— an attributing interest in a FIF— “(a) “(i) held by a life insurer or a multi­rate PIE that the life insurer has invested indirectly or indirectly; and for which the life insurer or multi­rate PIE uses the fair dividend rate method:”.
“(ii) 15 20 (2) Section EY 43C(2), other than the heading, is replaced by the following: “(2) For the purposes of subsection (1), a life insurer is treated as investing directly in a multi­rate PIE (PIE A) when a multi­ rate PIE has invested in PIE A and the investment may be 25 traced through an unbroken chain of investments in multi­rate PIEs to a direct investment by the life insurer in a multi­rate PIE.” Section EY 43C(3)(b)(ii) is replaced by the following: (3) “(ii) dividends or distributions for shares described in 30 subsection (1)(b) other than a distribution from a multi­rate PIE to which section CX 56B (Distri­ butions to investors in multi­rate PIEs) applies.” (4) Section EY 43C(9)(c)(ii) is replaced by the following: “(ii) dividends and distributions for the shares, other 35 than distributions from a multi­rate PIE to which section CX 56B applies.” 159 Part 1 cl 146 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (5) (6) In section EY 43C, in the list of deﬁned terms, “portfolio investment­linked life fund” is omitted and “life fund PIE”, “multi­rate PIE”, and “PIE” are inserted.
Subsections (1) to (5) apply for the 2009–10 income year.
146 Non­resident life insurers with life insurance policies in 5 (1) New Zealand Section EY 48(3) is replaced by the following: “Shareholder base and policyholder base “(3) The life insurer’s income, or expenditure or loss, is appor­ tioned between their policyholder base or shareholder base 10 under the provisions of this subpart to the extent to which the income, or expenditure or loss, relates to— “(a) life insurance policies that the life insurer, as insurer, offered or was offered or entered into in New Zealand: life reinsurance policies held by the life insurer that re­ 15 late exclusively to life insurance policies described in paragraph (a).” “(b) (2) (3) In section EY 48(4), “other than under a formula referred to in subsection (3)” is replaced by “other than under the provisions of this subpart”.
Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.

20 147 Section EZ 31 repealed (1) (2) Section EZ 31 is repealed.

Subsection (1) applies for the 2009–10 and later income 25 years.

148 Section EZ 32B repealed Section EZ 32B is repealed.
149 New headings and sections EZ 53 to EZ 60 added (1) After section EZ 52, the following is added: 30 160 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 149 “Life insurance transitional adjustment: expected death strain “Expected death strain formulas “EZ 53 How expected death strain is calculated “Calculation of expected death strain: steps 5 “(1) For an income year, the life insurer calculates their expected death strain by following these steps: “(a) ﬁrst, use the relevant expected death strain formula to calculate an amount for each life insured under each life insurance policy existing at the start of the income 10 year (see: subsections (2) and (3) for guidance on the relevant expected death strain formula): second, for each such life insurance policy, add together the amounts for the lives insured under it: third, add together the totals reached under paragraph 15 (b).
“(b) “(c) “Expected death strain formula (life) “(2) Section EZ 54(1) sets out the expected death strain formula (life).

This is the formula a life insurer uses for an income year, to calculate an amount for a life insured under a life insurance 20 policy, except to the extent to which an annuity is being paid under the policy at some time in the income year.

“Expected death strain formula (active annuities) “(3) Section EZ 54(2) sets out the expected death strain formula (active annuities).
This is the formula a life insurer uses for an 25 income year, to calculate an amount for a life insured under a life insurance policy, to the extent to which an annuity is being paid under the policy at some time in the income year.
“Deﬁned in this Act: business, income year, life insurance, life insurance pol­ icy, life insured, life insurer, pay 30 “EZ 54 Expected death strain formulas “Expected death strain formula (life) “(1) The expected death strain formula (life) is— 161 Part 1 cl 149 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill claim probability × (opening sum assured − opening actuarial reserves).
“Expected death strain formula (active annuities) “(2) The expected death strain formula (active annuities) is— claim probability × opening actuarial reserves.

“Deﬁnition of items in formulas “(3) The items in the formulas are deﬁned in subsections (4) to (6).

“Claim probability 5 “(4) Claim probability is the probability of a claim arising under the policy for the life insured’s death in the income year.
It is determined at the start of the income year using the same mortality assumptions as are used to calculate the life insurer’s 10 actuarial reserves at the start of the income year.

It is expressed as a decimal.

Variations to claim probability are in sections EZ 55(2) and EZ 57(2).
“Opening sum assured “(5) Opening sum assured is the claim that would be payable 15 under the policy for the life insured’s death in the income year or, if no such claim would be payable, the claim that would be payable under the policy for the life insured’s survival to the relevant date or age speciﬁed in the policy.

It is determined at the start of the income year.

It may be zero.

Variations to 20 opening sum assured are in sections EZ 56(2), EZ 57(3), and EZ 58(2).
“Opening actuarial reserves “(6) Opening actuarial reserves is the amount in the life insurer’s actuarial reserves for the life insured under the policy.

It is 25 determined at the start of the income year.
“Deﬁned in this Act: actuarial reserves, amount, claim, income year, life in­ sured, life insurer, pay 162 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 149 “EZ 55 Expected death strain formulas: option when more than 1 life insured “When this section applies “(1) This section applies when a life insurance policy covers more than 1 life insured.
“(2) “Claim probability In using the relevant expected death strain formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy.

“Features of common factor 5 10 “(3) The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured’s death in the income year.
It must be weighted as necessary to take account of— “(a) differing claims for individual lives insured under the 15 policy; and “(b) differing amounts in the life insurer’s actuarial reserves for individual lives insured under the policy.
“Deﬁned in this Act: actuarial reserves, amount, claim, income year, life insur­ ance policy, life insured, life insurer 20 “EZ 56 Expected death strain formula (life): when annuity payable on death “When this section applies “(1) This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the 25 start of which is contingent on the life insured’s death.
“(2) “Opening sum assured In using the expected death strain formula (life), the life in­ surer uses as opening sum assured the net present value of the annuity.
The net present value is determined— “(a) “(b) on the assumption that the life insured died at the start at the start of the income year; and 30 of the income year; and 163 Part 1 cl 149 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) using the same assumptions and bases of calculation as are used to calculate the life insurer’s actuarial reserves for the income year.
“Deﬁned in this Act: actuarial reserves, income year, life insurance policy, life insured, life insurer, payment 5 “EZ 57 Expected death strain formulas: when annuity payable on survival to date or age speciﬁed in policy “When this section applies “(1) This section applies when, and to the extent to which, a life “(2) “(3) insurance policy provides for the payment of an annuity the 10 start of which is contingent on the life insured’s survival to the relevant date or age speciﬁed in the policy.
“Claim probability In using the relevant expected death strain formula, the life in­ surer must use claim probability as deﬁned in section EZ 15 54(4), without regard to the fact that the payment of the annu­ ity is not contingent on the life insured’s death.

“Opening sum assured In using the expected death strain formula (life), the life insurer must use as opening sum assured the net present value of the 20 annuity.
The net present value is determined— “(a) “(b) on the assumption that the life insured survived to the at the relevant date or age speciﬁed in the policy; and “(c) date or age; and using the same assumptions and bases of calculation as 25 are used to calculate the life insurer’s actuarial reserves for the income year.
“Deﬁned in this Act: actuarial reserves, income year, life insurance policy, life insured, life insurer, pay, payment “EZ 58 Expected death strain formula (life): when partial 30 reinsurance exists “When this section applies “(1) This section applies when a life insurer has partial life reinsur­ ance.
164 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 149 “(2) “Opening sum assured In using the expected death strain formula (life), the life insurer must reduce opening sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contin­ gency against which the life insured is covered under the life 5 insurance policy.
“Deﬁned in this Act: claim, life insurance policy, life insured, life insurer, life reinsurance policy, partial reinsurance “Actuarial reserves “EZ 59 Meaning of actuarial reserves “Actuarial reserves generally “(1) For the purposes of sections EZ 53 to EZ 58, actuarial reserves means a life insurer’s reserves as calculated under section EZ 60.
“Closing actuarial reserves for annuities 10 15 “(2) For the purposes of the item closing actuarial reserves in sec­ tion EY 30(3) (Annuities), closing actuarial reserves (active annuities) means a life insurer’s opening actuarial reserves under section EZ 54(6) for a life insurance policy, to the ex­ tent to which an annuity is being paid under the policy where 20 the life insured dies in the income year for which the formula in section EY 30 is applied.
Where the life insured survives to the end of that income year, the closing actuarial reserves (active annuities) is zero.

“Link between actuarial reserves and life insurer 25 “(3) Actuarial reserves, for a life insurer at any time, means the life insurer’s actuarial reserves at that time.

“Deﬁned in this Act: actuarial reserves, life insurance policy, life insurer “EZ 60 Actuarial reserves: calculation “Calculation by actuary 30 “(1) The life insurer’s actuarial reserves must be actuarially deter­ mined.
“All reserves or 1 or more amounts “(2) The actuary may calculate— 165 Part 1 cl 149 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) the actuarial reserves for all the life insurance policies for which the life insurer is the insurer; or the amount in the life insurer’s actuarial reserves for 1 or more life insurance policies for which the life insurer is the insurer.
5 “Interest, mortality, and other assumptions and bases of calculation “(3) The actuary must do the calculation using interest, mortality, and other assumptions and bases of calculation that— “(a) are based on the same principles as those used in the 10 actuarial advice on which the following are calculated: the level of surplus funds available to the life “(i) insurer for allotment or payment to shareholders or policyholders; or the level of surplus funds available to the life 15 insurer, if a superannuation scheme, for allotment to objects of the scheme other than the object of providing for members’ beneﬁts; and “(ii) “(b) “(c) are likely to produce a reasonable estimation of the fu­ ture experience of the life insurer in relation to life in­ 20 surance policies of which the life insurer is the insurer, having regard to the past experience of the life insurer in relation to life insurance policies of which the life in­ surer was the insurer; and conform with commercially acceptable practice.
25 “Reserves for policy never negative “(4) The amount in the actuarial reserves for a life insurance policy must never be negative.

“Reserves for all policies never less than total of surrender values 30 “(5) The actuarial reserves at any time must not be less than the total of the surrender values of all the life insurance policies they cover at that time.
“Reserves for policies same at end of one, and start of next, income year 35 “(6) The amount in the actuarial reserves for life insurance policies at the start of an income year is the same as the amount in the 166 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 150 actuarial reserves for the life insurance policies at the end of the previous income year.
“Effect of partial reinsurance “(7) The actuarial reserves of a life insurer who has partial life rein­ surance must be reduced by an amount that the actuary respon­ 5 sible for actuarial control of the life insurer considers appropri­ ate having regard to the nature of the life reinsurance policies.

“Deﬁned in this Act: actuarial reserves, actuary, amount, income year, life in­ surance policy, life insurer, life reinsurance policy, partial reinsurance, payment, 10 shareholder, superannuation scheme”.
Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 150 New heading and sections EZ 61 to EZ 63 added Before the heading to Part F, the following is added: “Transitional and other miscellaneous provisions relating to entry into new life insurance regime “EZ 61 Disposal and re­acquisition upon entry 15 Immediately before the ﬁrst day of the income year beginning 20 on or after 1 April 2009, all of the property of a life insurer that supports actuarial reserves for the purposes of the policy­ holder income formula in section EY 43 (Policyholder income formula) is treated as disposed of, for market value consider­ ation, to a third person, and immediately re­acquired from that 25 person for the same consideration.
“Deﬁned in this Act: actuarial reserves, amount, dispose, income year, life insurer, market value “EZ 62 Allowance for cancelled amount: spreading “Policyholder base gross expenditure or loss “(1) For an income year beginning on or after 1 April 2009, a life insurer may choose, by a notice received by the Commissioner on or before the last day for furnishing a return of income for the relevant income year, that an amount is policyholder base gross expenditure or loss for the income year, if–– 30 35 167 Part 1 cl 150 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) the life insurer has no taxable income, other than in rela­ tion to its policyholder base, for the tax year correspond­ ing to the income year, and no taxable income, other than in relation to its policyholder base, for every ear­ lier tax year going back to, and including, the tax year 5 that corresponds with the ﬁrst income year beginning on or after 1 April 2009; and the amount is stated in the notice and the amount is equal to or less than the least of the following: “(i) the amount of available tax loss for the tax year 10 that corresponds with the income year, before ap­ plying this section; and the available concession amount for the income year, described in subsection (2); and “(ii) “(iii) the amount that would be the life insurer’s 15 schedular policyholder base income for the in­ come year, before applying this section for the year.
“Available concession amount “(2) For the purposes of subsection (1), the available concession 20 amount for the income year is a positive amount calculated using the formula— base concession amount − used.
“(3) “Deﬁnition of items in formula In the formula,,— “(a) base concession amount is the lesser of the following: 25 “(i) “(ii) the cancelled amount described in section IT 1 (Cancellation of life insurer’s policyholder net losses); and the amount of available tax loss for the tax year that corresponds with the ﬁrst income year begin­ 30 ning on or after 1 April 2009 before applying this section for the year: 168 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 151 “(b) used is the total amount of policyholder base gross ex­ penditure or loss that is under this section for income years before the income year.
“Deﬁned in this Act: amount, Commissioner, income year, life insurer, net loss, policyholder base gross expenditure or loss, return of income, schedular 5 policyholder base income, tax loss, tax year, taxable income “EZ 63 Reinsurance transition: life ﬁnancial reinsurance may be life reinsurance A contract that is entered into before 1 April 2009 and that, but for this section, would be a contract for life ﬁnancial rein­ 10 surance is treated as life reinsurance, not life ﬁnancial reinsur­ ance, for the period starting on the ﬁrst day of the ﬁrst income year begininning on or after 1 April 2009, and ending on the later of,–– “(a) the last day of the term of the contract, as that term is 15 stated in the contract before 1 April 2009 and ignoring any renewal; and “(b) 31 March 2014.
“Deﬁned in this Act: income year, life ﬁnancial reinsurance, life reinsurance”.

151 Recharacterisation of certain debentures (1) (2) Section FA 2(3) is repealed.
Section FA 2(4), other than the heading, is replaced by the following: 20 “(4) A proﬁt­related debenture— “(a) means a debenture with a rate of interest that is set from 25 time to time by reference to— “(i) the dividend payable by the company issuing the debenture; or the proﬁts of the company issuing the debenture, however measured: 30 “(ii) “(b) does not include a debenture under which the interest payable is determined by a ﬁxed relationship to— “(i) “(ii) general commercial rates; or “(iii) economic, commodity, industrial, or ﬁnancial in­ 35 dices, but the application of this subparagraph is banking rates; or 169 Part 1 cl 152 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill subject to section FZ 1(3) (Treatment of interest payable under debentures issued before certain date).” (3) “(5) (4) (5) 5 Section FA 2(5), other than the heading, is replaced by the following: In this section, a substituting debenture— “(a) means a debenture issued by a company to a share­ holder or class of shareholders of the company when the amount of the debenture is determined by reference to 1 or more of the following aspects of the shares in the 10 company or another company held by the shareholder or class of shareholder at the time the debenture is issued or at an earlier time: “(i) “(ii) the number of shares: the available subscribed capital of the relevant 15 company calculated under the slice rule set out in section CD 23 (Ordering rule and slice rule): “(b) “(iii) some other reference to the
 shares: includes a debenture issued to a shareholder or a class of shareholder when the amount of the debenture is deter­ 20 mined by reference to 1 or more aspects of the shares as described in paragraph (a) held by the shareholder in a company other than that issuing the debenture, whether or not the company is being, or has been, liquidated: does not include a debenture that is a convertible note.” 25 “(c) Section FA 2(6) is repealed.
Section FA 2(7), other than the heading, is replaced by the following: “(7) For the purposes of subsection (5), the amount of the deben­ ture means the principal sum secured by or owing under the 30 debenture.” 152 What this subpart does (1) Section FC 1(1)(d) is replaced by the following: “(d) the transfer of property on a distribution in kind by a company in a transfer of value caused by a shareholding 35 in the company:”.

Subsection (1) applies for the 2009–10 and later income years.
(2) 170 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 155 153 Transfer at market value Section FC 2(2), other than the heading, is replaced by the following: “(2) For property referred to in section FC 1(1)(a), the disposal and acquisition is treated as occurring immediately before the 5 death of the person.” 154 What this subpart does (1) Section FE 1(1)(a)(i) is replaced by the following: “(i) is controlled by a single non­resident, or is a New Zealand resident (an outbound entity) with an 10 income interest in a CFC, or a New Zealand resi­ dent that controls an outbound entity; and”.
(2) (3) (4) In section FE 1, in the list of deﬁned terms, “CFC” and “in­ come interest” are inserted.

In section FE 1, in the list of deﬁned terms, “control” is omit­ 15 ted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
155 When this subpart applies (1) In section FE 2(1)(d), “trust.” is replaced by “trust:”, and the 20 following is added: “(e) a company that is resident in New Zealand and has an income interest in a CFC: a company that is resident in New Zealand and has— “(i) an ownership interest in a company described in 25 paragraph (e) of 50% or more: control of a company described in paragraph (e) by any other means: “(ii) “(f) “(g) a natural person, or a trustee of a trust settled by a New Zealand resident, if the natural person or trustee is resi­ 30 dent in New Zealand and has–– “(i) “(ii) an income interest in a CFC: an ownership interest in a company described in paragraph (e) or (f) of 50% or more: “(iii) control of a company described in paragraph 35 (e) or (f) by any other means.” 171 Part 1 cl 156 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) (3) (4) In section FE 2, in the list of deﬁned terms, “CFC” and “in­ come interest” are inserted.
In section FE 2, in the list of deﬁned terms, “control” is omit­ ted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 5 come years.
156 Section FE 3 replaced (1) Section FE 3 is replaced by the following: “FE 3 Interest apportionment for individuals “Natural persons and trustees: inbound, not described in section FE 2(1)(g) 10 “(1) This subpart applies to a natural person or trustee not described in section FE 2(1)(g) with the following modiﬁcations: “(a) the New Zealand group of the natural person or trustee is made up of the natural person or trustee and all asso­ 15 ciated persons who–– “(i) “(ii) are resident in New Zealand; or are carrying on business in New Zealand through a ﬁxed establishment in New Zealand; or “(b) “(iii) derive income that has a source in New Zealand 20 and for which relief from New Zealand tax under a double tax agreement is unavailable: the worldwide group of the trustee is made up of the trustee and–– “(i) “(ii) the trustee’s New Zealand group; and all non­residents who are associated with the trustee or a member of the trustee’s New Zealand group: 25 “(c) in the calculation of the amount of the natural person’s total assets, private and domestic assets are excluded.
30 “Natural persons and trustees: outbound, described in section FE 2(1)(g) “(2) This subpart applies to a natural person or trustee described in section FE 2(1)(g) with the following modiﬁcations: “(a) the New Zealand group of the natural person or trustee 35 is made up of the natural person or trustee and all asso­ ciated persons who are not excess debt outbound com­ 172 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 158 panies and are not included in a New Zealand group of an excess debt outbound company, and who–– are resident in New Zealand; or “(i) are carrying on business in New Zealand through “(ii) a ﬁxed establishment in New Zealand; or “(iii) derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable: the worldwide group of the trustee is made up of the trustee and–– “(i) “(ii) the trustee’s New Zealand group; and all CFCs in which the trustee or a member of the trustee’s New Zealand group has an income interest: 5 10 “(b) “(c) in the calculation of the amount of the natural person’s 15 total assets, private and domestic assets are excluded.
“Deﬁned in this Act: amount, associated person, business, CFC, double tax agreement, ﬁxed establishment, generally accepted accounting practice, group of companies, income interest, natural person, New Zealand, resident in New Zealand, source in New Zealand, total group assets, total group debt, trustee”.

20 Subsection (1) applies for the 2009–10 and later income years.
(2) 157 Some deﬁnitions (1) In section FE 4, after the deﬁnition of excess debt entity, the following is inserted: “excess debt outbound company for an income year is an excess debt entity that meets the requirements of section FE 2(1)(e) or (f), and none of the requirements of section FE 2(1)(a) to (d)”.

Subsection (1) applies for the 2009–10 and later income 30 years.
25 (2) 158 Thresholds for application of interest apportionment rules (1) After section FE 5(1), the following is inserted: “Exceptions for excess debt outbound companies “(1B) Despite subsection (1), an excess debt outbound company and 35 a natural person or trustee who is described in section FE 173 Part 1 cl 159 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 2(1)(g) do not have to apportion interest expenditure for an income year under section FE 6 if, for the income year,— “(a) the ratio of the total group assets measured under sec­ tion FE 16 for its New Zealand group to the total group assets measured under section FE 18 for its worldwide 5 group is 90% or greater: its New Zealand group— “(i) “(b) has a total amount of deductions for interest al­ lowed under sections DB 6 to DB 8 (which re­ late to deductions for interest) to the group, less 10 the total deductions allowed in relation to inter­ est payable intra­group, that is not greater than $250,000; and “(ii) does not include an entity with an income interest in a CFC, and the CFC derives rent from land 15 in the country or territory in which the CFC is resident.
“Natural persons’ worldwide group total assets “(1C) For the purposes subsection (1B)(a), the total group assets of a natural person’s worldwide group under section FE 18 are 20 measured on the basis that the natural person is an excess debt entity that has a worldwide group made up of–– “(a) “(b) “(c) the natural person; and the natural person’s New Zealand group; and all CFCs in which the natural person or a member of 25 the natural person’s New Zealand group has an income interest.” (2) (3) In section FE 5, in the list of deﬁned terms, “CFC”, “excess debt outbound company”, “income interest”, and “total group assets” are inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
159 Apportionment of interest by excess debt entity Section FE 6(1) is replaced by the following: (1) “Who this section applies to “(1) This section applies to an excess debt entity or a natural per­ son if section FE 5 requires the entity or person to apportion 30 35 174 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 160 their interest expenditure for an income year under this sec­ tion, treating the natural person, for the purposes of this sec­ tion other than in the deﬁnition of threshold amount, as an excess debt entity.” In section FE 6(2), in the formula, “total deduction” is replaced 5 by “total deduction + FRFE dividend”.
In section FE 6(3)(a), “DB 8” is replaced by “DB 8 (which relates to deductions for interest expenditure)”.

(2) (3) (4) After section FE 6(3)(a), the following is inserted: “(ab) FRFE dividend means the total amount of dividends 10 paid by the excess debt entity in relation to ﬁxed­rate foreign equity–– “(i) “(ii) held by a person resident in New Zealand who is issued by the entity; and not a company that is a member of the entity’s 15 New Zealand group:”.
(5) (6) In section FE 6, in the list of deﬁned terms, “ﬁxed­rate foreign equity” is inserted.

Subsections (1), (2), (4), and (5) apply for the 2009–10 and later income years.

160 Calculation of debt percentages (1) In section FE 12(1), the second sentence is replaced by “A natural person must calculate their debt percentage under the rules set out in sections FE 13 to FE 16 and FE 18.” In section FE 12(2), “or natural person” is omitted.
Section FE 12(5) is replaced by the following: “Membership of company’s worldwide group (2) (3) “(5) For an excess debt entity that is a company, the worldwide group is made up of all companies included as members of the worldwide group under–– “(a) sections FE 31 and FE 32, for an excess debt entity that is not an excess debt outbound company: sections FE 31B to FE 32, for an excess debt outbound company.” “(b) (4) Section FE 12(6) is replaced by the following: 175 20 25 30 35 Part 1 cl 161 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Natural persons: membership of New Zealand groups “(6) For a natural person, the membership of the New Zealand group is determined as described in sections FE 3(1) and (2), as applicable.
“Trustees: membership of New Zealand and worldwide groups 5 (5) “(7) For a trustee, the memberships of the New Zealand group and the worldwide group are determined as described in sections FE 3(1) and (2), as applicable.” In section FE 12, in the list of deﬁned terms, “control” is omit­ 10 ted and “excess debt outbound company” is inserted.

Subsections (1) to (5) apply for the 2009–10 and later in­ come years.
(6) 161 Financial arrangements entered into with persons outside group In section FE 13(1), “However, this section applies only if the ﬁnancial arrangement would otherwise be included in the calculation of the debt percentage of the New Zealand group or worldwide group, as the case may be.” is added after “person A.” In section FE 13(2), “and a worldwide group” is inserted after “New Zealand group”.
Section FE 13(3)(a) is replaced by the following: “(a) a non­resident who is not carrying on business through a ﬁxed establishment in New Zealand and who— “(i) does not derive income that has a New Zealand source: 15 20 25 “(ii) does derive income that has a New Zealand source and, for all of that income, relief from New Zealand tax under a double tax agreement 30 is available; or”.

In section FE 13, in the list of deﬁned terms, “double tax agree­ ment” and “source in New Zealand” are inserted.
Subsections (3) and (4) apply for the 2009–10 and later in­ come years.
35 (1) (2) (3) (4) (5) 176 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 163 162 Consolidation of debts and assets (1) Section FE 14(2) and (3) are replaced by the following: “Natural persons’ and trustees’ calculation “(2) For a natural person and an excess debt entity that is a trustee, the debt percentage of a New Zealand group is calculated 5 under generallly accepted accounting practice for the con­ solidation of companies for the purposes of eliminating intra­group balances by consolidating the debts and assets for the group.
“(3) “When member not resident If a member of a New Zealand group is not resident in New Zealand, the assets and debts of the member are included in a consolidation only to the extent to which the assets and debts are for the group member to— “(a) carry on business in New Zealand through a ﬁxed es­ 15 tablishment in New Zealand: 10 “(b) derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable.” (2) (3) In section FE 14, in the list of deﬁned terms, “double tax agree­ 20 ment” and “source in New Zealand” are inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
163 Total group debt (1) “(1) Section FE 15(1) and (2) are replaced by the following: “Meaning In this subpart for a New Zealand group, total group debt means the sum of the outstanding balances for— “(a) ﬁnancial arrangements entered into by a natural person, 25 or an excess debt entity, or another member of the New 30 Zealand group, if the ﬁnancial arrangement— “(i) provides funds to the natural person, the entity, or another member of the group; and “(ii) gives rise to an amount for which the natural per­ son, the entity, or another member of the group, 35 would have a deduction: “(b) ﬁxed­rate foreign equity that is— 177 Part 1 cl 164 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) issued by the entity or another member of the New Zealand group; and “(ii) held by a person resident in New Zealand.
“Exchange rate ﬂuctuations “(2) Subsection (1)(a)(ii) does not include a deduction for an 5 amount that arises only from movement in currency exchange rates.” In section FE 15, in the list of deﬁned terms, “ﬁxed­rate foreign equity” and “resident in New Zealand” are inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 10 come years.
(2) (3) 164 Total group assets (1) After section FE 16(1), the following is inserted: “CFC investments excluded “(1B) If the excess debt entity or another member of the New 15 Zealand group has an investment in a CFC in which the entity or member has an income interest, the value of the investment is excluded from the calculation and measurement of total group assets under this section, except to the extent to which–– “(a) 20 the value represents the outstanding balances of ﬁnan­ cial arrangements to which section FE 13 applies: the CFC derives income with a New Zealand source and for which relief from New Zealand tax under a double tax agreement is unavailable.
25 “(b) “When member not resident “(1C) If the excess debt entity or another member of a New Zealand group is not resident in New Zealand, the assets of the entity or member are included in the calculation and measurement of total group assets under this section only to the extent to which 30 the assets are for the entity or member to— “(a) carry on business in New Zealand through a ﬁxed es­ tablishment in New Zealand: “(b) derive income that has a source in New Zealand and for which relief from New Zealand tax under a double tax 35 agreement is unavailable.” 178 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 165 (2) (3) In section FE 16, in the list of deﬁned terms, “CFC”, “dou­ ble tax agreement”, “income interest”, and “source in New Zealand” are inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

5 165 Measurement of debts and assets of worldwide group (1) In section FE 18(1), the words before paragraph (a) are re­ placed by the following: “(1) The amount of total group debt and the amount of total group assets of the worldwide group of an excess debt entity is cal­ 10 culated—”.
Section FE 18(2) and (3) are replaced by the following: “Date of measurement (2) “(2) The amount of total group debt and the amount of total group assets of the worldwide group of an excess debt entity for an 15 income year are measured using— “(a) the average amount at the end of each day of the income year; or the average amount at the end of each 3­month period in the income year; or the amount as at the worldwide group’s balance date that immediately precedes the income year.
“(b) “(c) 20 “Measurement of amounts “(3) Despite subsection (1), an excess debt entity must measure the amount of total group debt by applying section FE 15 as if it 25 referred to a deduction that would be allowed if the entity, or another group member, were resident in New Zealand.” In section FE 18(4), the ﬁrst sentence is replaced by “If an ex­ cess debt entity is unable to calculate the debt percentage of their worldwide for an income year, they may ask the Com­ 30 missioner to estimate the percentage under this subpart.” In section FE 18(5), the words before paragraph (a) and para­ graph (a) are replaced by the following: (3) (4) “(5) The debt percentage of the worldwide group of an excess debt entity is treated as 68.1818% in the following cases: 35 179 Part 1 cl 166 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) the entity is unable to calculate the percentage and does not ask the Commissioner to make an estimate under subsection (4):”.
(5) (6) In section FE 18, in the list of deﬁned terms, “natural person” is omitted.

Subsections (1) to (5) apply for the 2009–10 and later in­ come years.
5 166 Banking group’s New Zealand net equity (1) Section FE 21(3)(d)(ii) is replaced by the following: “(ii) that is made by a non­resident who is not a 10 member of the New Zealand banking group or associated with a member of the group under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 15 1990 version provisions) or of the 1988 version provisions; and”.
(2) In section FE 21(4), the words before paragraph (a) are re­ placed by the following: “(4) Adjustment 1 is the ﬁnancial value of ﬁxed­rate foreign equi­ 20 (3) “(i) ties that are—”.
Section FE 21(7)(a)(i) and (ii) are replaced by the following: acquired from a person who, at the time of ac­ quisition, is not associated with a member of the group under the parts of subpart YB that ap­ 25 ply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or under the 1988 version provisions; or relating to an entity that is acquired from a person who is not associated with a member of the group 30 under the parts of subpart YB that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or under the 1988 version provisions:”.
“(ii) In section FE 21(8) is replaced by the following: (4) “(8) Adjustment 5 is the total amount of capital gain arising for the 2004–05 income year or a later income year from a transfer 35 180 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 168 of an intangible asset between a member of the group and a person who is associated with a member of the group under the parts of subpart YB that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 version provisions.” Subsection (2) applies for the 2009–10 and later income years.
5 (5) 167 New Zealand group for excess debt entity that is a (1) (2) (3) (4) company In section FE 25(2), “company” is replaced by “company.

10 However, section FE 30 does not apply to an excess debt outbound company”.

In section FE 25, in the list of deﬁned terms, “excess debt outbound company” is inserted.

In section FE 25, in the list of deﬁned terms, “control” is omit­ 15 ted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
168 (1) Identifying New Zealand parent Section FE 26(2)(b)(ii) is replaced by the following: 20 “(ii) no single non­resident who is carrying on busi­ ness in New Zealand through a ﬁxed establish­ ment in New Zealand or who derives income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agree­ 25 ment is unavailable has an ownership interest in the entity of 50% or more:”.
(2) (3) In section FE 26(2)(b), “more.” is replaced by “more; or” and the following is added: “(c) the entity is an excess debt outbound company and no 30 single company resident in New Zealand has an owner­ ship interest in the entity of 50% or more.” The heading to section FE 26(3) is replaced by “Top tier New Zealand resident company if not excess debt outbound com­ pany”.
35 181 Part 1 cl 168 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (4) “(3) (5) In section FE 26(3), the words before the paragraphs are re­ placed by the following: If subsection (2) does not apply, and the excess debt entity is not an excess debt outbound company, the entity’s New Zealand parent is the company (company A) that meets all 5 the following requirements:”.
In section FE 26(3)(a)(ii), “New Zealand; and” is replaced by “New Zealand; or” and the following is added: “(iii) not resident in New Zealand but deriving income that has a source in New Zealand and for which 10 relief from New Zealand tax under a double tax agreement is unavailable; and”.
(6) In section FE 26(4)(a)(ii), “New Zealand; and” is replaced by “New Zealand; or” and the following is added: “(iii) not resident in New Zealand but deriving income 15 that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and”.
(7) After section FE 26(4), the following is inserted: “Top tier New Zealand resident company for excess debt outbound company “(4B) If subsection (2) does not apply, and the excess debt entity is an excess debt outbound company, the entity’s New Zealand parent is the company (company C) that meets all the follow­ ing requirements: “(a) company C— “(i) “(ii) has an ownership interest of 50% or more in the is resident in New Zealand; and 20 25 entity; and “(b) no company that meets the requirements of paragraph 30 (a)(i) and (ii) has a direct ownership interest in com­ pany C.” Section FE 26(6), other than the heading, is replaced by the following: If subsection (2) does not apply, and no company meets the 35 requirements of subsection (3), (4), or (4B), the excess debt entity is treated as the New Zealand parent.” (8) “(6) 182 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 169 (9) “(7) (10) (11) Section FE 26(7), other than the heading, is replaced by the following: In subsections (3) to (4B), ownership interests are determined under sections FE 38 to FE 41, but for the purpose of iden­ tifying a New Zealand parent, the ownership interests of an 5 associated person are ignored.” In section FE 26, in the list of deﬁned terms, “excess debt outbound company”, “double tax agreement”, and “source in New Zealand” are inserted.
In section FE 26, in the list of deﬁned terms, “control” is omit­ 10 ted.

(12) Subsections (1) to (10) apply for the 2009–10 and later in­ come years.
169 Section FE 28 replaced (1) Section FE 28 is replaced by the following: “FE 28 Identifying members of New Zealand group “New Zealand parent’s group “(1) A New Zealand group is made up of an excess debt entity, the entity’s New Zealand parent, and a company— “(a) 15 20 that is— “(i) “(ii) resident in New Zealand: carrying on a business in New Zealand through a ﬁxed establishment in New Zealand: “(iii) deriving income that has a source in New Zealand and for which relief from New Zealand tax under 25 a double tax agreement is unavailable; and that is identiﬁed under section FE 27 as being under the control of the New Zealand parent; and that is not a member of the New Zealand banking group of a registered bank.
30 “(b) “(c) “Special rule for some entity’s group “(2) Despite subsection (1), if the excess debt entity is not an excess debt outbound company and is not a company iden­ tiﬁed under section FE 27 as being under the control of the New Zealand parent because the threshold is not met, the New 35 Zealand group is made up of the entity and a company— “(a) that is— 183 Part 1 cl 169 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) resident in New Zealand: carrying on a business in New Zealand through a ﬁxed establishment in New Zealand: “(iii) deriving income that has a source in New Zealand and for which relief from New Zealand tax under 5 a double tax agreement is unavailable; and “(b) 10 “(ii) that is a company that— “(i) would be identiﬁed under section FE 27 as being under the control of the entity if the entity were treated as the New Zealand parent; or if the entity is identiﬁed under section FE 27 as being under the control of another company (company A), would be identiﬁed under section FE 27 as under the control of company A if com­ pany A were included in the New Zealand group 15 and treated as the New Zealand parent; or “(iii) would be identiﬁed under section FE 27 as under the control of a company (company B) included in the entity’s New Zealand group under sub­ paragraph (ii), if company B were treated as the 20 New Zealand parent; or is not a member of the New Zealand banking group of a registered bank.
“(iv) “Another special rule for some other entity’s group “(3) Despite subsection (1), if the excess debt entity is an excess 25 debt outbound company and is not a company identiﬁed under section FE 27 as being under the control of the New Zealand parent because the threshold is not met, the entity is included in the New Zealand group for the New Zealand parent if— “(a) the entity is a company that meets the requirements of 30 subsection (1)(a) and (c); and a member of the New Zealand group has a 50% or more ownership interest in the entity.
“(b) “Deﬁned in this Act: business, company, control, double tax agreement, excess debt entity, excess debt outbound company, ﬁxed establishment, New Zealand, 35 New Zealand banking group, registered bank, resident in New Zealand, source in New Zealand”.

184 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 171 (2) (3) In section FE 28, in the list of deﬁned terms, “control” is omit­ ted.

Subsection (1) applies for the 2009–10 and later income years.
170 Section FE 29 replaced (1) “FE 29 Combining New Zealand groups owned by natural Section FE 29 is replaced by the following: 5 persons and trustees “When this section applies “(1) This section applies when a natural person or trustee described 10 in section FE 2(1)(g) has–– “(a) a 50% or more ownership interest in a member of a New Zealand group (group 1) having a member that is an excess debt outbound company; and a 50% or more ownership interest in a member of a dif­ 15 ferent New Zealand group (group 2) having a member that is an excess debt outbound company.
“(b) “Groups combine “(2) Group 1 and group 2 combine into 1 New Zealand group.

(2) “Deﬁned in this Act: excess debt outbound company, New Zealand”.

Subsection (1) applies for the 2009–10 and later income years.
20 171 Ownership interests in companies outside New Zealand (1) group Section FE 30(1)(b) and (c) are replaced by the following: “(b) a particular excess debt entity (company A) that is not an excess debt outbound company is outside the group; and company A is— “(i) “(ii) resident in New Zealand: carrying on business in New Zealand through a ﬁxed establishment in New Zealand: “(c) “(iii) deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and”.
185 25 30 35 Part 1 cl 172 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) (3) (4) (5) Section FE 30(3)(b) is replaced by the following: “(b) company B is— “(i) “(ii) resident in New Zealand: carrying on business in New Zealand through a ﬁxed establishment in New Zealand: 5 “(iii) deriving income that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and”.
In section FE 30, in the list of deﬁned terms, “excess debt outbound company”, “double tax agreement”, and “source in 10 New Zealand” are inserted.

In section FE 30, in the list of deﬁned terms, “control” is omit­ ted.

Subsections (1) to (3) apply for the 2009–10 and later in­ come years.

15 172 Worldwide group for corporate excess debt entity (1) The heading to section FE 31 is replaced by “Worldwide group for corporate excess debt entity if not excess debt outbound company”.
In section FE 31(1), the words before the paragraphs and para­ 20 graph (a) are replaced by the following: (2) “(1) For an income year, for an excess debt entity that is a com­ pany and is not an excess debt outbound company, a world­ wide group is made up of— the entity; and”.

“(a) In section FE 31, in the list of deﬁned terms, “excess debt outbound company” is inserted.

Subsections (1) to (3) apply for the 2009–10 and later in­ come years.
(3) (4) 173 New sections FE 31B and FE 31C inserted (1) After section FE 31, the following is inserted: “FE 31B Worldwide group for excess debt outbound companies “Members of worldwide group “(1) For an income year, a worldwide group for an excess debt outbound company is made up of— “(a) the company; and 186 25 30 35 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 174 “(b) “(c) the company’s New Zealand group for the income year; and the company’s worldwide GAAP group, as described in subsection (2).
“Worldwide GAAP group 5 “(2) An excess debt outbound company’s worldwide GAAP group is made up of all non­residents who are required to be included with the company in consolidated ﬁnancial statement under generally accepted accounting practice.
“Deﬁned in this Act: excess debt outbound company, generally accepted ac­ 10 counting practice, income year, non­resident “FE 31C CFCs in worldwide group for natural persons or trustees described in section FE 2(1)(g) “When this section applies “(1) This section applies when a natural person or trustee described 15 in section FE 2(1)(g) has— “(a) a 50% or more ownership interest in an excess debt out­ bound company that is a member of a worldwide group (worldwide group A); and an income interest in a CFC that is not part of the world­ 20 wide group A.
“(b) “Transfer “(2) The CFC is part of the worldwide group A.

“Ownership interests “(3) For the purposes of this section, ownership interests are deter­ 25 mined under sections FE 38 to FE 41.

“Deﬁned in this Act: CFC, excess debt outbound company, income interest, New Zealand, non­resident”.

Subsection (1) applies for the 2009–10 and later income years.
30 (2) 174 Section FE 32 replaced (1) Section FE 32 is replaced by the following: 187 Part 1 cl 175 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “FE 32 Joint venture parties “What this section applies to “(1) This section applies to a company (the joint venture com­ pany) in a worldwide group under section FE 31 or FE 31B if— “(a) a person (the excluded joint venturer) holds an owner­ ship interest equal to 50% in the joint venture company; and “(b) 1 other person (the included joint venturer) in the 5 “(c) worldwide group holds an ownership interest equal to 10 50% in the joint venture company; and but for the application of this section, the worldwide group includes every person who holds both an owner­ ship interest equal to 50% in the joint venture company and–– “(i) who has an ownership interest in the included 15 “(ii) joint venturer; or in whom the included joint venture company has an ownership interest.
“Exclusion of excluded joint venturer 20 “(2) The joint venture company may choose to exclude the ex­ cluded joint venturer from its worldwide group for an income year, despite sections FE 31 and FE 31B.

“Ownership interests “(3) For the purposes of this section, ownership interests are deter­ 25 mined under sections FE 38 to FE 41.

(2) “Deﬁned in this Act: company, excess debt entity, income year”.

Subsection (1) applies for the 2009–10 and later income years.
175 Subpart FF repealed Subpart FF is repealed.

(1) Subsection (1) applies for the 2009–10 and later income (2) years.

176 Consolidation rules (1) Section FM 2(2)(g) is replaced by the following: 30 35 188 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 180 (2) section 74 of the Tax Administration Act 1994.” “(g) Subsection (1) applies for the 2009–10 and later income years.
177 Some general rules for treatment of consolidated groups (1) (2) Section FM 6(3)(b) is repealed.

Section FM 6(3)(c) is replaced by the following: “(c) sections FM 8(3)(c), FM 27 to FM 30, GB 38, GB 40, and OP 3 to OP 50 (which relate to dividends and con­ solidated groups):”.

(3) (4) (5) Section FM 6(3)(e) is replaced by the following: “(e) section 74 of the Tax Administration Act 1994.” In section FM 6(5), “YA 2(2)(e)” is replaced by “YA 2(7)”.
Section FM 6(5) is replaced by the following: “Balance of imputation credit account 5 10 “(5) Sections OA 3 (General rules for maintaining memorandum 15 accounts) and YA 2(7) (Meaning of income tax varied) apply for the purposes of section GB 38, subpart OP, and section 74 of the Tax Administration Act 1994 as if the references to the imputation rules were references to sections OP 3 to OP 50.” In section FM 6, in the list of deﬁned terms, “FDP account” 20 and “FDP rules” are omitted.
Subsections (1) to (3), (5) and (6) apply for the 2009–10 and later income years.

(7) (6) 178 Heading and sections FM 24 to FM 26 repealed (1) (2) Sections FM 24 to FM 26 are repealed.

Subsection (1) applies for the 2009–10 and later income years.

25 179 Imputation rules In section FN 2(i), “YA 2(2)(d)” is replaced by “YA 2(7)(b)”.

180 Treatment of interest payable under debentures issued 30 before certain date In section FZ 1(3), “Despite section FA 2(3)(c), section” is replaced by “Section”.
189 Part 1 cl 181 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (5) (6) 182 (1) 181 Attribution rule for income from personal services (1) (2) (3) (4) In section GB 27(2)(c), “$60,000” is replaced by “$70,000”.

In section GB 27(2)(c), “$70,000” is replaced by “$75,000”.

In section GB 27(2)(c), “$75,000” is replaced by “$80,000”.

Subsection (1) applies for the 2008–09 and later income 5 years.

Subsection (2) applies for the 2010–11 and later income years.
Subsection (3) applies for the 2011–12 and later income years.
10 Interpretation of terms used in section GB 27 Section GB 28(2), other than the heading, is replaced by the following: “(2) A person is treated as being associated with another person if the person would be treated as associated under the parts of 15 subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or the 1988 provisions, at the time the services are personally performed by the working person.” Section GB 28(2), other than the heading, is replaced by the 20 following: (2) “(2) A person is treated as being associated with another person if they are associated at the time the services are personally performed by the working person.” Subsection (2) applies for the 2009–10 and later income 25 years.
(3) 183 Beneﬁts provided to employee’s associates (1) In section GB 32, the heading is replaced by “Beneﬁts pro­ vided through employment relationships”.

Section GB 32(1)(a) is replaced by the following: “(a) the beneﬁt is provided to a person because of the exis­ tence of an employment relationship; and”.

In section GB 32(2), the heading is replaced by “Exemption for shareholder­employees and corporates”.
Section GB 32(2)(c) is replaced by the following: “(c) the person receiving the beneﬁt is a company; and”.
(2) (3) (4) 190 30 35 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 187 (5) Section GB 32(4), other than the heading, is replaced by the following: “(4) Section CX 18 (Beneﬁts provided when both employment and shareholding relationships exist) applies to determine when a beneﬁt provided to a person through both an employment re­ 5 lationship and a shareholding relationship is treated as a fringe beneﬁt and not a dividend.” Subsections (1) to (5) apply for the 2009–10 and later in­ come years.
(6) 184 Section GB 39 repealed (1) (2) Section GB 39 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

10 185 Arrangements involving money not at risk In section GB 45(3), in paragraph (f) of the deﬁnition of ac­ 15 ceptable property, “CE 1(d)” is replaced by “CE 1(1)(d)”.
186 Deﬁned terms for sections GB 45 and GB 46 (1) Section GB 48(1)(b) is replaced by the following: “(b) the persons are associated under the parts of subpart YB (Associated persons and nominees) that apply for the 20 purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or of the 1988 version pro­ visions.” (2) (3) (4) Section GB 48(1)(b) is replaced by the following: “(b) the persons are associated persons.” In section GB 48(3)(d) and (e), “under subpart YB” is omitted in all places in which it appears.
Subsections (2) and (3) apply for the 2009–10 and later in­ come years.
187 New section GC 4B inserted After section GC 4, the following is inserted: 25 30 191 Part 1 cl 188 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “GC 4B Disposals of emissions units at below market value “When this section applies “(1) This section applies when— “(a) “(b) “(c) a person (the transferor) disposes of an emissions unit to another person (the transferee); and the disposal is not a surrender or conversion under the Climate Change Response Act 2002; and the disposal is for no consideration or an amount of con­ sideration less than the market value of the emissions unit at the time of disposal.
5 10 “Disposal treated as being for market value “(2) For the purposes of this Act, the consideration received by the transferor and provided by the transferee is treated as being equal to the market value of the emissions unit at the time.

“Deﬁned in this Act: amount, convert, emissions unit, surrender”.

15 188 Leases for inadequate rent (1) In section GC 5(5), in the deﬁnition of related company, the words before paragraph (a) are replaced by the following: “related company means a company that with—”.
Subsection (1) applies for the 2009–10 and later income years.

is associated 20 Insufﬁcient amount receivable by person Section GC 8(1)(b) is repealed.

Subsection (1) applies for the 2009–10 and later income 25 years.

190 Compensating arrangement: person receiving more than (1) (2) arm’s length amount Section GC 10(2)(b) is repealed.

Subsection (1) applies for the 2009–10 and later income 30 years.
191 Requests for matching treatment (1) Section GC 11(2)(b) is replaced by the following: 192 (2) 189 (1) (2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 193 “(b) including, when the other party is a CFC, the calculation of net attributable CFC income or net attributable CFC loss in relation to the other party, and the resultant cal­ culation of the attributed CFC income or an attributed CFC loss or attributed CFC net loss of a person.” In section GC 11, in the list of deﬁned terms,— (a) “branch equivalent income” and “branch equivalent loss” are omitted: “net attributable CFC income” and “net attributable CFC loss” are inserted.
(b) (2) (3) Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

192 Section GC 12 replaced (1) “GC 12 Effect on person’s withholding obligations Section GC 12 is replaced by the following: An adjustment under any of sections GC 7 to GC 10 has no effect on an obligation of the taxpayer to withhold under Part R (General collection rules) in relation to the amount other than to the extent to which section GC 11(2) applies.

(2) “Deﬁned in this Act: amount”.


Subsection (1) applies for the 2009–10 and later income years.
193 New section GZ 2 inserted (1) After section GZ 1, the following is added: “GZ 2 Arrangements involving cancellation of conduit tax relief credits “What this section applies to “(1) This section applies to a company with a CTRA that enters an arrangement involving a person who is a New Zealand resident if— “(a) the arrangement involves transactions giving rise to CTR credits in the CTRA and undertaken between 1 December 2007 and the beginning of the 2009–10 income year; and a purpose of the arrangement is to produce a beneﬁt 35 under a taxation law for the person.
“(b) 193 Part 1 cl 194 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(2) The company has an income tax liability equivalent to the amount of CTR credits referred to in subsection (1)(a).

(2) “Deﬁned in this Act: amount, arrangement, CTR credit, CTRA, taxation law”.

Subsection (1) applies for the 2009–10 and later income years.
5 194 Shareholding requirements After section HA 7(3), the following is added: “Shareholder continuity requirements “(4) For the application of shareholder continuity requirements to the memorandum accounts of qualifying companies, see sec­ 10 tion OA 8(3B) (Shareholder continuity requirements).” 195 New section HA 8B inserted (1) After section HA 8, the following is inserted: “HA 8B No CFC income interests or FIF direct income interests of 10% or more A qualifying company must not have— income interests in a CFC: “(a) attributing interests in a FIF that are a direct income “(b) interest of 10% or more.
15 “Deﬁned in this Act: attributing interest, CFC, direct income interest, FIF, in­ 20 come interest, qualifying company”.

Subsection (1) applies for the 2009–10 and later income years.
(2) 196 Fully imputed distributions (1) In section HA 15(1), the ﬁrst sentence is replaced by “This 25 section applies when a qualifying company with an imput­ ation credit account or foreign dividend payment (FDP) ac­ count pays a dividend to a person resident in New Zealand.” Section HA 15(9) is replaced by the following: “Relationship with sections HA 14 and HA 16 If part of the dividend is exempt income under sections HA 14 and HA 16, an imputation credit or FDP credit is treated as attached to the part that is not exempt income.” 30 (2) “(9) 194 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 200 197 Section HA 16 replaced Section HA 16 is replaced by the following: “HA 16 Dividends paid by qualifying companies to trustee shareholders If a dividend that is exempt income under section HA 14(2) is 5 paid to a trustee shareholder, and it is or becomes beneﬁciary income of a beneﬁciary resident in New Zealand, the amount is exempt income of the beneﬁciary under section CW 15(2) (Dividends paid by qualifying companies) as if the beneﬁciary were the shareholder referred to in section HA 15.
10 “Deﬁned in this Act: amount, dividend, exempt income, pay, resident in New Zealand, shareholder, trustee”.
198 Credit accounts and dividend statements Section HA 19(1), other than the heading, is replaced by the following: 15 “(1) This section applies when a qualifying company pays a divi­ dend that is treated either as a fully imputed distribution under section HA 15 or as exempt income under sections HA 14 and HA 16.” 199 Calculating qualifying company election tax (1) 20 In section HA 41(4)(c), “relevant date:” is replaced by “rele­ vant date.” and paragraph (d) is repealed.
Section HA 41(8)(c) is replaced by the following: “(c) if the company pays income tax with a purpose or inten­ tion of reducing the amount of election tax, the amount 25 of credit in the imputation credit account is reduced by the amount of the credit arising from the company’s ac­ tion, unless that purpose is merely incidental.” In section HA 41, in the list of deﬁned terms, “FDP” is omitted.

Subsections (1) to (3) apply for the 2009–10 and later in­ 30 come years.
(2) (3) (4) 200 Corpus of trust (1) (2) Section HC 4(5)(b) is repealed.

Section HC 4(5)(c) is replaced by the following: 195 Part 1 cl 201 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) it would fall under paragraph (a) if the settlor were resi­ dent in New Zealand at the time of the settlement.” (3) (4) In section HC 4, in the list of deﬁned terms, “FDP” is omitted.

Subsections (1) to (3) apply for the 2009–10 and later in­ come years.
5 201 Taxable distributions from non­complying and foreign trusts Section HC 15(5)(a)(ii) is replaced by the following: (1) “(ii) a capital gain derived by the trustee through a transaction or series of transactions between the 10 trustee and a person associated with them under the parts of subpart YB (Associated persons and nominees) that apply for the purposes of the whole Act (excluding the 1973, 1988, and 1990 version provisions) or under the 1988 version 15 provisions:”.
(2) Section HC 15(5)(a)(ii) is replaced by the following: “(ii) a capital gain derived by the trustee through a transaction or series of transactions between the trustee and a person associated with them:”.

20 (3) Subsection (2) applies for the 2009–10 and later income years.

202 Who is a settlor?

(1) Section HC 27(1)(e) is replaced by the following: “(e) subpart YB (Associated persons and nominees) as 25 modiﬁed by section YB 10 (Who is a settlor?
).” Subsection (1) applies, for the purposes of— (a) provisions other than the land provisions, 2009–10 and later income years: the land provisions other than section CB 11, for land 30 acquired on or after 1 April 2009: section CB 11, for land on which improvements are be­ gun on or after 1 April 2009. for the (b) (c) (2) 196 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 206 203 Trusts and minor beneﬁciary rule (1) In section HC 36(5), the deﬁnition of associated person or person associated is replaced by the following: “associated person or person associated does not include a person associated only under sections YB 4 and YB 5 (which 5 relate to relatives who are treated as associated persons)”.
Subsection (1) applies for the 2009–10 and later income years.

(2) 204 Limitation on deductions by partners in limited partnerships In section HG 11(8)(b), “under section HG 2” is omitted.

10 205 Eligibility requirements for entities (1) Section HL 3(9), other than the heading, is replaced by the following: “(9) The business requirement is that the entity must not carry on 15 a business of life insurance.
This requirement does not apply to a life fund PIE.” In section HL 3(11), “HL 14(1)” is replaced by “HL 15(1)”.

Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.

(2) (3) 20 206 Effect of failure to meet eligibility requirements for (1) (2) entities Section HL 4(1)(a) is replaced by the following: “(a) Section HL 4(2)(a) is replaced by the following: “(a) referred to in sections HL 2(2) and HL 3; and”.
25 the portfolio investor class of the entity fails to meet a requirement under section HL 6 or HL 9 on the last day of a quarter— “(i) beginning 6 months or more after the date on which the portfolio investor class is formed; and 30 ending more than 3 months before an announce­ ment by the entity to its investors that the portfolio investor class is winding up within 12 months of the announcement; and “(ii) 197 Part 1 cl 207 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(ab) the entity fails to meet a requirement under section HL 10 on the last day of a quarter— “(i) “(ii) beginning 6 months or more after the date on which the entity becomes a portfolio investment entity; and ending more than 3 months before an announce­ ment by the entity to its investors that the entity is winding up within 12 months of the announce­ ment; and”.
5 (3) 207 (1) In section HL 4(2)(b)(ii), “paragraph (a)(ii)” is replaced by 10 “paragraphs (a)(ii) and (ab)(ii)”.

Investor membership requirement Section HL 6(1)(a) is replaced by the following: “(a) 20 persons, treating all interests held by associated per­ sons and included by subsection (4) as being held by 1 15 person:”.

(2) After section HL 6(1)(i), the following is inserted: (3) (4) “(ib) Auckland Regional Holdings:”.
In section HL 6(1)(j)(iii), “entity:” is replaced by “entity.” and section HL 6(1)(k) is repealed.

Section HL 6(4)(a) and (b) are replaced by the following: “(a) “(b) the investor is not listed in subsection (1)(b) to (ib); and the associated person is not listed in subsection (1)(b) to (ib); and”.

20 (5) In section HL 6, in the list of deﬁned terms, “1988 version 25 provisions” is omitted.
Investor interest size requirement 208 (1) After section HL 9(4)(h), the following is inserted: “(hb) Auckland Regional Holdings:”.

Section HL 9(4)(j) is repealed.

Section HL 9(6)(a) and (b) are replaced by the following: “(a) “(b) the investor is not listed in subsection (4)(a) to (hb); and the associated person is not listed in subsection (4)(a) to (hb); and”.
30 (2) (3) 198 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 213 209 Further eligibility requirements relating to investments Section HL 10(2)(b)(iii) is replaced by the following: “(iii) an amount of income from a lease of land, but this subparagraph does not apply if the lessee under the lease is associated with the entity deriving the 5 amount:”.
210 Unlisted company choosing to become portfolio listed company In section HL 12(1)(a), “100 shareholders” is replaced by “at least 100 shareholders”.
10 211 Becoming portfolio investment entity Section HL 13(1)(b) is replaced by the following: “(b) the entity, if treated as becoming a portfolio invest­ ment entity when the election would be effective, would cease under section HL 4 to be eligible through a failure 15 to meet 1 or more of the requirements in section HL 6, HL 9, or HL 10 in each quarter of the 12­month period.” 212 Portfolio class taxable income and portfolio class taxable loss for portfolio allocation period In section HL 20(3), the formula is replaced by the following: 20 class net income – class net loss – other loss used.
213 Credits received by portfolio tax rate entity or portfolio (1) (2) investor proxy In section HL 29(6)(a)(ii), “HL 21” is replaced by “HL 22”.

In section HL 29(7), the words before paragraph (a) are re­ placed by the following: “(7) The investor is treated as receiving for the allocated credits, for the tax year corresponding to the investor’s income year or, in the case of an investor having a portfolio investor exit period, for the quarter to which the portfolio investor exit period re­ lates,—”.
25 30 199 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 214 Subpart HL replaced by subpart HM Subpart HL is replaced by the following: (1) “Subpart HM—Portfolio investment entities “Introductory provisions “HM 1 Outline of subpart and relationship with other Parts 5 “Subpart HM “(1) This subpart sets out— “(a) the entry and exit rules for portfolio investment entities, see sections HM 7 to HM 30: “(b) who an investor is, and what an investor class is, see 10 sections HM 4 and HM 5: “(c) what a multi­rate PIE must do in relation to its investors “(d) “(e) and its investments, see sections HM 31 to HM 62: the treatment of losses by PIEs, see sections HM 63 to HM 69: how an entity makes an election to become a PIE, and the consequences of making the election, see sections HM 70 to HM 75.
15 “Relationship with Parts C and D “(2) The following sections apply to portfolio investment entities: 20 section CB 26 (Disposal of certain shares by portfolio investment entities): section CP 1 (Attributed income of investors in multi­ rate PIEs): section CX 55 (Proceeds from disposal of investment 25 shares): section CX 56 (Attributed income of certain investors in multi­rate PIEs): section CX 56B (Distributions to investors in multi­rate PIEs): section CX 56C (Distributions to investors by listed PIEs): section CX 57 (Credits for investment fees): section DB 53 (Attributed PIE losses of certain in­ vestors): section DB 54 (Treatment of credits for investment fees).
35 30 “(a) “(b) “(c) “(d) “(e) “(f) “(g) “(h) “(i) 200 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “Relationship with subpart LS “(3) Subpart LS (Tax credits for multi­rate PIEs and investors) con­ tains the rules relating to the amount and use of a tax credit arising under this subpart.
“Deﬁned in this Act: amount, investor, investor class, multi­rate PIE, PIE, port­ 5 folio investment entity, tax credit “Compare: 2007 No 97 ss HL 1, HL 2 “HM 2 What is a portfolio investment entity?
“Meaning “(1) A portfolio investment entity (a PIE) is a company or fund 10 that— “(a) makes investments on behalf of 1 or more investors in the entity or in an investor class of the entity; and “(b) meets and maintains the requirements for PIE status; “(c) and chooses to become a PIE by notifying the Commis­ sioner.

15 “PIE types “(2) An entity that chooses to become a PIE must be 1 of the fol­ lowing types of entity: a multi­rate PIE: “(a) a listed PIE: “(b) a beneﬁt fund PIE: “(c) a life fund PIE.
“(d) 20 “Deﬁned in this Act: beneﬁt fund PIE, Commissioner, company, investor, in­ 25 vestor class, life fund PIE, listed PIE, multi­rate PIE, notify, PIE, portfolio in­ vestment entity “Compare: 2007 No 97 s YA 1 ‘ portfolio investment entity’ “HM 3 Foreign PIE equivalents A foreign PIE equivalent means an entity that— is not resident in New Zealand; and “(a) is— “(b) “(i) “(ii) a company: a superannuation scheme: 30 201 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(iii) the trustee of a trust that would be a unit trust if it had more than 1 subscriber, purchaser, or con­ tributor participating as beneﬁciaries under the trust; and “(c) meets the requirements relating to investment types, in­ 5 come sources, and maximum shareholding in invest­ ments in sections HM 11 to HM 13 applying the ex­ ception set out in section HM 23(2); and “(d) has investors that would qualify as an investor class under section HM 14 taking into account the limita­ 10 tions under sections HM 21(2) and HM 22; and “(e) meets the requirements relating to investors’ interests in section HM 15 applying the exceptions set out in section HM 21(3) to (5) and section HM 22.
“Deﬁned in this Act: company, investor, investor class, investor interest, resi­ 15 dent in New Zealand, superannuation scheme, trustee, unit trust “Compare: 2007 No 97 s HL 5(1) “HM 4 Who is an investor?
“Meaning of investor “(1) An investor in a PIE or foreign PIE equivalent means— 20 “(a) “(b) “(c) for an entity that is a company, a shareholder in a com­ pany: for a life fund PIE, a person whose beneﬁts under the relevant life insurance policy are directly linked to the value of investments held in the PIE: for an entity that is not a company or a life fund PIE, a person who is entitled to a proportion of the funds available for distribution by the entity— “(i) under the rules of the entity or terms of the trust under which the entity is established; and as if the entity were a company and the person were a shareholder in the company.
25 30 “(ii) 202 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “Proxies “(2) Despite subsection (1), if a share, entitlement, or life insur­ ance policy is held through a proxy referred to in section HM 33, the investor is the proxy.

“Deﬁned in this Act: company, foreign PIE equivalent, investor, life fund PIE, 5 life insurance policy, PIE, share, shareholder “Compare: 2007 No 97 s HL 5B(1) “HM 5 What is an investor class?
“Meaning of investor class “(1) An investor class of an entity means a group of 1 or more 10 investors in the entity that meet the requirements of subsec­ tions (2) to (4).

“Entitlement to distributions “(2) Each investor in the group must have an entitlement to a distri­ bution by the entity of proceeds from the entity’s investments 15 that means the requirements of subsections (3) and (4) are met.

“Same investments “(3) The investments must be the same for all investors in the group.
“Similar proportionate entitlement “(4) Each investor’s interest in the investment as a proportion of the value of their entitlement must not differ from the average value for the group and the investment by 2.5% or more un­ less— “(a) the investment is an arrangement under which the PIE is assured of receiving sufﬁcient proceeds from the in­ vestments to repay each investor in the group an amount contributed to it: the excess in any difference between the proportion for 30 the investor and the average value for the group arises from differences between the notiﬁed tax rates of those investors in the group.
“(b) “Deﬁned in this Act: arrangement, investor, investor class, investor interest, notiﬁed tax rate, pay “Compare: 2007 No 97 s HL 5B(2), (3) 35 203 20 25 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “HM 6 Intended effects for multi­rate PIEs and investors “Intended effects for entity “(1) The intended effects for an entity that is using funds supplied by investors to make investments of certain types and who meets the requirements for multi­rate PIE status are that— “(a) 5 in relation to proceeds of the investments that are at­ tributed to investors who are natural persons or certain trustees or other persons, the PIE has a tax liability— “(i) “(ii) calculated using a tax rate for each investor; and resembling the total tax liability the group of in­ 10 vestors would have if the investors were to make the investments separately: “(b) “(c) the PIE has no tax liability on proceeds of the invest­ ments that are attributed to other investors: the PIE allocates to each investor amounts resembling 15 the amounts that the investor would receive, after allow­ ing for the tax paid by the PIE if making the investment separately.
“Intended effects for investors “(2) The intended effects for an investor in the multi­rate PIE are 20 that— “(a) “(b) “(c) the investor has no tax liability on income arising from proceeds for which the PIE has a tax liability, unless the investor has given the PIE a rate that is lower than the correct rate: the investor is liable for tax on any assessable income arising from proceeds for which the PIE has a tax liabil­ ity: the investor receives on the investment in the PIE an economic return that the investor would receive after 30 payment of tax liabilities if personally making invest­ ments similar to those made by the PIE in which they have an investor interest.
25 “Deﬁned in this Act: amount, assessable income, investor, investor interest, multi­rate PIE, pay, PIE, tax, trustee “Compare: 2007 No 97 s HL 1(2)(a) 35 204 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “HM 7 Requirements “Entry rules For an entity to be a PIE, it must— “(a) meet the requirements of the entry rules in sections HM 8 to HM 10, HM 17, and HM 18, as applicable; 5 and “(b) be 1 of the types of entity referred to in section HM 2(2); and “(c) choose under section HM 70 to become a PIE; and “(d) maintain the requirements of the rules in sections HM 10 “(e) 8 to HM 20, as applicable; and not lose PIE status under the exit rules in sections HM 24 to HM 30.
“Deﬁned in this Act: PIE “Compare: 2007 No 97 ss HL 2(2), HL 15(1), (2) 15 “Requirements “HM 8 Residence in New Zealand The entity must be— “(a) “(b) not treated under a double tax agreement as not resident 20 resident in New Zealand; and in New Zealand.
“Deﬁned in this Act: double tax agreement, resident in New Zealand “Compare: 2007 No 97 s HL 3(10) “HM 9 Collective schemes The entity must be— “(a) “(b) “(c) a company: a superannuation scheme: the trustee of a trust that would be a unit trust if there were more than 1 subscriber, purchaser, or contributor participating as beneﬁciaries under the trust: a separate identiﬁable fund forming part of a life insurer that holds investments subject to life insurance policies “(d) 25 30 205 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill under which beneﬁts are directly linked to the value of the investments held in the fund.
“Deﬁned in this Act: company, life insurance policy, life insurer, superannu­ ation scheme, trustee, unit trust “Compare: “HM 10 Exclusion: life insurance business The entity must not carry on a business of life insurance unless it is a life fund PIE.
“Deﬁned in this Act: life fund PIE, life insurance “Compare: 2007 No 97 s HL 3(9) “HM 11 Investment types The entity’s investments, to the extent of 90% or more by value of its assets, must be— “(a) “(b) “(c) “(d) an interest in land: a ﬁnancial arrangement: an excepted ﬁnancial arrangement: a right or option in relation to property listed in para­ graphs (a) to (c).
“Deﬁned in this Act: excepted ﬁnancial arrangement, ﬁnancial arrangement, land “Compare: 2007 No 97 s HL 10(1) “HM 12 Income sources Income derived by the entity, to the extent of 90% or more, must— “(a) be derived from property referred to in section HM 11; and consist of the following: a dividend: “(i) “(ii) a replacement payment: “(iii) an amount of income treated under subpart EW (Financial arrangements rules) as derived by the 30 entity: “(iv) an amount of income derived from a lease of land, but this subparagraph does not apply if the “(b) 206 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 lessee under the lease is associated with the en­ tity receiving the amount: an amount derived from the disposal of property referred to in section HM 11: “(v) “(vi) FIF income: “(vii) attributed PIE income: “(viii) a distribution from a superannuation fund.
“Deﬁned in this Act: amount, associated person, attributed PIE income, divi­ dend, FIF income, income, land, lessee, replacement payment, superannuation fund “Compare: 2007 No 97 s HL 10(2) “HM 13 Maximum shareholdings in investments “When this section applies “(1) This section applies when an entity has an investment consist­ ing of shares in a company other than shares in— “(a) “(b) “(c) a PIE, or an entity that qualiﬁes for PIE status: a foreign PIE equivalent: a land investment company.
“Voting interests: companies other that unit trusts 5 10 15 “(2) The investment must carry voting interests in the company of 20 no more than 20%.

This subsection does not apply to a unit trust.

Subsection (5) overrides this subsection.

“Investments in unit trusts “(3) For an investment in a unit trust, the investment must have a market value no more than 20% of the market value of all 25 interests in the unit trust.

Subsection (5) overrides this sub­ section.


“Class requirements “(4) For each investment and each investor class of the entity, the percentage thresholds set out in subsections (2) and (3) ap­ 30 ply to the investment by the class in the same way as they apply to the investment by the entity.

Subsection (5) overrides this subsection.


“Exception for limited non­complying investments “(5) Despite subsections (2) to (4), the 20% cap in those subsec­ 35 tions can be exceeded if the total market value of all invest­ 207 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill ments where the cap is exceeded is not more than 10% of the market value of the total investments of the entity or investor class.
“Deﬁned in this Act: company, foreign PIE equivalent, investor class, land investment company, market value, PIE, share, voting interest, unit trust “Compare: 2007 No 97 s HL 10(3)–(5) 5 “HM 14 Minimum number of investors “(1) “(2) “Requirement for entities other than listed companies If the entity is not a company listed on a recognised exchange in New Zealand, each investor class must include 20 or more 10 persons.
“Requirements for listed companies If the entity is a company listed on a recognised exchange in New Zealand, it must have only 1 investor class of which each investor is a member.

Each investor interest must be a share 15 traded on the exchange.

This subsection applies equally to an unlisted PIE that meets the requirements of section HM 18.

“Exceptions “(3) Subsection (4) and sections HM 21(2) and HM 22 over­ ride subsection (1).
“Exception for boutique classes “(4) Subsection (1) does not apply to an investor class (the bou­ tique investor class) of an entity if— “(a) “(b) “(c) “(d) the investor class does not have 20 or more members; and the entity has 1 or more other investor classes that meet the requirement of subsection (1); and no investor in the boutique investor class, other than the manager or trustee of the entity, can control investment decisions relating to the class; and the interests of investors in all boutique investor classes of the entity add up to less than 10% of the total value of interests in the entity.
20 25 30 “Deﬁned in this Act: company, investor, investor class, investor interest, listed company, listed PIE, New Zealand, recognised exchange, share, trustee “Compare: 2007 No 97 s HL 6(1A), (1), (2), (4) 35 208 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “HM 15 Maximum investors’ interests “Requirement for investors’ interests “(1) An investor in an investor class must not hold more than 20% of the total interests of investors in the class.
“Exceptions 5 “(2) Sections HM 21(3) to (5) and HM 22 override this section.

“Deﬁned in this Act: investor, investor class “Compare: 2007 No 97 s HL 9(1), (6) “HM 16 Associates combined For the purposes of sections HM 14 and HM 15, if a person 10 is associated with an investor, the person and the investor are treated as 1 person, but only if both the person and the investor hold an investor interest of 5% or more.

Section HM 21(6) overrides this section.


“Deﬁned in this Act: associated person, investor, investor interest “Compare: 2007 No 97 s HL 9(6) “HM 17 Same rights to all investment proceeds “What this section does “(1) This section is an additional entry rule for a PIE that is not a life fund PIE.
“Same rights in relation to proceeds of investments “(2) All investor interests in the entity that give rights in relation to proceeds from a portfolio investment must give the same rights in relation to all types of proceeds from the investment.

“Category B income excluded “(3) This section does not apply if the proceeds are category B in­ come.
15 20 25 “Deﬁned in this Act: category B income, investor interest, life fund PIE, PIE, portfolio investment “Compare: 2007 No 97 s HL 5C 30 209 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “HM 18 Requirements for listed PIEs: unlisted companies “Choosing to become listed PIE 5 has 100 shareholders or more; and “(1) A company that is not listed on a recognised exchange in New Zealand may choose under section HM 70 to become a listed PIE if it— “(a) “(b) has resolved to become a company listed on a recog­ nised exchange in New Zealand if it were to obtain the required consents; and has applied to the Securities Commission for an exemp­ 10 tion to disclose in a prospectus its intention to become a listed company; and satisﬁes the Commissioner that the company would ap­ ply to become a listed company if it were to obtain the required consents.
“(d) “(c) 15 “(2) “Two­year period If the company is not listed within 2 years of the election, it loses PIE status from the last day of that period.

“Deﬁned in this Act: Commissioner, company, listed company, listed PIE, New Zealand, PIE, recognised exchange, shareholder “Compare: 2007 No 97 s HL 12 20 “HM 19 Requirements for listed PIEs: fully crediting distributions “What this section does “(1) This section is an additional rule for an entity that is a listed 25 PIE other than a life fund PIE.
“Fully crediting distributions “(2) When a listed PIE distributes an amount to an investor in an investor class, the distribution must be fully credited as described in section CD 43(26) (Available subscribed cap­ 30 ital (ASC) amount) to the extent permitted by the imputation credits or FDP credits that the directors of the company deter­ mine are available.
“Relationship with section CX 56C “(3) For the treatment of imputation credits when a shareholder 35 chooses to include the distribution as income in their return 210 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 of income, see section CX 56C(2) (Distributions to investors by listed PIEs).
“Deﬁned in this Act: amount, company, director, FDP credit, imputation credit, income, investor, investor class, life fund PIE, listed PIE, return of income, shareholder “Compare: 2007 No 97 s HL 8 5 “HM 20 Re­entering as PIE: 5­year rule If an entity loses PIE status through the application of sec­ tions HM 24 to HM 29, it cannot choose to become a PIE again until 5 years have passed from the date of loss of status 10 to the date on which a new election takes effect.
“Deﬁned in this Act: PIE “Compare: 2007 No 97 s HL 3(11) “Exceptions “HM 21 Exceptions for certain investors “When this section applies “(1) This section applies when an investor is— “(a) “(b) “(c) “(d) “(e) a PIE, or an entity that qualiﬁes for PIE status: a foreign PIE equivalent: a life insurer: the New Zealand Superannuation Fund: the Accident Compensation Corporation, or a Crown entity subsidiary of the Corporation: “(f) the Earthquake Commission: “(g) Auckland Regional Holdings.
“Investor classes “(2) Section HM 14(1) does not apply to an investor class of an entity if the class includes at least 1 investor listed in subsec­ tion (1).

“Certain investors in non­listed PIEs “(3) Section HM 15 does not apply in relation to an entity other than a listed PIE in the case of an investor listed in subsection (1).
15 20 25 30 211 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Certain investors in listed PIEs “(4) Section HM 15 does not apply in relation to a listed PIE in the case of an investor listed in subsection (1) that holds more than 20% but less than 40% of the total interests in the investor class.
5 “Transitional provision for investors in listed PIEs “(5) Section HM 15 does not apply in the case of an investor in a listed PIE, other than an investor listed in subsection (1), that holds more than 20% but less than 40% of the total interests in the investor class and held more than 20% and less than 10 40% of the total interests at all times from 17 May 2006 to the relevant time.
“Not combined associates “(6) Sections HM 16 does not apply if either the associated person or the investor is an investor listed in subsection (1).
15 “Deﬁned in this Act: associated person, foreign PIE equivalent, investor, in­ vestor class, life insurer, listed PIE, PIE “Compare: 2007 No 97 ss HL 6(4), HL 9 “HM 22 Exceptions for certain funds “Public unit trust “(1) Sections HM 14(1) and HM 15 do not apply to an investor class of a PIE if, treating the class as a unit trust, it would meet the requirements of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust.
“Certain superannuation funds “(2) Sections HM 14(1) and HM 15 do not apply in the case of 20 25 an investor class of an entity that is— “(a) a superannuation fund established under the proposal for the restructuring of the National Provident Fund re­ quired by the National Provident Fund Restructuring 30 Act 1990: a fund established by the Government Superannuation Fund Act 1956: a superannuation fund that— “(i) was in existence before 17 May 2006; and 35 “(b) “(c) 212 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(ii) would, if treated as a unit trust, meet the require­ ments of 1 or more of paragraphs (a) and (c) to (e) of the deﬁnition of public unit trust; and “(iii) has no investor, other than its manager or trustee, who can control the its investment decisions.
5 “Deﬁned in this Act: investor class, PIE, public unit trust, superannuation fund, trustee, unit trust “Compare: 2007 No 97 ss HL 6(3), HL 9(2) “HM 23 Exceptions for foreign PIE equivalents “(1) “(2) “Investor classes and investors’ interests If an investor in a PIE is a foreign PIE equivalent,— “(a) the requirement for investor classes under section HM 14(1) is treated as met: “(b) no limitation on investors’ interests under section HM 15 applies in the case of that investor.
10 15 “Shareholding in investments If a PIE holds an investment in a foreign PIE equivalent, no maximum limit on shareholding in investments under section HM 13 applies to that investment.

“Deﬁned in this Act: foreign PIE equivalent, investor, investor class, investor 20 interest, PIE “Compare: 2004 No 35 ss HL 9(4), HL 10(4) “Exit rules “HM 24 Ending of New Zealand residence An entity loses PIE status immediately if it is no longer resi­ 25 dent in New Zealand.
“Deﬁned in this Act: PIE, resident in New Zealand “Compare: 2007 No 97 s HL 4(1) “HM 25 When entity no longer meets investment or investor requirements “Effect “(1) An entity loses PIE status if,— “(a) on the last day of a quarter (the ﬁrst quarter),— 30 213 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) the entity no longer meets a requirement of sec­ tions HM 11 to HM 13; or an investor class of the entity no longer meets a requirement of sections HM 13 to HM 15; and “(b) the failure to meet the requirements— “(i) is signiﬁcant and is within the control of the en­ tity: is not remedied by the last day of the next quarter (the second quarter).
“(ii) “Date of loss of status “(2) The date of loss of PIE status is— “(a) when subsection (1)(b)(i) applies, the last day of the ﬁrst quarter: “(b) when subsection (1)(b)(i) does not apply, the last day of the second quarter.
“Transitional quarters disregarded “(3) Subsection (1) does not apply if the start of the ﬁrst quarter would be within— “(a) 6 months plus 1 day of the date on which the entity becomes a PIE, or the investor class is formed; or “(b) 3 months before an announcement by the entity to its investors that it or the relevant investor class is winding up within 12 months of the announcement.
“Deﬁned in this Act: investor class, PIE, quarter “Compare: 2007 No 97 s HL 4(2) “HM 26 Starting life insurance business An entity that is not a life fund PIE loses PIE status immedi­ ately if it starts to carry on the business of life insurance.
“Deﬁned in this Act: business, life fund PIE, life insurance, PIE “Compare: 2004 No 35 s HL 4(1) 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “HM 27 When multi­rate PIE no longer meets investor interest adjustment requirements A multi­rate PIE loses PIE status immediately if it fails to meet a requirement of section HM 48.
“Deﬁned in this Act: investor interest, multi­rate PIE, PIE “Compare: 2004 No 35 s HL 4(1) “HM 28 When listed PIE no longer meets crediting requirement A listed PIE loses PIE status immediately if it fails to meet the requirements of section HM 19.

“Deﬁned in this Act: listed PIE, PIE “Compare: 2004 No 35 s HL 4(1) “HM 29 Choosing to cancel status 5 10 An entity loses PIE status if it chooses to cancel PIE status by notifying the Commissioner under section 31B of the Tax Administration Act 1994.
Section HM 71(3) applies to de­ 15 termine the date the election takes effect.

“Deﬁned in this Act: Commissioner, notify, PIE “Compare: 2004 No 35 s “HM 30 When foreign PIE equivalent no longer meets requirements “Commencing New Zealand residence 20 “(1) A foreign PIE equivalent loses its status immediately if it be­ comes resident in New Zealand.
“Continued failure “(2) A foreign PIE equivalent loses its status if it no longer meets 25 the requirements set out in section HM 3(b) to (e) at the end of 2 consecutive quarters.

The loss of status takes effect from the ﬁrst day of the third quarter.
“Deﬁned in this Act: foreign PIE equivalent, quarter, resident in New Zealand “Compare: 2007 No 97 s HL 5(2) 30 215 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Rules for multi­rate PIEs “Introductory provisions “HM 31 Rules for multi­rate PIEs “Rules “(1) A multi­rate PIE must— “(a) “(b) “(c) attribute income arising from the proceeds of an invest­ ment to an investor, and pay tax on the income based on the investor’s tax rate, see sections HM 34 to HM 40: calculate and pay its tax liability, choosing certain periods to do this, see sections HM 41 to HM 47: adjust investors’ interests in the entity or distributions from the entity to reﬂect an amount of tax paid, see section HM 48: “(d) use tax credits received to satisfy the entity’s tax li­ 5 10 ability, in some cases providing any surplus credits to 15 certain investors by making an adjustment described in paragraph (c), see sections HM 49 to HM 55.
“Further provisions related to payment options, tax rates, and exit periods “(2) For the provisions relating to the options available to a multi­ 20 rate PIE for calculating and paying its tax liability, prescribed and notiﬁed tax rates for investors, and exit levels and periods, see sections HM 56 to HM 60.
“Deﬁned in this Act: exit level, exit period, investor, investor interest, multi­ rate PIE, notiﬁed tax rate, pay, prescribed tax rate, tax, tax credit “Compare: 2007 No 97 s 25 “HM 32 Rules for and treatment of investors in multi­rate PIEs “Tax rates “(1) An investor in a multi­rate PIE must notify the PIE of a tax rate applying to their investment income or have a default rate 30 apply, see sections HM 56 to HM 60.
“Attributed income “(2) An amount of income attributed by a multi­rate PIE to an in­ vestor in the PIE is— 216 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(a) “(b) income of the investor under section CP 1 (Attributed income of investors in multi­rate PIEs): for certain investors, excluded income of the investor under section CX 56 (Attributed income of certain in­ vestors in multi­rate PIEs).
5 “Deﬁned in this Act: amount, excluded income, income, investor, multi­rate PIE, notify “Compare: 2007 No 97 s “HM 33 Proxies for PIE investors “Proxies “(1) An entity may become a proxy for an investor in a multi­rate PIE for an attribution period if the entity— “(a) “(b) notiﬁes the PIE that it holds the interest as proxy.
holds an investor interest for the investor; and “Role 10 15 “(2) The proxy must perform the duties set out in subsection (3) in relation to amounts attributed to them for the period as holder of the interest as if— “(a) “(b) the proxy were a multi­rate PIE; and the investor interest were an interest of the investor in 20 the income of the proxy; and the amounts attributed and distributions received by the proxy were amounts of the proxy to which the investor is entitled as holder of the interest.
“(c) “Duties “(3) The proxy’s duties are to— 25 attribute amounts to the investor for the period; and “(a) “(b) distribute amounts and credits to the investor for the “(c) “(d) “(e) period; and pay income tax on the investment income for the period; 30 and adjust the investor interest of the investor or distribu­ tions to the investor under section HM 48; and provide returns as required under section 57B of the Tax Administration Act 1994 to the Commissioner and 35 any other information required by the Commissioner; and 217 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(f) provide the investor with a notice under section 31C of that Act; and “(g) provide the PIE with information about the investor and investor interest that may be relevant to any eligibility requirements of the PIE.
5 “Deﬁned in this Act: amount, attribution period, Commissioner, income, in­ come tax, investor, investor interest, multi­rate PIE, notify, PIE “Compare: 2007 No 97 s HL 33 “Attributing income to investors “HM 34 Attribution periods 10 A multi­rate PIE must use 1 of the following periods for at­ tributing an amount for a tax year to an investor and an in­ vestor class: “(a) for an entity that uses the quarterly calculation option under section HM 43, but chooses the attribution 15 period by notifying the Commissioner before the start of the tax year or on choosing to become a PIE, a day, a month, or a quarter: for an entity that chooses under section HM 44 to pay provisional tax and chooses the attribution period by 20 notifying the Commissioner before the start of the tax year or on choosing to become a PIE, a day, a month, a quarter, or an income year: for an entity that does not make a choice under para­ graphs (a) and (b), a day.
25 “(b) “(c) “Deﬁned in this Act: amount, attribution period, Commissioner, investor, in­ vestor class, multi­rate PIE, PIE, provisional tax, tax year “Compare: 2007 No 97 s HL 16(2) “HM 35 Determining net amounts and taxable amounts “What this section applies to 30 “(1) This section applies for the purposes of a calculation under section HM 36(2).
“Net amounts “(2) The net amount for an investor class of a multi­rate PIE for an attribution period is calculated using the formula— 35 218 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 assessable income – deductions.
“(3) “Deﬁnition of items in formula In the formula in subsection (2),— “(a) assessable income is the total amount of the PIE’s as­ sessable income attributed to the class for the attribution 5 period: “(b) deductions is the total amount of the PIE’s expenditure or loss for which the PIE is allowed a deduction that is— “(i) incurred by the PIE in deriving the assessable 10 income referred to in paragraph (a); and attributed to the class for the attribution period.
“(ii) “(4) “Net income or net loss If the result of the formula is positive, the amount is net in­ come of the class for the period.

If the result of the formula is 15 negative, the amount is a net loss of the class for the period.

“Taxable amounts “(5) The taxable amount for an investor class of a multi­rate PIE for an attribution period is calculated using the formula— net income – net loss – other loss used.
20 “(6) “Deﬁnition of items in formula In the formula in subsection (5),— “(a) net income is the amount of the PIE’s net income re­ ferred to in subsection (4): “(b) net loss is amount of the PIE’s net loss referred to in 25 “(c) subsection (4): other loss used is the lesser of the following amounts: the total amount for the class of formation loss “(i) that is attributable for the attribution period under sections HM 65 to HM 69 and any amount of 30 land loss under section HM 64 that has not been used for an earlier period: the total amount of net income referred to in paragraph (a).
“(ii) 219 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(7) “(8) “Taxable income or tax loss If the result of the formula is positive, the amount is taxable income of the class for the period.

If the result of the formula is negative, the amount is a tax loss of the class for the period.
“Use of valuations or ﬁnancial statements Income and deductions of the multi­rate PIE are allocated to investors and investor classes for attribution periods as— “(a) reﬂected in the PIE’s valuation of investors’ interests, if the PIE makes these valuations: shown in the PIE’s ﬁnancial statements, if the PIE does 10 not makes the valuations referred to in paragraph (a).
“(b) 5 “Deﬁned in this Act: amount, assessable income, attribution period, deduction, formation loss, income, investor class, investor interest, land loss, multi­rate PIE, net income, net loss, PIE, tax loss, taxable income “Compare: 2007 No 97 ss HL 19, HL 20 15 “HM 36 Calculating amounts attributed to investors “Calculating amount “(1) The amount of attributed PIE income or attributed PIE loss for an income year for an investor and an investor class in a multi­rate PIE is the total of the amounts calculated using the 20 formula in subsection (2) for— “(a) “(b) “(c) each attribution period in the income year; and each day in the attribution period; and each investor class to which the investor belongs on the day.
25 “Formula “(2) The formula is— percentage × (income – loss) days in period – (expenses – credits for fees).
“Deﬁnition of items in formula In the formula,— “(a) percentage is the percentage of the investor’s entitle­ 30 ment to a distribution by the PIE to the investor class: “(3) 220 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(b) “(c) income is the amount of taxable income determined under section HM 35(5) and (7) for the period: loss is the amount of tax loss determined under section HM 35(5) and (7) for the period: “(d) days in period is the number of days in the period: “(e) expenses is the total amount for the day in the period of— “(i) fees for ongoing management and administration services paid from or charged to the account of the investor as a member of the investor class: expenditure of the investor as a member of the investor class and transferred under subpart DV (Expenditure speciﬁc to certain entities) to the PIE: “(ii) 5 10 “(f) credits for fees is the amount of the credit for the fee 15 paid or credited by the PIE to the account of the in­ vestor as a member of the investor class on the day in the period.
“Treatment of attributed loss for PIEs paying provisional tax “(4) Despite subsection (3), an investor in a multi­rate PIE that 20 chooses under section HM 44 to pay provisional tax has no attributed PIE loss.

“When derived or incurred “(5) The investor is treated as deriving the income or incurring the loss in the income year of the investor in which the end of the 25 PIE’s income year falls.
“Deﬁned in this Act: amount, attributed PIE income, attributed PIE loss, at­ tribution period, income, income year, investor, investor class, multi­rate PIE, PIE, provisional tax, tax loss, taxable income “Compare: 2007 No 97 s HL 26 30 “HM 37 When income cannot be attributed “When this section applies “(1) This section applies when a multi­rate PIE has income or prop­ erty in which no investor has an interest, or income or property in which no person has a conditional entitlement under sec­ 35 tion HM 38.
221 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Sole investor “(2) The PIE is treated as the sole investor in an investor class hav­ ing an interest in the income or property.
“Deﬁned in this Act: income, investor, investor class, multi­rate PIE “Compare: 2007 No 97 s HL 17(1) 5 “HM 38 When superannuation fund investor has conditional entitlement “When this section applies “(1) This section applies for the purposes of section HM 37 in re­ lation to an attribution period when a person has a conditional 10 entitlement to an investor interest in a multi­rate PIE that is a superannuation fund that meets the requirements of subsec­ tion (4) in income or property of the PIE.
“Attribution “(2) The investor interest is treated as held by the person for the 15 attribution period.
“When conditional entitlement exists “(3) A person is treated as having a conditional entitlement to an investor interest if— “(a) the investor interest is bought by or for the person’s 20 employer; and the person and the employer have agreed that the person will have an unconditional entitlement to the interest before the end of a vesting period that is no longer than 5 years; and the agreement exists before the attribution period; and the vesting period ends after the attribution period.
25 “(b) “(c) “(d) “Modiﬁcations to certain vesting periods “(4) For the purposes of subsection (3)(b),— “(a) “(b) for a PIE that exists on 17 May 2006, a vesting period 30 longer than 5 years is allowed but the vesting period must not be longer than the longest vesting period al­ lowed by the PIE at that date for an interest created on that date: for a PIE that does not exist on 17 May 2006, but the 35 investor interest has been transferred to it by a super­ 222 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 annuation scheme in existence on that date without sig­ niﬁcant change to the interest, a vesting period of any length is allowed.
“Deﬁned in this Act: attribution period, employer, income, investor interest, multi­rate PIE, PIE, superannuation fund, superannuation scheme “Compare: 2007 No 97 s HL 17(2) 5 “HM 39 New investors in existing investor classes “When this section applies “(1) This section applies when a person is a new investor in an existing investor class of a multi­rate PIE but, at the time of 10 investing, the PIE holds insufﬁcient investments for the person to qualify as an investor in the class.
“Person treated as investor “(2) The PIE may treat the person as an investor in the class if the PIE acquires sufﬁcient investments as soon after the investor’s 15 acquisition of the interests as is practicable.
“Deﬁned in this Act: investor, investor class, multi­rate PIE, PIE “Compare: 2007 No 97 s HL 18 20 25 “HM 40 Deductions for attributed PIE losses for zero­rated and exiting investors “When this section applies “(a) “(b) “(1) This section applies to an investor in a multi­rate PIE when— an amount of attributed PIE loss is attributed under sec­ tion HM 36 to the investor for an attribution period in a tax year; and either— “(i) “(ii) the investor is a zero­rated investor; or the PIE calculates its tax liability using the quar­ terly calculation option under section HM 43 and the amount is attributed to the investor’s exit 30 period.
“(2) “Deduction In the investor’s income year in which the end of the PIE’s income year falls, the investor is allowed a deduction under section DB 53 (Attributed PIE losses of certain investors).

The 35 223 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill amount of the deduction is equal to the amount attributed for the income year or exit period.
“Deﬁned in this Act: amount, attributed PIE loss, attribution period, deduction, exit period, income year, investor, multi­rate PIE, PIE, tax year, zero­rated in­ vestor “Compare: 2007 No 97 s HL 27 5 “Calculating and paying tax liability “HM 41 Options for calculation and payment of tax “Available options “(1) The options available to a multi­rate PIE for calculating and 10 paying its income tax liability are— “(a) the payment of tax calculated under the exit calculation option, see section HM 42; or the payment of tax calculated under the quarterly calcu­ lation option, see section HM 43; or the payment of provisional tax and terminal tax calcu­ lated on an income­year basis, see section HM 44.
15 “(b) “(c) “Default option “(2) The PIE must use the default option under subsection (1)(b) unless it chooses an option under subsection (1)(a) or (c) by 20 notifying the Commissioner.

“Income tax liability “(3) The income tax liability of the PIE for the tax year is equal to the total amount calculated under the relevant method for periods in the tax year or, in the case of the provisional tax 25 option under section HM 44, for the PIE’s income year cor­ responding to the tax year.
“Deﬁned in this Act: amount, Commissioner, income tax liability, income year, multi­rate PIE, notify, pay, PIE, provisional tax, tax year, terminal tax “Compare: 2007 No 97 ss HL 16(3), HL 22–HL 24 30 “HM 42 Exit calculation option “When this section applies “(1) This section applies when a multi­rate PIE chooses for a tax year to calculate its income tax liability for exiting investors 224 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 and remaining investors.
The PIE must notify the Commis­ sioner under section 31C of the Tax Administration Act 1994 of this election.

“Calculation for exiting investors “(2) For an investor whose interest has reached the exit level during 5 the tax year, the PIE must calculate its income tax liability under section HM 47 for the investor and the relevant exit period.

The exit level and exit periods are determined under sections HM 61 and HM 62.
“Calculations for investors for non­exit periods “(3) For investors and periods in the income year other than exit periods, the PIE must calculate its income tax liability under section HM 47 for the relevant period.
“Payment to Commissioner “(4) The PIE must pay to the Commissioner— 10 15 “(a) the amount of income tax liability for an exiting investor for the exit period— “(i) within 1 month after the end of the month of “(b) “(ii) withdrawal; or if the month of withdrawal is November, by the 20 following 15 January; and the rest of the PIE’s income tax liability for the tax year within 1 month after the end of the tax year for remain­ ing investors in the PIE at the end of the tax year, after allowing for any payment under paragraph (a) or any 25 voluntary payment under section HM 45.
“Provisional tax rules “(5) The PIE is not required to pay provisional tax under subpart RC (Provisional tax) for the tax year.
“Deﬁned in this Act: amount, Commissioner, exit level, exit period, income 30 tax liability, income year, investor, multi­rate PIE, pay, PIE, provisional tax, tax year “Compare: 2007 No 97 s HL 24(1)–(4) 225 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “HM 43 Quarterly calculation option “Quarterly calculation “(1) A multi­rate PIE that does not choose to calculate and pay its income tax liability under the exit calculation or provisional tax options, must calculate its tax liability for each quarter of 5 the tax year using the formula set out in section HM 47.
“Quarterly payment “(2) The PIE must pay to the Commissioner the amount of its in­ come tax liability for the quarter within 1 month of the end of the quarter.

The notice requirements are set out in section 10 31C of the Tax Administration Act 1994.
“(3) “(4) “Exiting investors: zero­rated If an investor’s interest in the PIE has reached the exit level, they are treated under section HM 60 as a zero­rated investor for the exit period which includes a grace period of 5 working 15 days after the end of the quarter.

This subsection does not apply if the PIE voluntarily chooses to pay an amount under section HM 45.
“Exiting investors: remaining value to Commissioner If an investor’s interest at the end of an exit period is more than 20 zero, the PIE must pay an amount equal to the value of the interest to the Commissioner at the same time as the payment referred to in subsection (2).

“Provisional tax rules “(5) The PIE is not required to pay provisional tax under subpart 25 RC (Provisional tax) for the tax year.
“Deﬁned in this Act: amount, Commissioner, exit level, exit period, income tax liability, investor interest, multi­rate PIE, notice, pay, PIE, provisional tax, quarter, tax year, working day, zero­rated investor “Compare: 2007 No 97 s HL 22 30 “HM 44 Provisional tax calculation option “When this section applies “(1) This section applies when a multi­rate PIE chooses to calcu­ late its income tax liability on an income year basis and pay provisional tax by notifying the Commissioner before the start 35 226 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 of the income year or when choosing to become a PIE.
Notiﬁ­ cation is made under section 31C of the Tax Administration Act 1994.

“Application of subparts RB and RC “(2) The PIE must calculate its tax liability for the income year 5 corresponding to the tax year under section HM 47 and pay provisional tax for the tax year as required by subpart RC (Pro­ visional tax) and terminal tax for the tax year as required by subpart RB (Terminal tax).
“(3) “Treatment of losses If the calculation of the liability results in a negative amount, the loss must be carried forward to a later tax year, and section HM 63 does not apply.
10 “Deﬁned in this Act: income tax liability, income year, multi­rate PIE, notify, pay, PIE, provisional tax, tax year “Compare: 2007 No 97 s HL 23(1), (2) 15 “HM 45 Voluntary payments “When this section applies “(1) This section applies when a multi­rate PIE pays an amount of tax under section HM 42 or HM 43 and an investor reduces 20 their investor interest in an investor class of the PIE.
“Voluntary payment “(2) The PIE may pay an amount of income tax to the Commis­ sioner that represents an amount of its tax liability for the in­ vestor as a member of an investor class for the tax year.
25 “Time of payment “(3) The payment must be made— “(a) within 1 month after, as applicable,— “(i) “(ii) for calculation and payment of tax under the quarterly option, the end of the quarter; or for the calculation and payment of tax under the exit calculation option, the month of the reduc­ tion; or 30 227 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) if the month is November, by the following 15 January.
“Deﬁned in this Act: amount, Commissioner, income tax, investor, investor class, investor interest, multi­rate PIE, pay, PIE, quarter “Compare: 2007 No 97 s HL 25 “HM 46 Calculation process To calculate its tax liability, a multi­rate PIE must— “(a) determine the net amount for each investor class of the PIE: “(b) determine the taxable amount for each investor class of “(c) the PIE: calculate its tax liability for each investor in an investor class for each day of an attribution period.
“Deﬁned in this Act: amount, attribution period, investor, investor class, multi­ rate PIE, PIE “Compare: 2007 No 97 ss HL 19, HL 20 5 10 15 “HM 47 Calculation of tax liability or tax credit of multi­rate PIEs “What this section does “(1) This section quantiﬁes the amount of the tax liability or tax credit of a multi­rate PIE for a calculation period.
20 “Calculating amount “(2) The amount of the PIE’s tax liability or tax credit is the sum of the amounts calculated using the formula in subsection (3) for— “(a) “(b) “(c) “(d) each investor class in which the investor has an interest: 25 each investor in an investor class: each attribution period in the calculation period: each day in an attribution period.

“Formula “(3) The formula is— 30 rate × amount.


“Deﬁnition of items in formula In the formula,— “(a) rate is— “(4) 228 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(i) the tax rate relating to the investor for the period; or “(ii) 30%, if the PIE is treated as the sole investor under section HM 37: “(b) amount is the amount calculated under sections HM 5 36(1) and (2) and HM 37, as applicable, for the in­ vestor.
“Result of formula: tax liability or tax credit If the result of the formula in subsection (3) is positive, the amount is the PIE’s tax liability for the calculation period.

If 10 the result is negative, the amount is a tax credit of the PIE under section LS 1 (Tax credits for multi­rate PIEs), see section HM 55.
“Deﬁned in this Act: amount, attribution period, calculation period, investor, investor class, investor interest, multi­rate PIE, PIE, tax credit “Compare: 2007 No 97 ss EG 3, HL 21 15 “(5) “Adjusting investors’ interests “HM 48 Adjustments to investors’ interests or to distributions “Adjustment “(1) When a multi­rate PIE pays a tax liability or receives a tax 20 credit under section LS 1 (Tax credits for multi­rate PIEs) in relation to an investor, it must make an adjustment to an investor’s interest to reﬂect the investor’s prescribed investor rate.
The PIE may choose to adjust— “(a) “(b) “(c) the investor’s interest in an investor class; or the amount of a distribution paid to the investor; or the amount of a payment required from the investor to satisfy the PIE’s tax liability.

25 “Investor’s choice “(2) The PIE may offer the choice made under subsection (1) to 30 the investor.
“Date of adjustment “(3) An adjustment under subsection (1)(a) must be made— “(a) for the quarterly option, within 2 months of the end of the quarter; or 35 229 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) “(c) for the exit calculation option, within 2 months of the end of the tax year; or for the provisional tax option, within 3 months of the end of the income year.
“Deﬁned in this Act: amount, income year, investor, investor interest, multi­ 5 rate PIE, pay, PIE, prescribed investor rate, provisional tax, quarter, tax year “Compare: 2007 No 97 s HL 7 “Using tax credits “HM 49 Tax credits: when sections HM 50 to HM 55 apply “When sections apply “(1) Sections HM 50 to HM 55 apply in relation to the tax credits of a multi­rate PIE or proxy for an investor in a multi­rate PIE that has not chosen to calculate its income tax liability under section HM 44 using the provisional tax option.
“Limitation “(2) The entity must not, other than under sections HM 51 to HM 10 15 55,— “(a) “(b) use the credit to reduce the liability of the entity for income tax or to obtain a refund of income tax: attach the credit to a distribution or transfer the credit to 20 another person.

“Relationship with Part L “(3) Sections HM 51 to HM 55 override Part L (Tax credits and other credits) other than subpart LS (Tax credits for multi­rate PIEs and investors).
25 “Deﬁned in this Act: income tax, income tax liability, investor, multi­rate PIE, provisional tax, tax credit “Compare: 2007 No 97 s HL 29(1), (2) “HM 50 Attributing credits to investors “When this section applies 30 “(1) This section applies when a multi­rate PIE has— “(a) a credit for tax paid or withheld under subpart LB (Tax credits for payments, deductions, and family income): 230 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(b) “(c) an imputation credit under subpart LE (Tax credits for imputation credits): a credit for tax paid in a foreign country or territory under subpart LJ (Tax credits for foreign income tax).
“Attributing amount to investor “(2) The amount of the credit attributable to an investor in an in­ vestor class of the PIE for an attribution period is calculated using the formula in subsection (3).

The amount attributed to the investor is the total of the amounts calculated for each investment of the PIE and each day in the attribution period.

5 10 “Calculation of amount “(3) The formula is— credit × class’s percentage × investor’s percentage days in period.
“(4) “Deﬁnition of items in formula In the formula,— “(a) “(b) “(c) credit is amount of the credit the PIE has in relation to 15 the investment that gives rise to the credit: class’s percentage is the amount of the proceeds from the investment to which the investor class is entitled, including related tax credits: investor’s percentage is the amount to which the in­ 20 vestor is entitled of a distribution by the PIE to the in­ vestor class: “(d) days in period is the number of days in the attribution period.
“Deﬁned in this Act: amount, attribution period, imputation credit, investor, 25 investor class, multi­rate PIE, pay, PIE, tax credit “Compare: 2007 No 97 ss HL 29(3)­(5), YA 1 ‘portfolio class fraction’, ‘port­ folio investor interest fraction’ “HM 51 Use of foreign tax credits by PIEs “When this section applies 30 “(1) This section applies when a multi­rate PIE has a tax credit under subpart LJ (Tax credits for foreign income tax) that is attributable in a tax year to an investor other than— 231 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) a zero­rated investor: an exiting investor who is treated under section HM 60 as zero­rated.
“Using tax credit to satisfy income tax liability “(2) The multi­rate PIE may use the tax credit under section LS 5 1 (Tax credits for multi­rate PIEs) to satisfy its income tax liability for the tax year in relation to the investor.

The amount of the credit is determined under subsection (3).
“Amount “(3) The total amount of the credits able to be used is the lesser 10 of— “(a) “(b) the total amount of credits attributed to the investor as a member of any investor class for the calculation period together with any amount attributed to the investor in an earlier calculation period that remains unused: the amount of the PIE’s tax liability in relation to the investor as a member of any investor class for the cal­ culation period or an earlier calculation period, and not met by any credit allocated to the earlier period.
“Use under exit calculation option “(4) For a multi­rate PIE that calculates its tax liability for a tax year using the exit calculation option under section HM 42, the amount may be used for calculation periods earlier or later in the tax year, and in relation to different classes for the same investor.
15 20 25 “Use under quarterly option “(5) For a multi­rate PIE that calculates its tax liability for a tax year using the quarterly option under section HM 43, the amount may be used only for the relevant calculation period and later periods in the tax year, and in relation to different classes for 30 the same investor.
“Deﬁned in this section: amount, calculation period, income tax liability, in­ vestor, investor class, multi­rate PIE, PIE, quarter, tax credit, tax year, zero­rated investor “Compare: 2007 No 97 s HL 29(10)–(12) 35 232 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “HM 52 Use of foreign tax credits by zero­rated and certain exiting investors “When this section applies “(1) This section applies when a multi­rate PIE has a tax credit under subpart LJ (Tax credits for foreign income tax) that is 5 attributable in a tax year to an investor who is— “(a) “(b) a zero­rated investor: an exiting investor who is treated under section HM 60 as zero­rated.
“Using tax credit to satisfy income tax liability “(2) The investor may use the tax credit under section LS 3 or LS 4 (which relate to the use of tax credits) to satisfy their income tax liability for the tax year.

The amount of the credit is determined under subsection (3) or (4).
“Amount “(3) The total amount of the credits able to be used is the lesser 10 15 of— “(a) “(b) the total amount of the attributed foreign tax credits for the income year or exit period, as applicable: the amount calculated by multiplying the attributed PIE 20 income of the investor from the PIE for the tax year by,— “(i) for an exiting investor described in subsection (1)(b), the prescribed investor rate notiﬁed in re­ lation to the investor for the attribution period be­ 25 fore their exit period; or for a zero­rated investor, their basic tax rate set out in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe bene­ ﬁts) for the tax year.
30 “(ii) “Amount for PIEs or proxies “(4) Despite subsection (3), the amount of the credit is the at­ tributed amount if the investor is— “(a) a multi­rate PIE; or 233 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) a proxy for an investor in a multi­rate PIE.
“Deﬁned in this Act: amount, attributed PIE income, attribution period, exit period, foreign tax, income tax liability, income year, investor, multi­rate PIE, notify, PIE, prescribed investor rate, tax credit, tax year, zero­rated investor “Compare: 2007 No 97 s HL 29(7), (8) 5 “HM 53 Use of tax credits other than foreign tax credits by PIEs “When this section applies “(1) This section applies when a multi­rate PIE has— “(a) “(b) a tax credit under Part L (Tax credits and other credits) 10 other than a tax credit under subpart LJ (Tax credits for foreign income tax); and the credit is attributable in a tax year to an investor in an investor class other than— “(i) “(ii) a zero­rated investor: an exiting investor who is treated under section HM 60 as zero­rated.
15 “Using tax credit to satisfy income tax liability “(2) The PIE may use the tax credit under section LS 1 (Tax credits for multi­rate PIEs) to satisfy its income tax liability 20 for the tax year in relation to the investor as a member of the class or of another investor class.

A tax credit under this sec­ tion is used only after the use of any credit under section HM 52.

“Amount 25 “(3) The amount of the tax credit is the amount attributed.
“Deﬁned in this Act: amount, income tax liability, investor, investor class, multi­rate PIE, tax credit, tax year, zero­rated investor “Compare: 2007 No 97 s HL 29(13) “HM 54 Use of tax credits other than foreign tax credits by 30 investors “When this section applies “(1) This section applies when a multi­rate PIE has a tax credit under Part L (Tax credits and other credits) other than a tax 234 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 credit under subpart LJ (Tax credits for foreign income tax), that is attributable in a tax year to an investor who is— “(a) “(b) a zero­rated investor: an exiting investor who is treated under section HM 60 as zero­rated.
“Using tax credit to satisfy income tax liability “(2) The investor may use the tax credit under section LS 3 or LS 4 (which relate to the use of tax credits) to satisfy their income tax liability for the tax year.

“Amount “(3) The amount of the tax credit is the amount attributed.
“Deﬁned in this Act: amount, income tax liability, investor, multi­rate PIE, tax credit, tax year, zero­rated investor “Compare: 2007 No 97 s HL 29(7)(b) “HM 55 Tax credits for losses A multi­rate PIE that has a negative amount arising under sec­ tion HM 47(5) and has not chosen to calculate its tax liability using the provisional tax option under section HM 44 has a tax credit for a tax year under section LS 1 (Tax credits for multi­rate PIEs).
“Deﬁned in this Act: amount, multi­rate PIE, provisional tax, tax credit, tax year “Compare: 2007 No 97 s HL 28 “Prescribed and notiﬁed rates for investors in multi­rate PIEs “HM 56 Prescribed investor rates for investors, default and optional: 30% “Investors generally “(1) An investor in a multi­rate PIE has a prescribed investor rate of 30% unless sections HM 57 to HM 60 apply.
30 “Certain trustees “(2) An investor in a multi­rate PIE who is a trustee of a trust other than a trust referred to in section HM 58(b) may choose to 235 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill have a tax rate of 30%.

If they do not choose a rate, a default rate of 0% applies.
“Deﬁned in this Act: investor, multi­rate PIE, prescribed investor rate, trustee “Compare: 2007 No 97 s YA 1 ‘portfolio investor rate’, ‘prescribed investor rate’ 5 “HM 57 Prescribed investor rates for certain natural person investors: 19.5% An investor in a multi­rate PIE who is a natural person (other than a trustee) has a prescribed investor rate of 19.5% if— “(a) “(b) they are resident in New Zealand; and they have, in either of the 2 income years immediately before the tax year,— “(i) “(ii) $38,000 or less in taxable income; and a total amount of $60,000 or less of taxable income and attributed PIE income less any at­ 15 tributed PIE loss.
10 “Deﬁned in this Act: amount, attributed PIE income, income year, investor, multi­rate PIE, prescribed investor rate, resident in New Zealand, tax year, tax­ able income, trustee “Compare: 2007 No 97 s YA 1 ‘portfolio investor rate’, ‘prescribed investor 20 rate’ “HM 58 Prescribed investor rates for certain investors: 0% 25 An investor (a zero­rated investor) in a multi­rate PIE has a prescribed investor rate of 0% if they are resident in New Zealand and are— a company: “(a) an organisation or trust deriving exempt income under “(b) section CW 41 or CW 42 (which relate to charities): a person who derives income as a trustee, other than a trustee who chooses the 30% rate under section HM 30 56: an exiting investor referred to in section HM 60: a PIE when an amount is attributed, other than a trustee who chooses the 30% rate under section HM 56: a proxy acting under section HM 33: “(d) “(e) “(c) “(f) 35 236 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “(g) a superannuation fund, if the trustee chooses the 30% rate under section HM 56.
“Deﬁned in this Act: amount, company, exempt income, investor, multi­rate PIE, PIE, prescribed investor rate, resident in New Zealand, superannuation fund, trustee “Compare: 2007 No 97 s YA 1 ‘prescribed investor rate’ 5 “HM 59 Notiﬁed rates “Notifying PIE “(1) Despite sections HM 56 to HM 58, an investor who has pro­ vided their tax ﬁle number to a multi­rate PIE may notify the 10 PIE of the prescribed investor rate to be applied for a period.
Section 28B of the Tax Administration Act 1994 sets out the requirements for the notice.

“Time of notiﬁcation “(2) The investor must give notice before the end of the relevant 15 period.

“Application of prescribed rate “(3) A multi­rate PIE must apply the prescribed investor rate last notiﬁed by an investor in relation to every day of the period.
However, this subsection does not apply if the PIE has made 20 a voluntary payment of tax under section HM 45 that is in­ tended to satisfy its income tax liability for the period in rela­ tion to the investor unless the rate last notiﬁed applies to the voluntary payment.
“(4) “When chosen rate lower than rate prescribed in sections HM 56 to HM 58 If an investor notiﬁes a prescribed investor rate that is lower than the rate that would apply under sections HM 56 to HM 58, income attributed to them by the PIE is not excluded in­ come of the investor under sections CX 56 and CX 56B 30 (which relate to attributed income of and distributions to cer­ tain investors in multi­rate PIEs).
25 “When rate disregarded “(5) The Commissioner may notify a PIE to disregard a prescribed investor rate notiﬁed by an investor if the Commissioner con­ 35 237 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill siders the rate is incorrect.

The 30% default rate under sec­ tion HM 56 then applies.

“(6) “When no rate notiﬁed If an investor does not notify a multi­rate PIE of their pre­ scribed investor rate, the rate applying for a period is 30%.
5 “Deﬁned in this Act: Commissioner, excluded income, income, investor, multi­ rate PIE, notify, pay, PIE, prescribed investor rate, tax ﬁle number “Compare: 2007 No 97 s YA 1 ‘portfolio investor rate’, ‘prescribed investor rate’ “HM 60 Certain exiting investors zero­rated 10 Despite sections HM 56 to HM 59, the tax rate applying to an investor is 0% if— “(a) the investor exits from a multi­rate PIE in a quarter in which they are attributed income from the PIE; and the PIE calculates and pays tax using the quarterly op­ 15 tion under section HM 43; and the PIE does not choose to make voluntary payments under section HM 45.
“(b) “(c) “Deﬁned in this Act: income, investor, multi­rate PIE, pay, PIE, quarter “Compare: 2007 No 97 s YA 1 ‘portfolio investor rate’, ‘prescribed investor 20 rate’ “Exit levels and periods “HM 61 Exit levels for investors An investor in a multi­rate PIE is treated as reaching the exit level when the PIE’s tax liability for the investor is equal to, 25 or more than, the value of the investor’s interest in the PIE at the end of the exit period (the exit level).
“Deﬁned in this Act: exit level, investor, investor interest, multi­rate PIE, PIE “Compare: 2007 No 97 s “HM 62 Exit periods “When this section applies 30 “(1) This section applies when an investor in a multi­rate PIE reaches the exit level during a tax year.
238 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “Exit period: exit calculation “(2) For a PIE that calculates its tax liability using the exit calcula­ tion option under section HM 42, the investor’s exit period— begins with the day that is the later of the start of the tax “(a) year and the day on which the investor last became an 5 investor; and ends on the day in the tax year when the exit level is reached.
“(b) “Exit period: quarterly calculation “(3) For a PIE that calculates its tax liability using the quarterly 10 calculation option under section HM 43, the investor’s exit period is the quarter in which the exit level is reached plus a grace period of 5 working days after the end of the quarter.

“Voluntary payments of tax “(4) Subsection (3) does not apply if the PIE voluntarily pays tax 15 under section HM 45.
“Deﬁned in this Act: exit level, investor, multi­rate PIE, pay, PIE, quarter, tax year, working day “Compare: 2007 No 97 s YA 1 ‘portfolio investor exit period’ “Treatment of losses by PIEs 20 “Losses of certain multi­rate PIEs “HM 63 Use of investor classes’ losses “When this section applies “(1) This section applies when an investor class of a PIE that cal­ culates and pays tax using the exit calculation or quarterly cal­ 25 culation options under section HM 42 and HM 43 has a tax loss under section HM 35(7) for a calculation period.
But this section does not apply to a land loss as deﬁned in section HM 64(3).

“Amount not carried forward 30 “(2) The amount is not included in a loss balance carried forward under Part I (Losses) to a later calculation period.
239 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Tax credits “(3) To the extent to which the amount relates to an investor other than a zero­rated investor, the PIE has a tax credit under sec­ tion LS 1 (Tax credits for multi­rate PIEs) of an amount equal to the credit multiplied by the relevant prescribed investor rate.
5 “Deﬁned in this Act: amount, calculation period, investor class, land loss, loss balance, pay, PIE, prescribed investor rate, provisional tax, tax credit, zero­rated investor “Compare: 2007 No 97 s HL 32(1) “HM 64 Use of land losses of investor classes “When this section applies “(1) This section applies when an investor class of a multi­rate PIE that calculates and pays tax using the exit calculation option or the quarterly calculation option under section HM 42 or HM 43 has a land loss for a calculation period.
“Amount carried forward “(2) The amount of land loss may be included in a loss balance car­ ried forward under Part I (Losses) to a later calculation period and used under section HM 35(5) to reduce an amount of tax­ able income from the class.
10 15 20 “Meaning of land loss “(3) For the purposes of this section, a land loss means a tax loss under section HM 35(7) of an investor class of a PIE for a calculation period if, at the end of the period, the class has, through the investor interests of the members of the class, an 25 entitlement to the distribution of the proceeds of the PIE’s in­ vestments that— “(a) are investments in land or shares in a land investment company; and “(b) have a value that is more than 50% of the market value 30 of all the PIE’s investments in which the class has the entitlement.
“Deﬁned in this Act: amount, calculation period, investor class, investor in­ terest, land, land investment company, land loss, loss balance, market value, multi­rate PIE, pay, PIE, quarter, share, tax loss, taxable income “Compare: 2007 No 97 s HL 32(2), (3) 35 240 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 “Formation losses “HM 65 Formation losses carried forward to tax year “What this section applies to “(1) This section applies to an entity that becomes a PIE, other than a multi­rate PIE that calculates and pays tax using the exit 5 calculation or quarterly calculation option under section HM 42 or HM 43, when the entity has a formation loss.
“Amount carried forward “(2) The amount of formation loss may be included in a loss bal­ ance carried forward under Part I (Losses) to a tax year in 10 which the entity is a PIE.
“Deﬁned in this Act: amount, formation loss, loss balance, multi­rate PIE, pay, PIE, quarter, tax, tax year “Compare: 2007 No 97 s HL 30(1), (2) “HM 66 Formation losses carried forward to ﬁrst quarter 15 “When this section applies “(1) This section applies when an entity becomes a multi­rate PIE that— “(a) calculates and pays tax using the exit calculation or quarterly calculation option under section HM 42 or 20 HM 43; and “(b) has a formation loss.
“Amount carried forward “(2) The amount of formation loss may be carried forward under Part I (Losses) to the quarter in which the entity becomes a 25 PIE.
“Deﬁned in this Act: amount, formation loss, multi­rate PIE, pay, PIE, quarter “Compare: 2007 No 97 s HL 30(1) “HM 67 When formation losses carried forward are less than 5% of formation investment value If the total amount of formation loss carried forward under section HM 66 is less than 5% of the total market value of the PIE’s investments at the time it becomes a PIE, it may allocate to an attribution period the amount not already allocated, when 30 241 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill calculating under section HM 35(5) the taxable amount of an investor class for the attribution period.
“Deﬁned in this Act: amount, attribution period, formation loss, investor class, market value, PIE, taxable amount “Compare: 2007 No 97 s HL 30(3) 5 “HM 68 When formation losses carried forward are 5% or more of formation investment value: 3 year spread “What this section applies to “(1) This section applies to spread the formation loss over the period of 3 years from the date the entity becomes a PIE when 10 the amount of formation loss carried forward under section HM 66 is 5% or more of the total market value of the PIE’s investments at the time it becomes a PIE.
“Amount “(2) The maximum amount of formation loss that the PIE may allo­ 15 cate to an attribution period, when calculating under section HM 35(5) the taxable amount of an investor class for the attri­ bution period, is the amount calculated using the formula— initial loss × days 1095.

“(3) “Deﬁnition of items in formula In the formula,— “(a) initial loss is the amount of formation loss: “(b) days is the number of days in the attribution period.
“Deﬁned in this Act: amount, attribution period, formation loss, investor class, market value, PIE, taxable amount “Compare: 2007 No 97 s HL 30(4), (5) 20 25 “HM 69 Allocation of formation losses of multi­rate PIEs to investor classes “Maximum amount for allocation “(1) Despite sections HM 67 and HM 68, the maximum amount of formation loss that may be allocated, when calculating 30 under section HM 35(5) the taxable amount of an investor 242 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 class for an attribution period, is calculated using the for­ mula— class net income – credits rate.
“(2) “Deﬁnition of items in formula In the formula,— “(a) “(b) “(c) class net income is the amount of the net income of the 5 investor class for the period under section HM 35(4): credits is the total amount attributed to the investor class for the period of— “(i) imputation credits: “(ii) Maori authority credits: “(iii) RWT credits: “(iv) FDP credits: rate is the basic rate for companies set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
10 15 “Deﬁned in this Act: amount, attribution period, company, FDP credit, forma­ tion loss, imputation credit, investor class, Maori authority credit, net income, RWT “Compare: 2007 No 97 s HL 30(6), (7) “Elections and consequences 20 “HM 70 Choosing to become PIE An entity that, at the time of election, meets the requirements of sections HM 8 to HM 20, except to the extent to which the relevant requirement is said not to be applicable to the entity, may choose to become a PIE by notifying the Commissioner 25 under section 31B of the Tax Administration Act 1994.
“Deﬁned in this Act: Commissioner, notify, PIE “Compare: 2007 No 97 s HL 11(1), (3) “HM 71 When elections take effect “Notice of election 30 “(1) An election under section HM 70 to become a PIE takes effect on the latest of the following dates: 243 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) “(c) the date the entity is formed: the date set out in the notice: 30 days before the Commissioner receives the notice.
“When entity does not meet basic requirements “(2) Despite subsection (1), an entity’s election to become a PIE 5 does not take effect if, in the period ending 12 months after the date on which the election would be effective,— “(a) “(b) the entity cancels the election: an event or situation arises that means the entity would lose PIE status under any of sections HM 24 to HM 10 28.
“Notice of cancellation “(3) An election under section HM 29 to cancel PIE status takes effect on the latest of the following dates: “(a) “(b) “(c) the date the entity became a PIE: the date set out in the notice: the date on which the Commissioner receives the notice.
“Deﬁned in this Act: Commissioner, notice, PIE “Compare: 2007 No 97 ss HL 11(2), (2B), (4), HL 13(1), (4), HL 15(2) 15 20 “HM 72 Transition: provisional tax “When this section applies “(1) This section applies when an entity chooses to become a PIE in an income year and has an increased liability for provisional tax for the income year because of the election.
25 “Penalties and interest “(2) The entity is not liable to pay any penalty or interest for which it would otherwise be liable for an inaccuracy arising from the increased liability in— “(a) “(b) an estimate of provisional tax made before the election: 30 a payment of provisional tax due before the end of the 2­month period that starts when the election takes ef­ fect.
“Tax liability “(3) An entity that becomes a PIE in a tax year and is liable to pay 35 an amount of income tax because of the disposal and reacquisi­ 244 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 214 tion referred to in section HM 74 may satisfy the tax liability by paying the Commissioner at least— “(a) “(b) one half of the balance remaining after a payment under one third of the liability in the tax year; and “(c) paragraph (a) in the tax year after that in which the 5 entity became a PIE; and the balance owing after the payments under para­ graphs (a) and (b) in the second tax year after that in which the entity became a PIE.
“Deﬁned in this Act: amount, Commissioner, income tax, income year, pay, 10 PIE, provisional tax, tax year “Compare: 2007 No 97 s HL 14 “HM 73 Transition: entities with non­standard income years “When this section applies “(1) This section applies when— “(a) “(b) an entity with a non­standard income year chooses to become a PIE; and the entity calculates and pays its tax liability using the exit calculation or quarterly calculation option under section HM 42 or HM 43.
“Consequential changes in balance date 15 20 “(a) “(2) Section 39 of the Tax Administration Act 1994 applies as if— the day before that on which the election takes effect were the original balance date of the entity; and the next 31 March after the election takes effect were 25 a new balance date approved by the Commissioner for the entity.
“(b) “Deﬁned in this Act: Commissioner, non­standard income year, pay, PIE, quar­ ter “Compare: 2007 No 97 s HL 13(2) 30 “HM 74 Transition: treatment of shares held in certain companies “When subsection (2) applies “(1) Subsection (2) applies when— “(a) an entity chooses to become a PIE; and 35 245 Part 1 cl 214 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) before the election takes effect— “(i) the entity holds a share in relation to which the proceeds of disposal would be excluded income under section CX 55(3)(a) and (b) (Proceeds from disposal of investment shares) once the en­ 5 tity becomes a PIE: the entity is a share supplier in a returning share transfer in relation to that type of share; and the share is in a company that is not a PIE and does not become a PIE within 6 months from the date on which 10 the entity became a PIE.
“(ii) “(c) “Disposal and reacquisition “(2) The entity is treated as— “(a) “(b) “(c) disposing of the share to another person; and receiving consideration of an amount that equals the 15 market value of the share at the time; and reacquiring the share from the other person for the same consideration.

“Timing “(3) The disposal and reacquisition is treated as occurring on the 20 day before that on which the election takes effect.
“When subsection (5) applies “(4) Subsection (5) applies when an entity— “(a) loses PIE status under any of sections HM 24 to HM 28 or chooses to cancel PIE status under section HM 25 29; and “(b) holds a share in relation to which the proceeds of dis­ posal would be excluded income under section CX 55(3)(a) and (b) while the entity is a PIE.
“Disposal and reacquisition “(5) The entity is treated as— 30 “(a) “(b) “(c) disposing of the share to another person; and receiving consideration of an amount that equals the market value of the share at the time; and reacquiring the share from the other person for the same 35 consideration.

246 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 216 “Timing “(6) The disposal and reacquisition is treated as occurring on the day before PIE status is lost.
“Deﬁned in this Act: amount, company, exempt income, market value, PIE, returning share transfer, share, shareholder “Compare: 2007 No 97 ss HL 13(3), HL 15(3) 5 “HM 75 Transition: FDPA companies When an FDPA company becomes a PIE during a tax year, the balance of the company’s FDP account at the end of the tax year for the purposes of section RM 21(2)(c) (Refunds when 10 loss balances used to reduce net income) is equal to the balance of the FDP account immediately before the company becomes a PIE.
“Deﬁned in this Act: FDP account, FDPA company, PIE, tax year “Compare: 2007 No 97 s HL 13(3B)”.

Subsection (1) applies for the 2009–10 and later income years.

15 (2) 215 Tax losses Section IA 2(4)(f) is omitted.

216 Restrictions relating to ring­fenced tax losses (1) (2) Section IA 7(3) is repealed.
In section IA 7(6), the ﬁrst sentence is replaced by “The gen­ eral rules do not apply to a FIF net loss.” Section IA 7(10) is replaced by the following: “Net losses of multi­rate PIEs (3) 20 25 “(10) The general rules do not apply to a multi­rate PIE’s net loss when the PIE does not calculate and pay tax using the pro­ visional tax calculation option under section HM 44 (Provi­ sional tax calculation option).” In section IA 7, in the list of deﬁned terms, “life insurer” and 30 “policyholder net loss” are omitted.
In section IA 7, in the list of deﬁned terms, “portfolio tax rate entity” is omitted and “multi­rate PIE”, “PIE”, and “provi­ sional tax” are inserted.

(5) (4) 247 Part 1 cl 217 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (6) (7) Subsections (1) and (4) apply for income years beginning on and after 1 April 2009.

Subsection (3) and (5) applies for the 2009–10 and later income years.
217 Restrictions relating to schedular income (1) Before section IA 8(1)(a), the following is inserted: “ (aa) paragraph (a), which relates to life insurers’ schedular 5 policyholder base income; or”.

(2) (3) In section IA 8, in the list of deﬁned terms, “schedular policy­ holder base income” is inserted.

Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.
218 Common ownership: group of companies (1) Section IC 3(2B) is replaced by the following: “When multi­rate PIEs included in group “(2B) In relation to 2 or more companies of which 1 is a multi­rate PIE, the companies are treated as a group of companies at a particular time or for a particular period if— “(a) the PIE owns 100% of the voting interests in the other companies; and the other companies in the group are not land invest­ ment companies.” “(b) (2) (3) In section IC 3, in the list of deﬁned terms, “portfolio land company” and “portfolio tax rate entity” are omitted and “land investment company” and “multi­rate PIE” are inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
10 15 20 25 219 New section IC 13 added After section IC 12, the following is added: “IC 13 Variation of requirements for development companies 30 in Niue “When this section applies “(1) This section applies in relation to the required common own­ ership of group companies set out in sections IC 2(2), IC 3, 248 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 220 and IC 5(1)(a) for the purposes of providing relief to company A for losses incurred in connection with development work in Niue.
“Order in Council “(2) The Governor­General may make an Order in Council varying 5 the threshold in section IC 3(1)(a) and (b) applying to company A if satisﬁed that the company— “(a) is carrying on a business or enterprise that— “(i) has been or is carried on wholly or mainly for the development of Niue: 10 “(ii) has been or is important to the development of Niue; and “(b) has incurred expenditure wholly or mainly in deriving income from Niue or in the course of carrying on a busi­ ness or enterprise in Niue for the purpose of deriving 15 income.
“Named company “(3) For the purposes of subsection (2), company A must be a company named in the order.

“Application of order 20 “(4) The order may specify a period or periods to which it applies.

If no period is speciﬁed, the order applies to the whole com­ monality period.

“Deﬁned in this Act: business, commonality period, company, group of com­ panies, income”.
25 220 Ring­fencing cap on attributed CFC net losses (1) After section IQ 2(1), the following is inserted: “Attributed CFC net losses from 2009–10 or earlier income years “(1B) If a person’s attributed CFC net loss relates to the 2009–10 or 30 a later income year and is carried forward to the tax year, the amount used for the tax year in reducing the person’s net in­ come is equal to the amount of the reduction under subsection (1).
249 Part 1 cl 221 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Attributed CFC net losses from 2008–9 or earlier income years “(1C) If a person’s attributed CFC net loss relates to the 2008–09 or an earlier income year and is carried forward to the 2009–10 or a later tax year,— “(a) 5 the maximum amount of the attributed CFC net loss (the maximum useful loss) that may be used in a reduction of the person’s net income for the tax year is the greater of the following amounts: “(i) the amount determined under subsection (1) (the 10 maximum income reduction) for the tax year: an amount equal to the branch equivalent income of the person for the tax year: “(ii) “(b) “(c) “(d) the amount of the attributed loss carried forward: the maximum useful loss: the amount of the attributed CFC net loss (the applied amount) used for the tax year must be the lesser of the 15 following amounts: “(i) “(ii) the effect of the applied amount depends on whether the applied amount exceeds the amount (the thresh­ 20 old amount) calculated by subtracting the maximum income reduction from the maximum useful loss: the applied amount reduces the person’s net income for the tax year by an amount equal to— “(i) the maximum income reduction, if the applied 25 amount is equal to the maximum useful loss; or the amount by which the applied amount exceeds the threshold amount, if the applied amount is less than the maximum useful loss and exceeds the threshold amount; or “(ii) 30 “(iii) zero, if the applied amount is less than or equal to the threshold amount.” (2) Subsection (1) applies for the 2009–10 and later income years.
221 Group companies using attributed CFC net losses (1) In section IQ 4(3)(a), the words before subparagraph (i) are replaced by the following: 35 250 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 222 “(a) the amount of the tax loss that company A may make available to another group company (company B) in the tax year may not be greater than the amount that company B would require as attributed CFC net loss from the same income year or income years to produce 5 a reduction in company B’s net income for the tax year equal to the total of—”.
(2) Subsection (1) applies for the 2009–10 and later income years.
222 Subpart IT replaced Subpart IT is replaced by the following: “Subpart IT—Cancellation of life insurer’s losses “IT 1 Cancellation of life insurer’s policyholder net losses “When this section applies 10 15 “(1) This section applies to the amount of a life insurer’s tax loss to be carried forward to the tax year corresponding to the ﬁrst income year beginning on or after 1 April 2009, to the ex­ tent to which the amount (the cancelled amount) would be a ring­fenced tax loss for policyholder net losses under sec­ 20 tion IA 7(3) (Restrictions relating to ring­fenced losses) if the enactment of the Taxation (International Taxation, Life Insur­ ance, and Remedial Matters) Act 2008 were ignored.
“Cancellation of life insurer’s policyholder net losses “(2) The cancelled amount— 25 “(a) is removed from the life insurer’s available tax loss for the tax year corresponding to an income year beginning on or after 1 April 2009; and “(b) must not be subtracted from the life insurer’s net income under section BC 5 (Taxable income) for the tax year 30 corresponding to an income year beginning on or after 1 April 2009; and is not a tax loss component; and “(c) 251 Part 1 cl 223 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(d) is cancelled.
“Deﬁned in this Act: available tax loss, income year, life insurer, net income, policyholder net loss, ring­fenced tax loss, tax loss, tax year “IT 2 Cancellation of life insurer’s tax loss when allowed into policyholder base “When this section applies “(1) This section applies to the amount of a life insurer’s tax loss to be carried forward to a tax year corresponding to an income year beginning on or after 1 April 2009.
“Cancellation of life insurer’s tax loss 5 10 “(2) When the life insurer has for an income year an amount of pol­ icyholder base gross expenditure or loss as provided by sec­ tion EZ 62 (Allowance for cancelled amount: spreading), an equal amount— “(a) is removed from the life insurer’s available tax loss for 15 the tax year corresponding to the income year; and “(b) must not be subtracted from the life insurer’s net income under section BC 5 for the tax year; and is not a tax loss component; and is cancelled.
“(c) “(d) 20 “Deﬁned in this Act: available tax loss, income year, life insurer, net income, tax loss, tax year”.
223 Remaining refundable credits: PAYE, RWT, and certain other items In section LA 6(1)(e), “authority credits.” is replaced by “au­ 25 thority credits:” and the following is added: “(f) section LS 1 (Tax credits for portfolio tax rate entities and investors).” In section LA 6(1)(f), “(Tax credits for portfolio tax rate en­ tities and investors)” is replaced by “(Tax credits for multi­rate 30 PIEs)”.

Subsection (2) applies for the 2009–10 and later income years.
(1) (2) (3) 252 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 225 224 Remaining refundable credits: tax credits for families In section LA 7, the heading and subsection (1) are replaced by the following: “LA 7 Remaining refundable credits: tax credits under social policy schemes “What this section applies to 1This section applies to a person’s tax credit remaining for a tax year under section LA 5(5), if it is a tax credit under— “(a) “(b) section LB 4 (Tax credits for families): section LD 1(5) (Tax credits for charitable and other public beneﬁt gifts).” 225 New section LA 8B (1) After section LA 8, the following is inserted: “LA 8B General rules particular to life insurers “Apportionment 5 10 15 “(1) For the purposes of this subpart a life insurer’s total tax credit is apportioned between their policyholder base and shareholder base, using the basis of apportionment in section EY 4 (Ap­ portionment of income of particular source or nature, and of 20 tax credits).
“Unsatisﬁed income tax liability “(2) Despite section LA 3,— “(a) a life insurer has an unsatisﬁed income tax liability to the extent to which— “(i) 25 the tax credit apportioned to their policyholder base is less than their schedular income tax liabil­ ity for schedular policyholder base income (pol­ icyholder base income tax liability); and the tax credit apportioned to their shareholder 30 base is less than their income tax liability for the tax year, calculating their income tax liabil­ ity (shareholder base income tax liability) as if they only had shareholder base gross income, ex­ penditure, or loss: 35 “(ii) “(b) the amount of unsatisﬁed income tax liability is the total of the difference, if any, described in paragraph 253 Part 1 cl 226 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) (a)(i) and the difference, if any, described in paragraph (a)(ii): the amount of unsatisﬁed income tax liability under paragraph (b) is satisﬁed when the life insurer pays their terminal tax for the tax year.
5 “Use of credits “(3) Despite section LA 4,— “(a) “(b) if the tax credit apportioned to the policyholder base or the shareholder base is greater than the relevant base income tax liability described in subsection (2)(a)(i) 10 or (ii), the tax credit is used, in the order prescribed in section LA 4(1), to satisfy the relevant base income tax liability: tax credits not used under paragraph (a) are treated as remaining tax credits referred to in section LA 4(2) and 15 the life insurer must deal with the credits under section LA 5.
“Deﬁned in this Act: income tax liability, policyholder base gross expenditure or loss, policyholder base gross income, shareholder base expenditure or loss, shareholder base income, tax credit, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.

20 (2) 226 Use of credits (1) In section LA 9, “Section OZ 11 (Tax credits for imputation credits and FDP credits) may apply to modify this section.” is 25 omitted.
Subsection (1) applies for the 2008–09 and later income years.
(2) 227 Section LB 1 replaced Section LB 1 is replaced by the following: “LB 1 Tax credits for PAYE income payments “When this section applies 30 “(1) This section applies in a tax year when an employer provides the Commissioner with an employer monthly schedule that 254 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 228 shows an amount of tax withheld from a PAYE income pay­ ment of a person who is an employee.
“Amount of credit “(2) The person has a tax credit for the tax year equal to the amount of tax shown as withheld.
“Application to close companies 5 “(3) Despite subsection (2), the amount of the tax credit must be no more than the amount of tax paid to the Commissioner if— “(a) “(b) the employer is a close company; and the employer and the person are associated persons, or 10 the employer and the spouse, civil union partner, or de facto partner of the person are associated persons; and the employer withheld the amount of tax for the PAYE income payment shown in the employer monthly sched­ ule.
“(c) 15 “Exclusions “(4) The person’s credit is extinguished if the Commissioner does not receive an employer monthly schedule for the relevant amount of tax, or when the relevant particulars of the schedule are incorrect.

However, the credit is restored to the person if 20 the relevant matter is corrected and, for the purposes of this section, it is as if the error had not been made.
“Deﬁned in this Act: amount, amount of tax, associated person, close company, Commissioner, employee, employer, employer monthly schedule, pay, PAYE income payment, tax credit”.
25 228 Tax credits for resident withholding tax (1) Section LB 3(3) is replaced by the following: “Multi­rate PIEs and their investors “(3) For a multi­rate PIE and an investor in a multi­rate PIE, the amount of a tax credit is limited to the extent allowed under 30 subpart HM (Portfolio investment entities).” In section LB 3, in the list of deﬁned terms, “portfolio tax rate entity” is omitted, and “multi­rate PIE” is inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
35 (2) (3) 255 Part 1 cl 229 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 229 Tax credits related to personal service rehabilitation payments: providers In section LB 7(4)(b), “schedule 4, part H,” is replaced by “schedule 4, part I,”.

230 Tax credits related to personal service rehabilitation 5 payments: payers In section LB 8(3)(c), “schedule 4, part H,” is replaced by “schedule 4, part I,”.
231 Tax credits for housekeeping In section LC 6(4), “section LA 7 (Remaining refundable 10 credits: tax credits for families)” is replaced by “section LA 7 (Remaining refundable credits: tax credits under social policy schemes)”.

232 Subpart LD heading replaced The heading to subpart LD is replaced by “Tax credits for 15 gifts and donations”.

233 New heading inserted Before section LD 1, “Charitable and other public beneﬁt gifts” is inserted as a cross heading.
234 Tax credits for charitable or other public beneﬁt gifts 20 In section LD 1(5), “section LA 7 (Remaining refundable credits: tax credits for families)” is replaced by “section LA 7 (Remaining refundable credits: tax credits under social policy schemes)”.

235 Exclusions (1) In section LD 2, the words before paragraph (a) are replaced by the following: Section LD 1 does not apply to—”.
In section LD 2(f), “trusts).” is replaced by “trusts):”, and the following is added: “(g) in relation to the credit, a person who has a tax credit for a payroll donation.” (2) 256 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 236 236 New heading and sections LD 4 to LD 7 added After section LD 3, the following is added: “Payroll donations “LD 4 Tax credits for payroll donations “Who this section applies to “(1) This section applies to a person who— “(a) “(b) is an employee whose employer ﬁles by electronic means an employer monthly schedule that contains particulars relating to the person’s PAYE income pay­ ments for a pay period; and chooses to make a payroll donation in the pay period.
“Amount of credit “(2) The person has a tax credit for the pay period equal to an amount calculated using the formula— total donations × 331/3%.

“(3) “Deﬁnition of item in formula In the formula, total donations is the total amount of all pay­ roll donations made by the person in the pay period.

5 10 15 “Maximum credit “(4) Despite subsection (2), the amount of the tax credit must not 20 be more than the amount of tax for the person’s PAYE income payment for the period.
“Non­refundable credits “(5) A credit under this section is a non­refundable tax credit to which section LA 4(1) (When total tax credit more than in­ 25 come tax liability) applies for the tax year in which the period falls.

“No refunds for donations “(6) A person who has a tax credit under this section may not make an application under section 41A of the Tax Administration 30 Act 1994 for any refund relating to the amount of a payroll donation.
“Deﬁned in this Act: amount, amount of tax, employee, employer monthly schedule, non­refundable tax credit, pay period, PAYE income payment, payroll donation, tax credit 35 257 Part 1 cl 236 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “LD 5 When tax credit incorrectly calculated If an employer calculates the amount of a person’s tax credit under section LD 4 for a pay period incorrectly, the credit is extinguished and the correct amount is included in the person’s tax credits for PAYE income payments under section LB 1 5 (Tax credits for PAYE income payments) for the tax year in which the pay period falls.
“Deﬁned in this Act: amount, employer, pay period, PAYE income payment, tax credit, tax year “LD 6 When donation is paid to ineligible recipient or not 10 transferred “When this section applies “(a) “(1) This section applies for the purposes of section LD 4 when— an employer fails to transfer a person’s payroll donation to the relevant recipient under section 24Q of the Tax 15 Administration Act 1994: the recipient of a payroll donation is not an entity de­ scribed in section LD 3(2) or listed in schedule 32 (Re­ cipients of charitable or other public beneﬁt gifts).
“(b) “Treatment of credit “(2) The tax credit is extinguished.

“Deﬁned in this Act: employer, payroll donation, tax credit 20 “LD 7 Meaning and ranking of payroll donation “Meaning “(1) A payroll donation, for a pay period, is an amount that a per­ 25 son asks their employer to transfer from the amount of the per­ son’s PAYE income payment for the period to an entity de­ scribed in section LD 3(2) or listed in schedule 32 (Recipients of charitable or other public beneﬁt gifts).
“Priorities of amounts withheld and other deductions “(2) A person may make a payroll donation only after satisfying any tax obligation that they may have or any other statutory 30 258 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 238 requirement that they may be obliged to meet from their PAYE income payment.

“Deﬁned in this Act: amount, pay period, PAYE income payment, payroll do­ nation”.
237 Tax credits for imputation credits (1) In section LE 1(1), “Section OZ 11 (Tax credits for imputation credits and FDP credits) may apply to modify this section.” is added after “tax year.” 5 (2) After section LE 1(1), the following is inserted: “Portfolio tax rate entities and their investors “(1B) An investor in a portfolio tax rate entity who is allocated an imputation credit under section HL 29(7)(b) (Credits re­ ceived by portfolio tax rate entity or portfolio investor proxy) has a tax credit for the tax year of an amount equal to the amount of the imputation credit.” Section LE 1(1B), is replaced by the following: “Multi­rate PIEs and their investors (3) 10 15 (4) (5) “(1B) An investor in a multi­rate PIE who has an imputation credit attributed for use under section HM 54 (Use of tax credits other than foreign tax credits by investors) has a tax credit for 20 the tax year of an amount equal to the amount of the imputation credit.” Section LE 1(4) is repealed.
In section LE 1, in the list of deﬁned terms, “portfolio tax rate entity” is omitted, and “multi­rate PIE” is inserted.

Subsection (1) applies for the 2008–09 and later income years.

Subsections (3) and (5) apply for the 2009–10 and later in­ come years.
(6) (7) 25 238 Use of remaining credits by companies and trustees (1) Section LE 2(1) is replaced by the following: “When this section applies “(1) This section applies when–– 30 259 Part 1 cl 239 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) a person described in subsection (2) has an amount of tax credit remaining for a tax year under section LA 5(4) (Treatment of remaining credits): a life insurer has an amount of tax credit remaining for a tax year under section LA 5(4), but only to the extent 5 to which the amount is for their shareholder base.” (2) (3) (4) (5) (6) In section LE 2(2),–– (a) in the words before the paragraphs, “subsection (1)” is replaced by “subsection (1)(a)”: in paragraph (a), “company” is replaced by “company 10 that is not a life insurer”.
(b) In section LE 2(3), “The person” is replaced by “The person or the life insurer, as applicable,”.

In section LE 2(4)(a), “section LA 5(4)” is replaced by “sec­ tion LA 5(4), but, for a life insurer, only to the extent to which 15 the amount is for their shareholder base”.

In section LE 2, in the list of deﬁned terms, “life insurer” and “shareholder base” are inserted.

Subsections (1) to (5) apply for income years beginning on and after 1 April 2009.
20 239 New section LE 2B inserted (1) After section LE 2, the following is inserted: “LE 2B Use of remaining credits by life insurer on policyholder base “When this section applies “(1) This section applies to a life insurer who has an amount of tax credit remaining for a tax year (the surplus credit year) under section LA 5(4) (Treatment of remaining credits), but only to the extent to which the amount is for their policyholder base.
“Policyholder base gross expenditure or loss “(2) The life insurer has an amount of policyholder base gross ex­ penditure or loss, treated as incurred in deriving policyholder base gross income, for the income year corresponding to the tax year after the surplus credit year equal to an amount calcu­ lated using the formula–– 25 30 35 260 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 241 policyholder remaining credit policyholder rate.
“(3) “Deﬁnition of items in formula In the formula,–– “(a) policyholder remaining credit is the amount of the tax credit remaining for the surplus credit year under sec­ tion LA 5(4), but only to the extent to which the amount 5 is for the life insurer’s policyholder base: “(b) policyholder rate is the basic rate of income tax set out in schedule 1, part A, clause 8 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe beneﬁts).
“Deﬁned in this Act: amount, income tax, income year, life insurer, policy­ 10 holder base, tax credit, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.

(2) 240 Use of remaining credits by others (1) In section LE 3(1), “section LE 2(2)” is replaced by “section 15 LE 2(2) or a life insurer”.

In section LE 3, in the list of deﬁned terms, “life insurer” is inserted.

Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.
20 (2) (3) 241 Tax credits for FDP credits (1) Section LF 1(4) is replaced by the following: “Multi­rate PIEs and their investors “(4) For a multi­rate PIE and an investor in a multi­rate PIE, the amount of a tax credit is limited to the extent allowed under 25 subpart HM (Portfolio investment entities).” In section LF 1, in the list of deﬁned terms, “portfolio tax rate entity” is omitted, and “multi­rate PIE” is inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
30 (2) (3) 261 Part 1 cl 242 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 242 Subpart LH–Tax credits for expenditure on research and development In sections LH 1 to LH 17, the compare notes are repealed.

243 Who this subpart applies to (1) After section LH 1(2), the following is added: “Excluded income “(3) A tax credit that a person has under this subpart is excluded (2) (3) income of the person.” In section LH 1, in the list of deﬁned terms, “excluded income” is inserted.
Subsections (1) and (2) apply for the 2008–09 and later in­ come years.

244 Tax credits relating to expenditure on research and development (1) After section LH 2(6), the following are added: “Treatment when tax credit used under subsection (6) “(7) The amount of a tax credit used under subsection (6) is treated as excess tax for the purposes of section LA 6(2)(e) and Part 10B of the Tax Administration Act 1994.
“Statements “(8) Despite subsection (2), no amount of tax credit arises before the statements referred to in sections 68D or 68E of the Tax Administration Act 1994 are provided.” Subsection (1) applies for the 2008–09 and later income years.
(2) 245 Requirements (1) After section LH 3(5), the following is added: “Modiﬁcations of requirements “(6) The requirements of this section are modiﬁed as follows: “(a) section LH 5B modiﬁes the requirements in subsection 30 (1)(a) in relation to certain research and development activities: 262 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 246 “(b) section LH 5C modiﬁes the requirements in subsection (1)(e) in relation to the allocation of certain items of expenditure or depreciation loss.” (2) Subsection (1) applies for the 2008–09 and later income years.
5 246 New sections LH 5B and LH 5C inserted (1) After section LH 5, the following are inserted “LH 5B Modiﬁcation: timing of research and development activities “When this section applies “(1) This section applies for the purposes of section LH 3(1)(a) to modify the rule that research and development activities must be performed in the income year for which the person has the tax credit.
“First case: deferred pay for employees 10 15 “(2) The timing rule does not apply to research and development activities in relation to which the payment to an employee of an amount described in schedule 21, part A, clause 1(b) (Ex­ penditure and activities related to research and development) is deferred to an income year that is later than the income year 20 in which the relevant research and development activities were performed.
“Second case: project becoming New Zealand­based project “(3) The timing rule does not apply to research and development activities performed outside New Zealand in an income year 25 in which the activities were not part of a research and devel­ opment project because the requirements of section LH 6(4) were not met, but in a later income year the requirements of that section are met.
“Third case: when eligible expenditure increased in later income years 30 “(4) The timing rule does not apply to research and development activities performed outside New Zealand in an income year in relation to which the expenditure was excluded by section 263 Part 1 cl 246 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill LH 6(5)(c) in earlier income years, but in a later income year the requirements of that section are met.
“Deﬁned in this Act: amount, employee, income year, New Zealand, pay, re­ search and development activities, research and development project, tax credit “LH 5C Modiﬁcation: allocation of expenditure “When this section applies “(1) This section applies for the purposes of section LH 3(1)(e) to modify the rule that the expenditure must be incurred in the income year in which the research and development activities occurred.
5 10 “First case: deferred pay for employees “(2) The timing rule does not apply to expenditure relating to an employee that is an amount described in schedule 21, part A, clause 1(b) (Expenditure and activities related to research and development), the payment of which is deferred to an income 15 year that is later than the income year in which the relevant research and development activities were performed.
“Second case: project becoming New Zealand­based project “(3) The timing rule does not apply to expenditure or an amount of depreciation loss incurred on research and development ac­ 20 tivities performed outside New Zealand in an income year in which the activities were not part of a research and develop­ ment project because the requirements of section LH 6(4) were not met, but in a later income year the requirements of that sec­ tion are met.
25 “Third case: when eligible expenditure increased in later income years “(4) The timing rule does not apply to expenditure or an amount of depreciation loss incurred on research and development ac­ tivities performed outside New Zealand in an income year in 30 relation to which the expenditure was excluded by section LH 6(5)(c) in earlier income years, but in a later income year the requirements of that section are met.
The excess overseas eli­ gible expenditure must be carried forward to the next income year and used to the extent allowed under that section.

Any 35 remaining excess must be carried forward to the next income 264 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 249 year in the same way under this subsection, until the amount is fully used.
“Deﬁned in this Act: amount, depreciation loss, employee, income year, New Zealand, pay, research and development activities, research and development project, salary or wages”.

Subsection (1) applies for the 2008–09 and later income years.
(2) 247 New section LH 14B inserted (1) After section LH 14, the following is inserted: “LH 14B Recovery of overpaid tax credit “When this section applies “(1) This section applies when the Commissioner considers the amount of a tax credit under this subpart that is used under sec­ tions LA 2, LA 6(2), or LH 2(6) (which relate to tax credits) for a tax year is more than the proper amount.

“Recovery of overpayment “(2) The Commissioner may recover the excess as if it were income tax payable by the person.
“Deﬁned in this Act: amount, Commissioner, income tax, pay, tax credit, tax year”.

Subsection (1) applies for the 2008–09 and later income years.
(2) 248 What this subpart does After section LJ 1(5), the following is added: “Relationship with section YD 5 “(6) Section YD 5 (Apportionment of income derived partly in New Zealand) applies to determine how an amount is appor­ tioned to sources outside New Zealand.” 249 Tax credits for foreign income tax (1) Section LJ 2(5) is replaced by the following: “Multi­rate PIEs and their investors “(5) For a multi­rate PIE and an investor in a multi­rate PIE, the amount of a tax credit is limited to the extent allowed under subpart HM (Portfolio investment entities).” 265 Part 1 cl 250 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) (3) In section LJ 2, in the list of deﬁned terms, “portfolio tax rate entity” is omitted and “multi­rate PIE” is inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

250 Repaid foreign tax (1) (2) Section LJ 7(3) is repealed.

In section LJ 7(4), the words before paragraph (a) are replaced by the following: 5 “(4) The liability under subsection (2) is treated as income tax payable 30 days after the later of the following dates:”.
10 251 Tax credits relating to attributed CFC income (1) Section LK 1(1), other than the heading, is replaced by the following: “(1) A person who has an amount of attributed CFC income for an income year has a tax credit for the tax year correspond­ 15 ing to the income year equal to the following amounts paid or payable in relation to the attributed CFC income: “(a) the amount of income tax, including NRWT, paid by or on behalf of the CFC from which the income is derived: the amount of foreign income tax paid by or on behalf 20 of the CFC from which the income is derived: the amount of foreign income tax paid by a foreign com­ pany in relation to the CFC under the legislation of an­ other country or territory that is the equivalent of the international tax rules.” “(b) “(c) 25 In section LK 1(3), the second sentence is omitted.
(2) (3) After section LK 1(4), the following are added: “When subsection (6) applies “(5) Subsection (6) applies when— “(a) “(b) “(c) a person has a credit under subsection (1) in relation 30 to an amount of income tax or foreign tax; and the credit has been used under section LA 2 (Satisfac­ tion of income tax liability) or is carried forward under section LK 4; and the amount of income tax or foreign tax has been repaid.
35 266 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 253 “Credit repayable or extinguished “(6) The amount of the credit— “(a) must be paid to the Commissioner if it has been used “(b) under section LA 2: is extinguished, if it is carried forward under section LK 5 4.
“When liability payable “(7) The liability under subsection (6)(a) is treated as income tax payable 30 days after the later of the following dates: “(a) the date of the notice of assessment in relation to which 10 the person has used the credit: the date on which the person who paid the tax, or a person associated with them, receives the repaid tax.” “(b) (4) (5) (6) In section LK 1, in the list of deﬁned terms, “assessment”, “as­ sociated person”, “Commissioner”, “international tax rules”, 15 “notice”, and “NRWT” are inserted.
In section LK 1, in the list of deﬁned terms, “conduit tax relief” and “CTR company” are omitted.

Subsections (2) and (5) apply for the 2009–10 and later in­ come years.
20 252 Calculation of amount of credit Section LK 2(2)(b) is replaced by the following: “(b) tax paid is the amount of income tax or foreign income tax paid or payable by the CFC (or by the foreign com­ pany referred to in subsection (1)(c) in relation to the 25 CFC) for the accounting period corresponding to the tax year, including an amount withheld by another person and paid or payable on behalf of the CFC:”.
253 New section LK 5B inserted (1) After section LK 5, the following is inserted: “LK 5B Effect of credits carried forward from tax year before 30 2009–10 tax year “What this section applies to “(1) This section applies to a tax credit— 267 Part 1 cl 253 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) arising for a person under section LK 1 in relation to attributed CFC income from a CFC for a tax year before the 2009–10 tax year; and carried forward under section LK 4 to a tax year (the credit use year) that is the 2009–10 or a later tax year.
5 “Effect of credit under subpart LA “(2) The amount of the credit for the purposes of subpart LA (Gen­ eral rules for tax credits) for the credit use year is— “(a) zero, if the amount of the credit carried forward to the credit use year from the tax year in which the credit 10 arose under section LK 1, (the branch equivalent credit amount) is less than the amount (the non­at­ tributed CFC liability) that would be the person’s income tax liability for the credit use year if the person’s only assessable income were the amount 15 of branch equivalent income of the person from the CFC— “(i) “(ii) for the credit use year; and in excess of the attributed CFC income of the person from the CFC for the credit use year; or 20 “(b) “(c) the amount that would be the person’s income tax liabil­ ity for the credit use year if the person’s only assessable income were the attributed CFC income of the person from the CFC for the credit use year (the attributed CFC liability), if the branch equivalent credit amount 25 is equal to or greater than the greater of— the attributed CFC liability: “(i) the amount that would be the person’s income tax “(ii) liability for the credit use year if the person’s only assessable income were the branch equivalent in­ 30 come of the person from the CFC for the credit use year (the branch equivalent liability); or the lesser of the attributed CFC liability and the amount by which the branch equivalent credit amount exceeds the non­attributed CFC liability, if paragraphs (a) and 35 (b) do not apply.
268 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 256 “Amount of credit treated as being used in credit use year “(3) The amount deducted from the credit carried forward to the credit use year to determine the amount available to be carried forward under section LK 4 from the credit use year is— “(a) the branch equivalent credit amount, if that amount is 5 less than or equal to the greater of the attributed CFC liability and the branch equivalent liability; or the amount that is the greater of the attributed CFC li­ ability and the branch equivalent liability, if paragraph (a) does not apply.
10 “(b) “Deﬁned in this Act: assessable income, attributed CFC income, branch equivalent CFC income, CFC, income tax liability, tax credit, tax year”.

Subsection (1) applies for the 2009–10 and later income years.

(2) 254 Subpart LL repealed Subpart LL is repealed.

(1) Subsection (1) applies for the 2009–10 and later income (2) years.

255 Sections LQ 1 to LQ 4 repealed (1) (2) Sections LQ 1 to LQ 4 are repealed.

Subsection (1) applies for the 2009–10 and later income years.
256 Subpart LS replaced (1) Subpart LS is replaced by the following: “Subpart LS—Tax credits for multi­rate PIEs and investors “LS 1 Tax credits for multi­rate PIEs “Tax credit “(1) A multi­rate PIE has a tax credit for a tax year for the amount determined— “(a) under sections HM 51 and HM 53 (which relate to certain tax credits) for an imputation credit or a credit for tax paid or withheld: 15 20 25 30 269 Part 1 cl 256 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) under section HM 55 (Tax credits for losses) arising from a tax loss attributed to an investor.
“When this section does not apply “(2) This section does not apply— “(a) in relation to— “(i) “(ii) a zero­rated investor: an exiting investor who is treated under section HM 60 (Certain exiting investors zero­rated) as zero­rated: 5 “(b) if the PIE pays tax using the provisional tax calculation 10 option under section HM 44 (Provisional tax calcula­ tion option).

“Amount of credit “(3) The amount of the tax credit equals the amount determined under the relevant section.
“Timing 15 “(4) The PIE has the tax credit for the tax year in which the relevant calculation period falls.

“(5) “Exception: timing under exit calculation option If the PIE calculates its income tax liability using the exit cal­ 20 culation option under section HM 42 (Exit calculation op­ tion), the amount of a credit attributable to an investor is able to be used to satisfy a tax obligation relating to the investor.
“Deﬁned in this Act: amount, calculation period, imputation credit, income tax liability, investor, multi­rate PIE, pay, PIE, provisional tax, tax credit, tax loss, 25 tax year, zero­rated investor “Compare: 2007 No 97 s LS 1 “LS 2 Tax credits for investors in multi­rate PIEs “When this section applies “(1) This section applies when— 30 “(a) “(b) an investor has attributed PIE income from a multi­rate PIE for a tax year; and the investor’s prescribed investor rate is more than zero; and 270 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 256 “(c) the income is not excluded income of the investor be­ cause the test in section CX 56(1)(b) (Attributed in­ come of certain investors in multi­rate PIEs) is not met.
“Amount of credit “(2) The investor has a tax credit for the income year in which the 5 PIE’s tax year ends.

The amount of the credit is equal to the amount of income tax paid by the PIE in relation to the at­ tributed PIE income, and may be used to satisfy the investor’s income tax liability for the tax year.
“Deﬁned in this Act: amount, attributed PIE income, excluded income, income, 10 income year, investor, multi­rate PIE, pay, PIE, prescribed investor rate, tax credit, tax year “Compare: 2007 No 97 s LS 2 “LS 3 Tax credits for zero­rated investors “When this section applies 15 “(1) This section applies when a zero­rated investor has attributed PIE income from a multi­rate PIE for a tax year.
“Amount of credit “(2) The investor has a tax credit that may be used to satisfy their income tax liability for the tax year equal to the amount of 20 income tax paid by the PIE for the attributed income for the tax year.

“Credit for PIE’s foreign tax “(3) A zero­rated investor also has a tax credit for the tax year for the amount determined under section HM 52 (Use of foreign 25 tax credits by zero­rated and certain exiting investors) for for­ eign income tax paid by the PIE.
“Credit for PIE’s other tax credits “(4) A zero­rated investor also has a tax credit for the tax year for the amount determined under section HM 54 (Use of tax 30 credits other than foreign tax credits by investors) for tax paid or withheld.

271 Part 1 cl 256 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Timing “(5) The investor has the tax credit for the tax year corresponding to the income year in which the PIE’s tax year ends.
“Deﬁned in this Act: amount, attributed PIE income, income tax, income tax liability, income year, multi­rate PIE, pay, PIE, tax credit, tax year, zero­rated 5 investor “Compare: 2007 No 97 s LS 3 “LS 4 Tax credits for certain exiting investors “When this section applies “(1) This section applies when an exiting investor in a multi­rate 10 PIE who is treated under section HM 60 (Certain exiting investors zero­rated) as zero­rated has attributed PIE income from the PIE for a tax year in which the exit period falls.
“Amount of credit “(2) The investor has a tax credit that may be used to satisfy their 15 income tax liability for the tax year equal to any amount paid by the PIE under section HM 43(4) (Quarterly calculation option) to the Commissioner after the investor exits from the PIE for the residual value of the investor’s interest.
“Credit for PIE’s foreign tax “(3) An exiting investor also has a tax credit for the tax year for the amount determined under section HM 52 (Use of foreign tax credits by zero­rated and certain exiting investors) for foreign income tax paid by the PIE.

“Credit for PIE’s other tax credits “(4) An exiting investor also has a tax credit for the tax year for the amount determined under section HM 54 (Use of tax credits other than foreign tax credits by investors) for tax paid or with­ held.
20 25 272 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 258 “Timing “(5) The investor has the tax credit for the tax year corresponding to the income year in which the PIE’s tax year ends.

“Deﬁned in this Act: attributed PIE income, exit period, foreign income tax, income tax liability, income year, investor, investor interest, multi­rate PIE, pay, 5 PIE, tax credit, tax year “Compare: 2007 No 97 s LS 4”.
Subsection (1) applies for the 2009–10 and later income years (2) 257 Adjustments for calculation of family scheme income (1) Section MB 1(5) is replaced by the following: “Investment income 10 (2) “(5) For the purposes of subsection (1), an amount of income at­ tributed by a portfolio investment entity that is not excluded in­ come of the person is not included in family scheme income.” 15 In section MB 1, “portfolio investor allocated income” is omit­ ted and “income” and “portfolio investment entity” are in­ serted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years (3) 20 258 Tax credits for superannuation contributions (1) In section MK 1(1), the second sentence is replaced by “Sec­ tion MK 2 imposes some eligibility requirements for the year described in subsection (3) in relation to the person.” (2) After section MK 1(2), the following is inserted: “End of year square­up employer tax credit 25 “(2B) An employer who has a tax credit calculated under section MK 10 for a tax year and who meets the requirements in sec­ tion MK 12B may have an amount of tax credit (the end of year square­up credit) for a tax year, calculated under sec­ 30 tion MK 12C.” Subsection (2) applies for employer contributions made on or after 1 April 2008.
(3) 273 Part 1 cl 259 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 259 Eligibility requirements In section MK 2(1), the words before paragraph (a) are re­ placed by the following: “(1) For the purposes of section MK 1(1), the requirements for the person for the year described in section MK 1(3) are the fol­ 5 lowing:”.
260 New sections MK 12B to MK 12D inserted (1) After section MK 12, the following is inserted: “MK 12B Eligibility requirements: end of year square­up credit For the purposes of section MK 1(2B), the requirements are 10 that the employer— “(a) has, in the tax year, an amount of tax credit referred to in section MK 10 for an employee: claims their entitlement, square­up credit.
to an end of year if any, “(b) 15 “Deﬁned in this Act: “MK 12C Amount of credit: end of year square­up credit “End of year square­up credit: calculations “(1) For the tax year the amount of the end of year square­up credit is the lesser of the amounts calculated under subsections (2) 20 and (3), treating negative amounts as equal to zero.

“First amount “(2) For the purposes of subsection (1), the amount is calculated using the formula— employer contributions − ETC for tax year.
“Second amount 25 “(3) For the purposes of subsection (1), the amount is calculated using the formula— 1042.86 365 × days in tax year − ETC for tax year.
274 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 262 “(4) “Deﬁnition of items in formulas In the formulas in subsections (2) and (3),— “(a) employer contributions is employer contributions for the employee to the extent to which the contributions are for the tax year: “(b) ETC for tax year is the total amount of tax credit re­ ferred to in section MK 10 for an employee for payment periods which start in the tax year: “(c) days in tax year is the number of days in the tax year on 5 which the employee meets the requirements of section 10 MK 9(1)(a) and for which salary and wages are paid to the employee.
“Deﬁned in this Act: “MK 12D Using tax credits: end of year square­up credit The Commissioner must use an end of year square­up credit 15 referred to in section MK 12C by applying section MK 12, treating the end of year square­up credit as a tax credit referred to in section MK 10.

(2) “Deﬁned in this Act:”.

Subsection (1) applies for employer contributions made on 20 or after 1 April 2008.
261 Employees opting out (1) In section MK 14, “a tax credit for an employer contribution for the employee’s salary or wages” is replaced by “tax credits under section MK 1(2) and (2B)”.

Subsection (1) applies for employer contributions made on or after 1 April 2008.
25 (2) 262 What this subpart does Section ML 1(2)(b)(i) to (iii) are replaced by the following: “(i) to a director of a company by the company or a 30 person associated with the company: to a person by a person associated with them: “(ii) “(iii) by a person to an employee who has been paid a redundancy payment by a person associated with the person.” 35 275 Part 1 cl 263 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 263 Section ML 2 replaced Section ML 2 is replaced by the following: “ML 2 Tax credit for redundancy payments “Tax credit “(1) A person who derives a redundancy payment has a tax credit 5 of an amount equal to 6 cents for every complete dollar of total redundancy payments derived by them.
It does not matter whether— “(a) a redundancy payment is paid in a lump sum or by in­ stalment: the total redundancy payments relate to 1 or more occa­ sions of redundancy of the person.

“(b) “Maximum amount “(2) Despite subsection (1), the maximum credit that the person has for each occasion of redundancy is $3,600.

“Deﬁned in this Act: amount, redundancy payment, tax credit”.

264 Memorandum accounts (1) (2) Section OA 2(1)(f) is repealed.
Subsection (1) applies for income years beginning on and after 1 April 2009.

265 Credits (1) In section OA 5(2)(b), “groups.” is replaced by “groups:”, and the following is inserted: “(c) credited under section OZ 18 (Credit­back of PCA bal­ ance).” (2) (3) Section OA 5(7) is repealed.

Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.

266 Debits (1) (2) Section OA 6(7) is repealed.

Subsection (1) applies for income years beginning on and after 1 April 2009.
276 10 15 20 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 270 267 Opening balances of memorandum accounts (1) (2) Section OA 7(2)(f) is repealed.

Subsection (1) applies for income years beginning on and after 1 April 2009.

268 Shareholder continuity requirements for memorandum 5 (1) accounts In section OA 8(2), “Subsections (4) and (5)” is replaced by “Subsections (3B) to (5)”.
(2) After section OA 8(3), the following is inserted: “Exclusions: qualifying companies 10 “(3B) Subsection (2) does not apply to a qualifying company.
But, if section HA 11(1) (When requirements no longer met) applies to the company,— “(a) “(b) an adjustment must be made under section HA 18 (Treatment of dividends when qualifying company 15 status ends) to the company’s imputation credit account and FDP account, as applicable; and the shareholder continuity requirements apply to the company from the day before the date on which the sta­ tus as a qualifying company ends.” Section OA 8(4) is replaced by the following: “Exclusion: ASC accounts 20 (3) “(4) Subsection (2) does not apply to an ASC account.” (4) Subsection (3) applies for income years beginning on and after 1 April 2009.
25 269 Section OA 12 repealed (1) (2) Section OA 12 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

270 Calculation of maximum permitted ratios (1) In section OA 18(3), “for the income year” is replaced by “for the tax year corresponding to the income year”.

Subsection (1) applies for the 2008–09 and later income years.
(2) 30 277 Part 1 cl 271 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 271 General rules for companies with imputation credit (1) (2) (3) a multi­rate PIE.” accounts Section OB 1(2)(f) is replaced by the following: “(f) In section OB 1, in the list of deﬁned terms, “portfolio tax rate 5 entity” is omitted and “multi­rate PIE” is inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years 272 New section OB 3B (1) After section OB 3, the following is inserted: “OB 3B General rule for life insurer’s policyholder base 10 An imputation credit does not arise in relation to a life in­ surer’s policyholder base.

Similarly, an imputation debit does not arise in relation to a life insurer’s policyholder base.

“Deﬁned in this Act: imputation credit, imputation debit, life insurer, policy­ 15 holder base”.
Subsection (1) applies for income years beginning on and after 1 April 2009.

ICA payment of tax Section OB 4(3)(c) is replaced by the following: “(c) income tax paid by a life insurer to satisfy its schedular income tax liability for schedular policyholder base in­ come; or”.
20 Section OB 4(3)(e) and (eb) are replaced by the following: “(e) income tax paid under subpart LA and section LF 1 25 (which relate to tax credits for FDP credits and their use) by crediting a foreign dividend payment (FDP) credit; or “(eb) income tax paid by a tax credit under subpart LA and section LH 2 (which relate to tax credits for research 30 development and their use); or”.

Section OB 4(3)(h) is repealed.

In section OB 4, in the list of deﬁned terms, “branch equivalent tax account” is omitted.
In section OB 4, in the list of deﬁned terms, “policyholder 35 base income tax liability” is omitted, and “schedular income (2) 273 (1) (2) (3) (4) (5) 278 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 276 tax liability”, and “schedular policyholder base income” are inserted.

Subsection (2) applies for the 2008–09 and later income years.

Subsections (1) and (5) apply for income years beginning 5 on and after 1 April 2009.
Subsections (3) and (4) apply for the 2009–10 and later in­ come years.

ICA resident withholding tax withheld In section OB 8(1), “by the company” is replaced by “by the 10 company other than as policyholder base gross income”.

In section OB 8, in the list of deﬁned terms, “policyholder base gross income” is inserted.

Subsections (1) and (2) applies for income years beginning on and after 1 April 2009.
15 (6) (7) (8) 274 (1) (2) (3) 275 New section OB 9B inserted After section OB 9, the following is inserted: “OB 9B ICA company allocated imputation credit with income from PTRE “Credit 20 “(1) An ICA company that is an investor in a portfolio tax rate entity has an imputation credit for the amount of an imputation credit allocated to it under section HL 29(7)(b).
“Table reference “(2) The imputation credit in subsection (1) is referred to in table 25 O1: imputation credits, row 7B (imputation credit allocated with income from PTRE).

“Credit date “(3) The credit date is the day the amount is allocated.

“Deﬁned in this Act: amount, ICA company, imputation credit, portfolio tax 30 rate entity”.
276 Section OB 9B replaced (1) Section OB 9B is replaced by the following: 279 Part 1 cl 277 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “OB 9B ICA attributed PIE income with imputation credit “Credit “(1) An ICA company that is an investor in a multi­rate PIE has an imputation credit for the amount of an imputation credit attributed to it under subpart LJ (Foreign tax credits) and de­ 5 termined under section HM 54 (Use of tax credits other than foreign tax credits by investors).
“Table reference “(2) The imputation credit in subsection (1) is referred to in table O1: imputation credits, row 7B (attributed PIE income with 10 imputation credit).

“Credit date “(3) The credit date is the day the amount is attributed.

“Deﬁned in this Act: amount, attributed PIE income, ICA company, imputation credit, multi­rate PIE”.

Subsection (1) applies for the 2009–10 and later income years 15 (2) 277 Section OB 11 repealed (1) (2) Section OB 11 is repealed.
Subsection (1) applies for the 2009–10 and later income 20 years.

278 Section OB 17 repealed (1) (2) Section OB 17 is repealed.

Subsection (1) applies for income years beginning on and after 1 April 2009.

25 ICA refund of income tax 279 (1) After section OB 32(2)(a), the following is inserted: “(ab) a refund of income tax paid by a life insurer to satisfy its schedular income tax liability for schedular policy­ holder base income; or”.
30 (2) After section OB 32(6), the following is added: 280 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 281 “Relationship with section OB 37 “(7) This section does not apply to an amount that gives rise to a (3) (4) (5) debit under section OB 37.” In section OB 32, in the list of deﬁned terms, “life insurer”, “schedular policyholder base income”, and “schedular income 5 tax liability” are inserted.
Subsections (1) and (3) apply for income years beginning on and after 1 April 2009.

Subsection (2) applies for the 2008–09 and later income years.
10 280 (1) ICA amount applied to pay other taxes Section OB 33(1), other than the heading, is replaced by the following: “(1) An ICA company has an imputation debit for— “(a) “(b) an amount of overpaid income tax applied to pay an 15 amount due under the Inland Revenue Acts: an increased amount of tax as described in section RP 17B(3) (Tax pooling accounts and their use) applied to pay an amount due under the Inland Revenue Acts other than income tax.” 20 (2) After section OB 33(4), the following is added: “Relationship with section OB 37 “(5) This section does not apply to an amount that gives rise to a (3) debit under section OB 37.” Subsection (2) applies for the 2008–09 and later income 25 years.
281 (1) ICA refund from tax pooling account Section OB 34(4) is replaced by the following: “Debit date for companies other than qualifying companies “(4) The debit date for a company that is not a qualifying company 30 is— “(a) “(b) the last day of the previous tax year to the extent of the amount of the debit that is no more than the credit balance in the imputation credit account on that date; or the day the refund is made to the extent of the remain­ 35 ing amount of the debit that is no more than the credit 281 Part 1 cl 282 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill balance in the imputation credit account on the day of refund; or the last day of the previous tax year for the remainder of the debit.
“(c) “Debit date for qualifying companies “(5) The debit date for a qualifying company is the day the refund (2) is made.” In section OB 34, in the list of deﬁned terms, “company”, “imputation credit account”, “qualifying company”, and “tax year” are inserted.

282 ICA transfer within tax pooling account In section OB 35(4)(b), “refund” is replaced by “transfer”.
283 New section OB 35B (1) After section OB 35, the following is inserted: “OB 35B ICA debit for transfer from tax pooling account for policyholder base liability “Debit 5 10 15 “(1) An ICA company has an imputation debit for the amount trans­ ferred from a tax pooling account to their tax account with the Commissioner, to the extent to which the company is a life 20 insurer, and the amount satisﬁes its schedular income tax li­ ability for schedular policyholder base income or its income tax liability for a life fund PIE that is a multi­rate PIE.
“Table reference “(2) The imputation debit in subsection (1) is referred to in table 25 imputation debits, row 7B (debit for transfer from tax O2: pooling account for policyholder base liability).

“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: ICA company, imputation credit, imputation debit, life 30 insurer, schedular income tax liability, schedular policyholder base income, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 282 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 285 284 (1) ICA refund of tax credit Section OB 37(1) is replaced by the following: “Debit “(1) An ICA company has an imputation debit for— “(a) “(b) “(c) the amount of a transfer to the company under sec­ 5 tion LA 6(2)(d) (Remaining refundable credits: PAYE, RWT, and certain other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund to the company under section LA 6(2)(e): an amount used by the company under section LH 2(6) (Tax credits relating to expenditure on research and de­ velopment) to pay an amount payable under an Inland Revenue Act to the extent to which the use does not lead to a refund of income tax.
10 15 “Exclusion: FDPA companies “(1B) Despite subsection (1), an FDPA company does not have an imputation debit to the extent to which the amount transferred, refunded, or used is a tax credit under subpart LF (Tax credits for FDP credits).” Section OB 37(3), other than the heading, is replaced by the following: “(3) The debit date is— (2) “(a) “(b) “(c) for a debit referred to in subsection (1)(a), the day the amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: for a debit referred to in subsection (1)(c), the day the amount is applied.” 20 25 (3) Subsections (1) and (2) apply for the 2008–09 and later in­ 30 come years.
285 Section OB 47 replaced (1) Section OB 47 is replaced by the following: “OB 47 Debit for policyholder base imputation credits “Debit 35 “(1) An ICA company has an imputation debit for the amount of an imputation credit attached to a dividend derived by the com­ 283 Part 1 cl 286 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill pany, to the extent to which it is derived by it as a life insurer and apportioned to their policyholder base.
“Table reference “(2) The imputation debit in subsection (1) is referred to in table imputation debits, row 20 (debit for policyholder base 5 O2: imputation credits).

“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: ICA company, imputation credit, imputation debit, life insurer, policyholder base, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
10 (2) 286 Table O1: imputation credits (1) In table O1, after row 7, the following is inserted: 7B imputation credit day of allocation section OB 9B allocated with income from PTRE (2) Table O1, row 7B is replaced by the following: 15 7B attributed PIE income day of attribution section OB 9B with imputation credit (3) (4) (5) (6) Table O1, row 9 is repealed.

Table O1, row 15 is repealed.

Subsection (2) applies for the 2009–10 and later income years.
Subsection (4) applies for income years beginning on and 20 after 1 April 2009.
287 Table O2: imputation debits (1) In table O2, after row 7, the following is inserted: 7B Debit for transfer from tax pooling account for policyholder base liability 31 March section OB 35B (2) Table O2, row 9 is replaced by the following: 284 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 290 9 transfer, refund, or use day of transfer, refund, section OB 37 of tax credit or use (3) (4) 20 (5) (6) (7) Table O2, row 12 is repealed.
In table O2, row 20 is replaced by the following: Debit for policyholder base imputation credits 31 March section OB 47 Subsection (1) and (4) apply for income years beginning on and after 1 April 2009.

Subsection (2) applies for the 2008–09 and later income 5 years.

Subsection (3) applies for the 2009–10 and later income years.

288 General rules for companies with FDP accounts (1) In section OC 1(1), “portfolio tax rate entity” is replaced by 10 “multi­rate PIE”.

Section OC 1(3) is repealed.


In section OC 1, in the list of deﬁned terms, “portfolio tax rate entity” is omitted and “multi­rate PIE” is inserted.

Subsections (1) to (3) apply for the 2009–10 and later in­ 15 come years.

(2) (3) (4) 289 New section OC 2B (1) After section OC 2, the following is inserted: “OC 2B General rule for life insurer’s policyholder base An FDP credit does not arise in relation to a life insurer’s pol­ 20 icyholder base.
Similarly, an FDP debit does not arise in rela­ tion to a life insurer’s policyholder base.

(2) “Deﬁned in this Act: FDP credit, FDP debit, life insurer, policyholder base”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
25 290 When company chooses to stop being FDPA company Section OC 4(3)(b) is replaced by the following: (1) “(b) pays any further income tax payable under section OC 30 or OC 31 for the year of election.” 285 Part 1 cl 291 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for the 2009–10 and later income years.
291 When company emigrates (1) Section OC 5(2)(b) is replaced by the following: “(b) pays any further income tax payable under sections OC 5 30 to OC 34 for the tax year.” (2) Subsection (1) applies for the 2009–10 and later income years.

292 Section OC 6 repealed (1) (2) Section OC 6 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

10 293 Section OC 8 repealed (1) (2) Section OC 8 is repealed.

Subsection (1) applies for the 2009–10 and later income 15 years.
294 Section OC 9 repealed (1) (2) Section OC 9 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

20 295 Section OC 10 repealed (1) (2) Section OC 10 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
296 FDPA refund of tax credit (1) Section OC 16(1), other than the heading, is replaced by the following: 25 “(1) An FDPA company has an FDP debit for the amount of a trans­ fer or refund to the company under section LA 6(2)(d) or (e) (Remaining refundable credits: PAYE, RWT, and certain other 30 items) to the extent to which the amount transferred or re­ 286 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 299 funded is a tax credit under subpart LF (Tax credits for FDP credits).” Section OC 16(3), other than the heading, is replaced by the following: (2) “(3) The debit date is the day the transfer or refund is made.” (3) Subsections (1) and (2) apply for the 2008–09 and later in­ come years.
5 297 Section OC 20 replaced (1) Section OC 20 is replaced by the following: “OC 20 Debit for policyholder base FDP credits “Debit “(1) An FDP company has an FDP debit for the amount of an FDP credit attached to a dividend derived by the company, to the extent to which it is derived by it as a life insurer and appor­ tioned to their policyholder base.

“Table reference “(2) The FDP debit in section (1) is referred to in table O4: FDP debits, row 9, (debit for policyholder base FDP credits).
“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: FDP company, FDP credit, FDP debit, life insurer, pol­ icyholder base, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.

(2) 298 Section OC 23 repealed (1) (2) Section OC 23 is repealed.

Subsection (1) applies for income years beginning on and after 1 April 2009.
10 15 20 25 299 Heading before section OC 30 replaced The heading before section OC 30 is replaced by “Further 30 income tax”.

287 Part 1 cl 300 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 300 Payment of further FDP for closing debit balance (1) In the heading to section OC 30, “further FDP” is replaced by “further income tax”.
Section OC 30(1) and (2) are replaced by the following: “Liability (2) 5 “(1) An FDPA company or consolidated FDP group is liable to pay further income tax for a closing debit balance in the FDP account of the company or the group.

“Due date (3) (4) “(2) The company or group must pay the further income tax to the 10 Commissioner no later than the 20 June following the end of the tax year.” Section OC 30(3) is repealed.
In section OC 30, in the list of deﬁned terms,— (a) “FDP rules”, “further FDP”, and “income tax” are omit­ 15 ted: “further income tax” is inserted.

(b) Subsections (1) to (4) apply for the 2009–10 and later in­ come years.

(5) 301 Payment of further FDP when company no longer New 20 (1) (2) Zealand resident In the heading to section OC 31, “further FDP” is replaced by “further income tax”.
Section OC 31(1) to (3) are replaced by the following: “Liability 25 “(1) An FDPA company is liable to pay further income tax for a debit balance in the company’s FDP account when the com­ pany stops being resident in New Zealand.

“Due date “(2) The company must pay the further income tax to the Commis­ 30 sioner by the day the company stops being resident in New Zealand.
“Paramount section “(3) A company to which this section applies that stops being an FDPA company on the last day of a tax year is liable for further 35 income tax under this section and not under section OC 30.” 288 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 303 (3) (4) (5) Section OC 31(4) is repealed.

In section OC 31, in the list of deﬁned terms,— (a) (b) Subsections (1) to (4) apply for the 2009–10 and later in­ 5 come years.
“FDP rules” and “further FDP” are omitted: “further income tax” is inserted.

302 Reduction of further FDP (1) In the heading to section OC 32, “further FDP” is replaced by “further income tax”.

In section OC 32(1), the words before paragraph (a) are re­ 10 placed by the following: (2) (3) “(1) An FDPA company’s liability for further income tax under section OC 30 or OC 31 may be reduced under subsection (2) if—”.
In section OC 32, in the list of deﬁned terms,— (a) (b) Subsections (1) to (3) apply for the 2009–10 and later in­ come years.

“further FDP” is omitted: “further income tax” is inserted.
(4) 303 Section OC 33 replaced (1) “OC 33 Income tax paid satisfying liability for further income Section OC 33 is replaced by the following: tax “Election 15 20 “(1) On meeting the requirements of subsection (2), an FDPA 25 company that is liable for further income tax may choose to satisfy the liability through a payment of income tax.
“Requirements “(2) The company must pay the income tax— “(a) “(b) after the end of the tax year in which the relevant debit 30 balance arises; and for an income year corresponding to a tax year in which the company is an FDPA company.

289 Part 1 cl 304 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Payment credited “(3) The payment of income tax satisﬁes the company’s liability to pay further income tax.
“When treated as paid “(4) The further income tax is treated as paid on the day the Com­ 5 missioner receives the payment of income tax.

“Deﬁned in this Act: Commissioner, company, FDPA company, further income tax, income tax, income year, pay, tax year”.

Subsection (1) applies for the 2009–10 and later income years.
(2) 304 Section OC 34 replaced (1) “OC 34 Further income tax paid satisfying liability for income Section OC 34 is replaced by the following: tax “Election 10 15 “(1) A company that pays further income tax may choose to treat the payment as satisfying a liability of the company to pay income tax.

“FDPA company status “(2) The liability referred to in subsection (1) must be for an in­ 20 come year that corresponds with a tax year in which the com­ pany is an FDPA company.
“Alternative for consolidated group “(3) A company that is part of a consolidated FDP group may choose that the payment under subsection (1) satisﬁes a 25 group liability for income tax owed by another group com­ pany when or after the payment is made.

“Deﬁned in this Act: company, consolidated FDP group, FDPA company, fur­ ther income tax, income tax, income year, pay, tax year”.

Subsection (1) applies for the 2009–10 and later income 30 years.
(2) 305 Heading and sections OC 35 to OC 39 repealed (1) The heading before section OC 35, and sections OC 35 to OC 39 are repealed.

290 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 310 (2) Subsection (1) applies for income years beginning on and after 1 April 2009.

306 Table O3: FDP credits (1) (2) Table O3, rows 2, 3, 5, 6, and 7 are repealed.

Subsection (1) applies for the 2009–10 and later income 5 years.
307 Table O4: FDP debits (1) In table O4, row 5 is replaced by the following: 5 transfer or refund of tax day of transfer or refund section OC 16 credit (2) In table O4, row 9 is replaced by the following: 9 (3) (4) Debit for policyholder base FDP credits 31 March section OC 20 Subsection (1) applies for the 2008–09 and later income 10 years.

Subsection (2) applies for income years beginning on and after 1 April 2009.

308 General rules for companies with CTR accounts (1) (2) Section OD 1(3) is repealed.
Subsection (1) applies for the 2009–10 and later income years.

15 309 Section OD 5 repealed (1) (2) Section OD 5 is repealed.

Subsection (1) applies for the 2009–10 and later income 20 years.

310 Section OD 8 repealed (1) (2) Section OD 8 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

25 291 Part 1 cl 311 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 311 (1) (2) Section OD 11 repealed Section OD 11 is repealed.
Subsection (1) applies for the 2009–10 and later income years.

312 Section OD 23 repealed (1) (2) Section OD 23 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

5 313 Section OD 24 repealed (1) (2) Section OD 24 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

10 314 Table O5: conduit tax relief credits Table O5, rows 2 and 5 are repealed.

(1) Subsection (1) applies for the 2009–10 and later income 15 (2) years.
315 Table O6: conduit tax relief debits Table O6, row 3 is repealed.

(1) Subsection (1) applies for the 2009–10 and later income (2) years.

20 316 Branch equivalent tax accounts of companies (1) (2) Section OE 2(2) and (3) are repealed.

Subsection (1) applies for the 2009–10 and later income years.

317 Section OE 6 repealed (1) (2) Section OE 6 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
318 BETA payment of income tax (1) Section OE 7(3) and (3B) are replaced by the following: 25 30 292 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 320 “Application of debit “(3) The company or company B must record a credit in the branch equivalent tax account with the debit balance of an amount equal to the greater of the following amounts: “(a) “(b) the income tax liability in relation to the attributed CFC 5 income, limited to the amount of the debit balance: the income tax liability that would have been incurred on an amount of income equal to the branch equivalent income of the company for the same period as the at­ tributed CFC income, limited to the amount of the debit 10 balance.
“Amount of income tax liability satisﬁed “(3B) The application of the credit required by subsection (3) is treated as an application of a credit under section BC 8 (Satis­ faction of income tax liability) sufﬁcient to satisfy the amount 15 of income tax liability referred to in subsection (3)(a).” Subsection (1) applies for the 2009–10 and later income years.

(2) 319 Heading and sections OE 12 to OE 16 repealed (1) The heading before section OE 12 and sections OE 12 to OE 20 16 are repealed.
Subsection (1) applies for the 2009–10 and later income years.
(2) 320 New heading and section OE 16B inserted (1) Before the headings before section OE 17, the following is 25 inserted: “Debit if credit balance at beginning of 2009–10 tax year “OE 16B Company with credit balance at beginning of 2009–10 tax year If a BETA company has a credit balance in its branch equiva­ lent tax account at the beginning of the 2009–10 tax year, a 30 293 Part 1 cl 321 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill branch equivalent tax debit of an amount equal to the credit balance arises in the branch equivalent tax account at that time.
“Deﬁned in this Act: BETA company, branch equivalent tax account, branch equivalent tax debit, company, tax year”.

Subsection (1) applies for the 2009–10 and later income 5 years.

(2) 321 Table O7: branch equivalent tax credits (1) (2) Tables O7, row 2 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

10 322 Table O8 repealed (1) (2) Table O8 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
323 General rules for companies with ASC accounts (1) In section OF 1(1), the second sentence is replaced by “This section does not apply to a multi­rate PIE.” In section OF 1, in the list of deﬁned terms, “portfolio tax rate entity” is omitted and “multi­rate PIE” is inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 20 come years (2) (3) 15 324 Subpart OJ repealed Subpart OJ is repealed.

(1) Subsection (1) applies for income years beginning on and (2) after 1 April 2009.
25 325 MACA payment of tax (1) Section OK 2(3)(cb) is replaced by the following: “(cb) income tax paid by a tax credit under subpart LA (Tax credits and other credits) and section LH 2 (Tax credits relating to expenditure on research and development); 30 or”.

294 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 328 (2) Subsection (1) applies for the 2008–09 and later income years.
326 MACA refund of income tax (1) After section OK 12(6), the following is added: “Relationship with section OK 14B “(7) This section does not apply to an amount that gives rise to a (2) debit under section OK 14B.” Subsection (1) applies for the 2008–09 and later income years.
327 MACA payment of other taxes (1) After section OK 13(4), the following is added: “Relationship with section OK 14B 5 10 “(5) This section does not apply to an amount that gives rise to a (2) debit under section OK 14B.” Subsection (1) applies for the 2008–09 and later income 15 years.
328 New section OK 14B inserted (1) After section OK 14, the following is inserted: “OK 14B MACA refund of tax credit “Debit 20 “(1) A Maori authority has a Maori authority debit for— “(a) “(b) “(c) the amount of a transfer to the authority under sec­ tion LA 6(2)(d) (Remaining refundable credits: PAYE, RWT, and certain other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund to the authority under section LA 6(2)(e): an amount used under section LH 2(6) (Tax credits re­ lating to expenditure on research and development) to pay an amount payable under an Inland Revenue Act to 30 the extent to which the use does not lead to a refund of income tax.
25 295 Part 1 cl 329 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Exclusion “(2) Despite subsection (1), a Maori authority that is an FDPA company does not have a Maori authority debit to the extent to which the amount transferred, refunded, or used is a tax credit under subpart LF (Tax credits for FDP credits).

5 “Table reference “(3) The Maori authority debit in subsection (1) is referred to in table O18: Maori authority debits, row 6B (refund of tax credit).
“Debit date “(4) The debit date is— “(a) “(b) “(c) for a debit referred to in subsection (1)(a), the day the amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: for a debit referred to in subsection (1)(c), the day the amount is applied.

10 15 “Deﬁned in this Act: amount, FDPA company, Inland Revenue Acts, Maori authority, Maori authority debit, pay”.

Subsection (1) applies for the 2008–09 and later income 20 years.
(2) 329 Table O18: Maori authority debits (1) In table O18, after row 6, the following row is inserted: 6B transfer, refund, or use day of transfer, refund, section OK 14B of tax credit or use (2) Subsection (1) applies for the 2008–09 and later income years.

25 330 When credits and debits arise only in consolidated (1) imputation group accounts In section OP 5(2)(d), “credit):” is replaced by “credit).” and paragraph (e) is repealed.
(2) After section OP 5(4)(d), the following is inserted: 30 “(db) section OP 33B, row 7B (debit for transfer from tax pooling account for policyholder base liability):”.

296 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 333 (3) (4) (5) In section OP 5(4)(k), “ratio).” is replaced by “ratio):”, and the following is added: “(l) section OP 44, row 18 (debit for policyholder base im­ putation credits).” Subsection (1) applies for the 2009–10 and later income 5 years.
Subsections (2) and (3) apply for income years beginning on and after 1 April 2009.

331 Consolidated ICA payment of tax (1) Section OP 7(3)(d) is replaced by the following: “(d) income tax paid by a life insurer to satisfy its schedular income tax liability for schedular policyholder base in­ come; or”.
10 (2) (3) (4) (5) Section OP 7(3)(fb) is replaced by the following: “(fb) income tax paid by a tax credit under subpart LA (Tax 15 credits and other credits) and section LH 2 (Tax credits relating to expenditure on research and development); or”.

In section OP 7, in the list of deﬁned terms, “policyholder base income liability” is omitted, and “schedular income tax liabil­ 20 ity” and “schedular policyholder base income” are inserted.
Subsections (1) and (3) apply for income years beginning on and after 1 April 2009.

Subsection (2) applies for the 2008–09 and later income years.

25 332 Section OP 14 repealed (1) (2) Section OP 14 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

333 Consolidated ICA resident withholding tax withheld (1) In section OP 17, “by a group company” is replaced by “by a group company other than as policyholder base gross income”.
In section OP 17, in the list of deﬁned terms, “policyholder base gross income” is inserted.

(2) 30 297 Part 1 cl 334 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (3) Subsections (1) and (2) apply for income years beginning on and after 1 April 2009.

334 Section OP 20 repealed (1) (2) Section OP 20 is repealed.

Subsection (1) applies for income years beginning on and 5 after 1 April 2009.

335 Section OP 21 repealed (1) (2) Section OP 21 is repealed.
Subsection (1) applies for income years beginning on and after 1 April 2009.
10 336 Consolidated ICA refund of income tax (1) Section OP 30(2) is replaced by the following: “No debit “(2) The debit in subsection (1) does not include–– “(a) “(b) a refund of income tax paid by a life insurer to satisfy 15 its schedular income tax liability for schedular policy­ holder base income; or a refund of income tax paid before a debit arises under section OP 42 to the extent to which the amount of the refund is less than the amount of the debit.” 20 (2) In section OP 30(3), “subsection (2)” is replaced by “subsec­ tion (2)(b)”.
(3) After section OP 30(4), the following is added: “Relationship with section OP 35 “(5) This section does not apply to an amount that gives rise to a 25 debit under section OP 35.” In section OP 30, in the list of deﬁned terms, “life insurer”, “schedular income tax liability”, and “schedular policyholder base income” are inserted.

Subsections (1), (2), and (4) apply for income years begin­ 30 ning on and after 1 April 2009.

Subsection (3) applies for the 2008–09 and later income years.
(4) (5) (6) 298 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 339 337 Consolidated ICA amount applied to pay other taxes (1) After section OP 31(4), the following is added: “Relationship with section OP 35 “(5) This section does not apply to an amount that gives rise to a (2) debit under section OP 35.” Subsection (1) applies for the 2008–09 and later income years.
5 338 New section OP 33B (1) After section OP 33, the following is inserted “OP 33B Consolidated ICA debit for transfer from tax pooling 10 account for policyholder base liability “Debit “(1) A consolidated imputation group has an imputation debit for the amount transferred from a tax pooling account to their tax account with the Commissioner, to the extent to which the 15 amount satisﬁes its schedular income tax liability for schedular policyholder base income or its income tax liability for a life fund PIE that is a multi­rate PIE.
“Table reference “(2) The imputation debit in subsection (1) is referred to in table 20 imputation debits of consolidated imputation groups, O20: row 7B (debit for transfer from tax pooling account for pol­ icyholder base liability).

“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: ICA company, imputation credit, imputation debit, life insurer, schedular income tax liability, schedular policyholder base income, tax year”.
Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 25 30 339 Consolidated ICA refund of tax credit (1) Section OP 35(1) is replaced by the following: “Debit “(1) A consolidated imputation group has an imputation debit for— 299 Part 1 cl 340 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) “(c) the amount of a transfer under section LA 6(2)(d) (Re­ maining refundable credits: PAYE, RWT, and certain other items) to the extent to which the transfer does not lead to a refund of income tax: the amount of a refund under section LA 6(2)(e): an amount used under section LH 2(6) (Tax credits re­ lating to expenditure on research and development) to pay an amount payable under an Inland Revenue Act to the extent to which the use does not lead to a refund of income tax.
5 10 “Exclusion “(1B) Despite subsection (1), a consolidated group does not have an imputation debit to the extent to which the amount trans­ ferred, refunded, or used is— “(a) a tax credit for a payment of FDP relating to a dividend 15 derived by a group company; and the dividend was derived when the company did not have an FDP account and— “(i) was not part of a consolidated group; or “(ii) was part of a consolidated group without an FDP 20 “(b) account.” (2) Section OP 35(3), other than the heading, is replaced by the following: “(3) The debit date is— “(a) “(b) “(c) for a debit referred to in subsection (1)(a), the day the 25 amount is transferred: for a debit referred to in subsection (1)(b), the day the amount is refunded: for a debit referred to in subsection (1)(c), the day the amount is applied.” 30 (3) Subsections (1) and (2) apply for the 2008–09 and later in­ come years.
340 Section OP 38 repealed (1) (2) Section OP 38 is repealed.

Subsection (1) applies for the 2009–10 and later income 35 years.
300 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 343 341 Section OP 44 replaced (1) Section OP 44 is replaced by the following: “OP 44 Consolidated ICA debit for policyholder base imputation credits “Debit “(1) A consolidated imputation group has an imputation debit for the amount of an imputation credit attached to a dividend de­ rived by a group company, to the extent to which it is derived by a group company that is a life insurer and apportioned to that life insurer’s policyholder base.
“Table reference “(2) The imputation debit in subsection (1) is referred to in table imputation debits of consolidated imputation groups, O20: row 18 (debit for policyholder base imputation credits).

“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: consolidated imputation group, imputation credit, imput­ ation debit, life insurer, policyholder base, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 5 10 15 20 342 Table O19: imputation credits of consolidated imputation (1) (2) (3) (4) groups Table O19, row 9 is repealed.

Table O19, rows 15 and 16 are repealed.

Subsection (1) applies for the 2009–10 and later income 25 years.

Subsection (2) applies for income years beginning on and after 1 April 2009.
343 Table O20: imputation debits of consolidated imputation (1) 7B groups In table O20, after row 7, the following is inserted: 30 Debit for transfer from tax pooling account for policyholder base liability 31 March section OP 33B (2) Table O20, row 9 is replaced by the following: 301 Part 1 cl 344 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 9 transfer, refund, or use day of transfer, refund, section OP 35 of tax credit or use (3) (4) 18 (5) (6) (7) Table O20, row 12 is repealed.
In table O20, row 18 is replaced by the following: Debit for policyholder base imputation credits 31 March section OP 44 Subsections (1) and (4) applies for income years beginning on and after 1 April 2009.

Subsection (2) applies for the 2008–09 and later income 5 years.

Subsection (3) applies for the 2009–10 and later income years.
344 When credits and debits arise only in consolidated FDP (1) group accounts Section OP 54(2), other than the heading, is replaced by the following: 10 “(2) The credit referred to in subsection (1) is a credit under section (2) (3) (4) OP 58, described in table O21, row 4.” In section OP 54(4)(d), “ratio).” is replaced by “ratio):”, and 15 the following is added: “(e) section OP 74, row 12 (debit for policyholder base FDP credits).” Subsection (1) applies for the 2009–10 and later income years.
Subsection (2) applies for income years beginning on and after 1 April 2009.

20 345 Section OP 56 repealed (1) (2) Section OP 56 is repealed.

Subsection (1) applies for the 2009–10 and later income 25 years.

346 Section OP 57 repealed (1) Section OP 57 is repealed.

302 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 351 (2) Subsection (1) applies for the 2009–10 and later income years.

347 Section OP 61 repealed (1) (2) Section OP 61 is repealed.
Subsection (1) applies for the 2009–10 and later income 5 years.

348 Section OP 62 repealed (1) (2) Section OP 62 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
10 349 Consolidated FDPA refund of tax credit (1) Section OP 68(1), other than the heading, is replaced by the following: “(1) A consolidated FDP group has an FDP debit for the amount of a transfer or refund under section LA 6(2)(d) or (e) (Remaining 15 refundable credits: PAYE, RWT, and certain other items) to the extent to which the amount transferred or refunded is a tax credit under subpart LF (Tax credits for FDP credits) relating to a dividend derived by a group company that is part of the group at the time it derives the dividend.” Section OP 68(3), other than the heading, is replaced by the following: 20 (2) “(3) The debit date is the day the transfer or refund is made.” (3) Subsections (1) and (2) apply for the 2008–09 and later in­ come years.
25 350 Section OP 70 repealed (1) (2) Section OP 70 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
351 Section OP 74 replaced (1) Section OP 74 is replaced by the following: 30 303 Part 1 cl 352 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “OP 74 Consolidated FDPA debit for policyholder base FDP credits “Debit “(1) A consolidated FDP group has an FDP debit for the amount of an FDP credit attached to a dividend derived by a group com­ 5 pany, to the extent to which it is derived by a group company that is a life insurer and apportioned to that life insurer’s pol­ icyholder base.
“Table reference “(2) The FDP debit in subsection (1) is referred to in table O22: 10 FDP debits of consolidated FDP groups, row 12 (debit for pol­ icyholder base FDP credits).

“Debit date “(3) The debit date is the last day of the tax year.

“Deﬁned in this Act: consolidated FDP group, FDP credit, FDP debit, life in­ 15 surer, policyholder base, tax year”.

Subsection (1) applies for income years beginning on and after 1 April 2009.
(2) 352 Table O21: FDP credits of consolidated FDP groups (1) (2) Table O21, rows 2, 3, 7, and 8 are repealed.

Subsection (1) applies for the 2009–10 and later income years.

353 Table O22: FDP debits of consolidated FDP groups (1) (2) Table O22, row 8 is repealed.

In table O22, row 12 is replaced by the following: 20 25 Debit for policyholder base FDP credits 31 March section OP 74 Subsection (1) applies for the 2009–10 and later income years.
Subsection (2) applies for income years beginning on and after 1 April 2009.

12 (3) (4) 304 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 360 354 When credits and debits arise only in CTR group accounts Section OP 79(2), other than the heading, is replaced by the (1) following: “(2) The credit referred to in subsection (1) is a credit under section (2) OD 7, described in table O5, row 4.” Subsection (1) applies for the 2009–10 and later income years.
5 355 Sections OP 81 repealed (1) (2) Sections OP 81 is repealed.

Subsection (1) applies for the 2009–10 and later income 10 years.

356 Sections OP 82 repealed (1) (2) Sections OP 82 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

15 357 Section OP 88 repealed (1) (2) Section OP 88 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

358 Section OP 95 repealed (1) (2) Section OP 95 is repealed.
Subsection (1) applies for the 2009–10 and later income years.

359 Table O23: conduit tax relief credits of consolidated (1) (2) groups Table O23, rows 2 and 3 are repealed.

Subsection (1) applies for the 2009–10 and later income years.

360 Table O24: conduit tax relief debits of consolidated groups Table O24, row 3 is repealed.

(1) 20 25 30 305 Part 1 cl 361 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for the 2009–10 and later income years.
361 Section OP 99 repealed (1) (2) Section OP 99 is repealed.

Subsection (1) applies for the 2009–10 and later income 5 years.

362 Section OP 100 repealed (1) (2) Section OP 100 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
10 363 Consolidated BETA payment of income tax (1) Section OP 101(2) and (2B) are replaced by the following: “Application of debit “(2) The nominated company of the consolidated BETA group must record a credit in the branch equivalent tax account with 15 the debit balance of an amount equal to the greater of the following amounts for a tax year corresponding to the income year referred to in subsection (1): “(a) the income tax liability of the group or group company B in relation to the attributed CFC income, limited to 20 the amount of the debit balance: the income tax liability that the group or group company B would have incurred on an amount of income equal to the branch equivalent income of the company for the same period as the attributed CFC income, limited to 25 the amount of the debit balance.
“(b) “Amount of income tax liability satisﬁed “(2B) The application of the credit required by subsection (2) is treated as an application of a credit under section BC 8 (Satis­ faction of income tax liability) sufﬁcient to satisfy the amount 30 of income tax liability referred to in subsection (2)(a).” Subsection (1) applies for the 2009–10 and later income years.
(2) 306 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 368 364 Heading and sections OP 105 to OP 108 repealed (1) The heading before section OP 105 and sections OP 105 to OP 108 are repealed.

Subsection (1) applies for the 2009–10 and later income years.
(2) 5 365 New heading and section OP 108B inserted (1) Before table O25, the following is inserted: “Debit if credit balance at beginning of 2009–10 tax year “OP 108B Consolidated BETA group with credit balance at 10 beginning of 2009–10 tax year If a consolidated BETA group has a credit balance in its branch equivalent tax account at the beginning of the 2009–10 tax year, a branch equivalent tax debit of an amount equal to the credit balance arises in the branch equivalent tax account at 15 that time.
“Deﬁned in this Act: branch equivalent tax account, branch equivalent tax debit, consolidated BETA group, tax year”.

Subsection (1) applies for the 2009–10 and later income years.

(2) 366 Table O25: branch equivalent tax credits of consolidated (1) (2) BETA groups Table O25, row 2 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

367 Table O26 repealed (1) (2) Table O26 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
20 25 368 Headings and sections OP 109 to OP 116 repealed (1) The headings before section OP 109 and sections OP 109 to OP 116 are repealed.

30 307 Part 1 cl 369 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for income years beginning on and after 1 April 2009.

369 Tables O27 and O28 repealed (1) (2) Tables O27 and O28 are repealed.

Subsection (1) applies for income years beginning on and 5 after 1 April 2009.
370 ASCA lost excess available subscribed capital Section OZ 5(6)(a) is replaced by the following: (1) “(a) non­taxable gains and losses, including exempt income; and”.

10 (2) Subsection (1) applies for the 2009–10 and later income years.

371 Modifying ratios for imputation credits and FDP credits (1) In section OZ 10(2), “section OA 5(2) and (3) (Credits)” is replaced by “sections LE 8, LE 9, LF 6, and LF 7 (which relate 15 to tax credits for imputation credits and FDP credits)”.
Subsection (1) applies for the 2008–09 and later income years.
(2) 372 New section OZ 18 After section OZ 17, the following is added: 20 “OZ 18 Credit­back of PCA balance Immediately before the ﬁrst day of the income year beginning on or after 1 April 2009,–– “(a) the credit balance of a person’s policyholder credit ac­ count is credited as an imputation credit to the person’s 25 imputation credit account, and the policyholder credit account is debited accordingly: the credit balance of a consolidated group’s policy­ holder credit account is credited as an imputation credit to the consolidated group’s imputation credit account, 30 and the consolidated group’s policyholder credit ac­ count is debited accordingly.
“(b) “Deﬁned in this Act: consolidated group, imputation credit, imputation credit account, income year, policyholder credit account”.

308 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 377 373 What this Part does (1) (2) (3) Section RA 1(g) is repealed.

In section RA 1, in the list of deﬁned terms, “FDP” is omitted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
5 374 Withholding and payment obligations for passive income (1) (2) Section RA 6(3) is repealed.

In section RA 6, in the list of deﬁned terms, “FDP, foreign dividend” is omitted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 10 come years.

(3) 375 When obligations not met (1) In section RA 10(1)(b), “the amount; or” is replaced by “the amount.” and paragraph (c) is repealed.

In section RA 10, in the list of deﬁned terms, “FDP” is omitted.
15 Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

(2) (3) 376 Payment dates for interim and other tax payments Section RA 15(2)(c) is replaced by the following: (1) “(c) when the period for which the payment is made is a tax 20 year or income year or both, by 31 May: “(cb) despite subsection (3)(c), for FBT payable for the last quarter of a tax year, by 31 May:”.
Section RA 15(3)(c) is replaced by the following: “(c) for FBT payable quarterly under sections RD 58, RD 25 59, and RD 62 (which set out the basis for payment of FBT), the last day of a quarter:”.

In section RA 15, in the list of deﬁned terms, “FDP” is omitted.

Subsections (2) and (3) apply for the 2009–10 and later in­ come years.

30 (2) (3) (4) 377 Application of other provisions for purposes of ESCT rules and NRWT rules Section RA 23(2) is repealed.
309 Part 1 cl 378 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 378 Who is required to pay provisional tax?

(1) Section RC 3(2)(d) is replaced by the following: “(d) a multi­rate PIE that does not choose to calculate and pay tax using the provisional tax calculation option under section HM 44 (Provisional tax calculation 5 option).” (2) (3) In section RC 3, in the list of deﬁned terms, “portfolio tax rate entity” is omitted and “multi­rate PIE” is inserted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

379 PAYE rules and their application In section RD 2(1), paragraph (b) is replaced by the following: sections LA 6, LB 1, and LD 4 (which relate to tax “(b) credits); and”.
380 Salary or wages (1) After section RD 5(7), the following is added: “Accommodation beneﬁts “(8) A beneﬁt treated as income under section CE 1(1)(c) (Amounts derived in connection with employment) is in­ cluded in salary or wages.” In section RD 5, in the list of deﬁned terms, “accommodation” is inserted.
(2) 10 15 20 381 Certain beneﬁts and payments (1) Section RD 6(1)(a) and (b) are replaced by the following: “(a) an accommodation beneﬁt treated as income under sec­ 25 tion CE 1(1)(c) (Amounts derived in connection with employment); or another beneﬁt in kind that is included in their salary or wages; or”.

“(b) (2) In section RD 6, in the list of deﬁned terms, “accommodation” 30 is inserted.

382 Schedular payments In section RD 8(1)(b)(v), “who does not have” is replaced by “who has”.
310 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 385 383 Multiple payments of salary or wages (1) Section RD 12(2)(b) is replaced by the following: “(b) to salary or wages from employment as a casual agri­ cultural employee, election day worker, or non­resident seasonal worker.” (2) (3) In section RD 12, in the list of deﬁned terms, “non­resident seasonal worker” is inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
384 New section RD 13B inserted After section RD 13, the following is inserted: “RD 13B Adjustments for payroll donations “When this section applies 5 10 “(1) This section applies when an employee makes a payroll do­ nation for a pay period for which they have a tax credit under 15 section LD 4 (Tax credits for payroll donations).
“Subtracting amount of tax credit “(2) The employer or PAYE intermediary must subtract the amount of the tax credit from the amount of tax for the employee’s PAYE income payment for the pay period and record the in­ 20 formation in the relevant employer monthly schedule.

“Deﬁned in this Act: employee, employer, employer monthly schedule, pay period, PAYE income payment, PAYE intermediary, payroll donation, tax credit”.
385 Schedular payments without notiﬁcation Section RD 18(3) is replaced by the following: “Additional amount of tax “(3) The person must withhold, in addition to the amount calculated under section RD 10(3), an amount of tax for the schedular payment determined as follows: “(a) 5% of the amount of the schedular payment if— “(i) the person receiving the payment is a company that is a non­resident contractor; and the non­resident contractor receives the payment other than as a result of a choice that is made for 35 “(ii) 25 30 311 Part 1 cl 386 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill the purposes that include a purpose of defeating the intent and application of paragraph (b): “(b) 15% of the amount of the schedular payment in all other cases.
“Non­application to non­resident entertainers 5 “(4) This section does not apply if the schedular payment is made to a non­resident entertainer.” 386 Schedular payments to non­resident entertainers Section RD 19(2) is repealed.

387 PAYE income payment forms for amounts of tax paid 10 (1) (2) to Commissioner In section RD 22, the heading is replaced by “Returns for amounts of tax paid to Commissioner”.
Section RD 22(1) is replaced by the following: “Paying amount withheld with returns “(1) An employer or a PAYE intermediary who withholds an amount of tax from a PAYE income payment must pay the amount to the Commissioner under section RD 4 and provide an employer monthly schedule and a PAYE income payment form in relation to the amount.” In section RD 22(2), the words before paragraph (a) are re­ placed by the following: (3) 15 20 25 (4) (5) “(2) The employer or PAYE intermediary must provide the em­ ployer monthly schedule and PAYE income payment form re­ ferred to in subsection (1) by—”.
In section RD 22(3) and (4), “the employer monthly schedule and” is inserted before “PAYE income form” in both places where it appears.

In section RD 22(3) and (4), “$100,000” is replaced by “$250,000” in all places where it appears.
Section RD 22(6), other than the heading, is replaced by the following: In addition to the requirements of subsections (2) to (4), if the employer stops carrying on a business in relation to which an amount of tax for a PAYE income payment has been withheld, 35 they must notify the Commissioner of the cessation by the 15th “(6) (6) 30 312 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 391 day of the second month following the month in which the business is ended.” 388 Calculation of all­inclusive pay In section RD 51(3)(a), “or applied on their account” is omit­ ted.
5 389 Close company option Section RD 60(1), other than the heading, is replaced by the following: “(1) This section applies in an income year when an employer that is a close company provides a fringe beneﬁt to a shareholder­ 10 employee if, in the preceding income year,— “(a) the gross amounts of tax for both PAYE income pay­ ments and employer’s superannuation contributions for the corresponding tax year were no more than $250,000; or the only beneﬁt provided by the employer was a fringe beneﬁt— “(i) arising under section CX 6 (1) (Private use of motor vehicle); and limited to making available to shareholder­em­ 20 ployees 2 vehicles for their private use; or “(ii) 15 “(b) “(c) the employer did not employ any employees.” 390 Small business option In section RD 61(1)(a), “$100,000” is replaced by “$250,000”.
391 Persons who have withholding obligations (1) In section RE 4(6), the words before paragraph (a) are replaced by the following: 25 “(6) For the purposes of subsection (5), in the calculation of the amount of RWT to be credited against income tax, the amount must be converted to New Zealand currency at the option of 30 the person deriving the resident passive income at either—”.

In section RE 4, in the list of deﬁned terms, “FDP” is omitted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
(2) (3) 313 Part 1 cl 392 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 392 Agents’ or trustees’ obligations in relation to certain (1) dividends Section RE 9(2), other than the heading, is replaced by the following: “(2) To the extent to which the resident passive income con­ 5 sists of a dividend other than a dividend treated as inter­ est, an amount of tax that must be withheld under sec­ tion RE 3 is treated as an amount to which the RWT rules apply.” (2) (3) In section RE 9, in the list of deﬁned terms, “FDP rules” is 10 omitted.
Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

393 Non­resident passive income (1) In section RF 2(2)(b), “CX 56 (Portfolio investor allocated 15 income and distributions of income by portfolio investment entities)” is replaced by “CX 56 to CX 56C (which relate to attributed PIE income)”.

In section RF 2, in the list of deﬁned terms, “attributed PIE income” is inserted.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
20 (2) (3) 394 Non­cash dividends In section RF 10(2), the formula is replaced by the following: rate A 1 — rate A × dividend payment + rate B × amount paid.

395 Dividends paid to companies under control of 25 non­residents The heading to section RF 11 is replaced by “Dividends paid to companies associated with non­residents”.
Section RF 11(1)(b) and (c) are replaced by the following: “(b) while the non­resident held the share, company A was 30 associated with the non­resident; and (1) (2) 314 (3) (4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 399 “(c) the non­resident has disposed of the share to another company (company B) that is resident in New Zealand and associated with the non­resident; and”.

In section RF 11, in the list of deﬁned terms, “control” is omit­ ted.
Subsections (1) and (2) apply, for the purposes of— (a) provisions other than the land provisions, 2009–10 and later income years: the land provisions other than section CB 11, for land acquired on or after 1 April 2009: section CB 11, for land on which improvements are be­ gun on or after 1 April 2009.

(b) (c) for the 5 10 396 Subpart RG repealed Subpart RG is repealed.

(1) Subsection (1) applies for the 2009–10 and later income 15 (2) years.
397 Retirement scheme contributors In section RH 4, “An entity is a retirement scheme contributor” is replaced by “An entity may choose to become a retirement scheme contributor”.

20 398 What this subpart does (1) (2) Section RM 1(b) is repealed.

In section RM 1, in the list of deﬁned terms, “foreign dividend” is omitted.

Subsections (1) and (2) apply for the 2009–10 and later in­ 25 come years.
(3) 399 Refunds for overpaid tax (1) After section RM 2(1), the following is inserted: “Refundable credits “(1B) An amount of tax under subsection (1) includes an amount of 30 a refundable tax credit to which section LA 5(5) (Treatment of remaining credits) applies.” In section RM 2, in the list of deﬁned terms, “refundable tax credit” is inserted.
(2) 315 Part 1 cl 400 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 400 Overpayment on income statements (1) After section RM 5(1), the following is inserted: “Refundable credits “(1B) An amount of tax under subsection (1) includes an amount of a refundable tax credit to which section LA 5(5) (Treatment of 5 remaining credits) applies.” In section RM 5, in the list of deﬁned terms, “refundable tax credit” is added.
(2) 401 Using refund to satisfy tax liability (1) In section RM 10(1), “An amount of tax under this section 10 includes an amount of a refundable tax credit under section LA 5(5) (Treatment of remaining credits).” is added after “RM 6.” In section RM 10(4), “section LA 7 (Remaining refundable credits: tax credits for families)” is replaced by “section LA 7 (Remaining refundable credits: tax credits under social policy 15 schemes)”.
In section RM 10, in the list of deﬁned terms, “refundable tax credit” is added.

(2) (3) 402 Information required from employers After RP 8(a)(ii), the following is inserted: “(iii) the amount of any payroll donations for the pay “(iv) period; and the amount of any tax credit under section LD 4 (Tax credits for payroll donations); and”.
403 Collection, payment, and information requirements After section RP 14(a), the following is inserted: “(ab) transfer the amount of any payroll donation to the rele­ vant recipient within the period described in section 24Q of the Tax Administration Act 1994; and”.
404 Tax pooling intermediaries In section RP 17, “provisional tax.” is replaced by “provisional tax, terminal tax, or an increase in an assessment of tax as described in section RP 17B(3).” 20 25 30 316 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 405 405 New section RP 17B inserted After section RP 17, the following is inserted: “RP 17B Tax pooling accounts and their use “Meaning “(1) A tax pooling account means a trust account into which a tax 5 “(b) pooling intermediary pays an amount that— “(a) they receive in their role as intermediary from a person liable to pay provisional tax; and is a payment for— “(i) “(ii) “(iii) an increased amount of tax described in subsec­ provisional tax: terminal tax: 10 tion (3).
“Use of funds in tax pooling accounts “(2) An amount held in a tax pooling account on behalf of a person 15 may be used only to satisfy the person’s liability for income tax, provisional tax, or an increased amount of tax described in subsection (3).
“When original liability increased “(3) For the purposes of this section, an increased amount of tax— 20 “(a) arises when a person’s previous assessed liability is in­ creased after— “(i) the Commissioner amends an assessment under section 113 of the Tax Administration Act 1994: the Commissioner makes a determination under 25 section 119 of that Act: “(ii) “(iii) an assessment is made because the Commis­ sioner or the person is treated under section 89H of that Act as having accepted a proposed adjustment: the person makes a voluntary disclosure: a dispute between the Commissioner and the per­ son is resolved: “(iv) “(v) “(b) does not include the amount of the previous assessment.
“(4) “Transfer within 60 days for provisional tax or terminal tax If a person chooses to use funds in a tax pooling account to satisfy an obligation for provisional tax or terminal tax for a 30 35 317 Part 1 cl 406 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill tax year, they must ask the tax pooling intermediary within 60 days from the person’s terminal tax date for the tax year to transfer the amount to the person’s tax account with the Commissioner.
“(5) “Transfer within 60 days for increased amounts If a person chooses to use funds in a tax pooling account to satisfy an obligation for an increased amount of tax, they must ask the tax pooling intermediary within 60 days from the date on which the Commissioner issues the notice of assessment increasing the amount to transfer the amount to the person’s 10 tax account with the Commissioner.
5 “Deﬁned in this Act: amount, amount of tax, assessment, Commissioner, no­ tice, pay, provisional tax, tax account with the Commissioner, tax pooling ac­ count, terminal tax”.
406 Deposits in tax pooling accounts In section RP 18(2)(c), “person.” is replaced by “person:” and the following is added: “(d) transferred at the person’s request to another intermedi­ ary.” 407 Transfers from tax pooling accounts (1) Section RP 19(1) is replaced by the following: “Transferring amounts “(1) A tax pooling intermediary may ask the Commissioner to transfer an amount in their tax pooling account to the tax account of a person who is their client.
“Treatment of transferred amounts “(1B) An amount transferred and credited to the tax account of a 15 20 25 person is treated as follows: “(a) for an amount credited on or before the person’s ter­ minal tax date for a tax year, as income tax paid to meet 30 a provisional tax obligation under the provisional tax rules: for an amount credited after the person’s terminal tax date for a tax year,— “(b) 318 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(i) “(ii) ﬁrst, as applied under section 120F of the Tax Administration Act 1994 to pay interest that the person is liable to pay; and secondly, as income tax paid to meet the person’s provisional tax obligation.” 5 (2) Section RP 19(3), other than the heading, is replaced by the following: “(3) The credit date for an amount transferred to a person’s tax account is— “(a) for a request made within the 60­day period referred to 10 in section RP 17B(4) or (5), the date sought under subsection (2); or for any other case, the date on which the Commissioner receives the request for the transfer.” “(b) 408 Deﬁnitions (1) (2) (3) (4) (5) After the deﬁnition of accident insurance contract, the fol­ 20 This section amends section YA 1.
The deﬁnition of 1973 version provisions is repealed.

The deﬁnition of 1988 version provisions is repealed.

The deﬁnition of 1990 version provisions is repealed.

15 lowing is inserted: “accommodation is deﬁned in section CE 1(2) (Amounts derived in connection with employment) for the purposes of that section”.

In the deﬁnition of actuarial reserves, “section EY 3” is re­ 25 placed by “section EZ 59”.
Before the deﬁnition of actuary, the following is inserted: “actuarially determined, for an amount and a person,— “(a) means a requirement that is met when an actuary has— (6) (7) “(i) “(ii) calculated the amount: certiﬁed that the amount is calculated no later than the last day for furnishing the return of in­ come to which the amount relates: 30 “(iii) provided to the Commissioner in writing, in the form prescribed by the Commissioner, if any, all 35 assumptions, methodologies, bases and working 319 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill calculations necessary to support the calculation of the amount: “(i) “(b) does not include when the calculation of the amount— does not accurately reﬂect the person’s business experience: is not made according to usual business practice: “(ii) “(iii) is, or is part of, a tax avoidance arrangement”.
5 The deﬁnition of after­income tax earnings is repealed.

The deﬁnition of after­income tax loss is repealed.

(8) (9) (10) After the deﬁnition of approved issuer, the following is in­ 10 serted: “arm’s length amount, for an arrangement that is a cross­bor­ der arrangement under section GC 6 (Purpose of rules and na­ ture of arrangements) means an arm’s length amount of con­ sideration under section GC 13 (Calculation of arm’s length 15 amounts)”.
(11) After the deﬁnition of asset, the following is inserted: “asset base means the asset base for a proﬁt participation pol­ icy, described in paragraph (a) of the deﬁnition of proﬁt par­ ticipation policy”.
20 (12) The deﬁnition of associated, associated person, person as­ sociated is replaced by the following: “associated, associated person, person associated, and other expressions indicating the association of persons with each other are deﬁned in sections YB 1 to YB 15 (which relate 25 to associated persons)”.
(13) After the deﬁnition of associated mining operations, the fol­ lowing is inserted: “associated non­attributing active CFC, for a CFC, means a person who is— “(a) associated with the CFC under section YB 2 (Two com­ panies with common control); and subject with the CFC to the laws of the same country or territory under which, for each company,— “(i) the company is liable to income tax on its income 35 because of its domicile, residence, place of incor­ poration, or centre of management: 30 “(b) 320 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(ii) persons holding income interests in the company are liable for the income tax on its income and the country or territory is the source of 80% or more of that income; and a non­attributing active CFC”.
“(c) In the deﬁnition of associated non­attributing active CFC, paragraph (a) is replaced by the following: “(a) associated with the CFC under section YB 2 (Two companies); and”.

5 (14) (15) After the deﬁnition of association rebate, the following is in­ 10 serted: “attributable CFC amount is deﬁned in section EX 20B (Attributable CFC amount)”.
(16) After the deﬁnition of attributed CFC net loss, the following are inserted: “attributed PIE income means an amount of income at­ tributed by a multi­rate PIE to an investor in the PIE under section HM 36 (Calculating amounts attributed to investors) “attributed PIE loss means an amount of loss attributed by a multi­rate PIE to an investor in the PIE under section HM 36 20 (Calculating amounts attributed to investors)”.
15 (17) After the deﬁnition of attributing interest, the following is inserted: “attribution period, for a multi­rate PIE, means a period de­ scribed in section HM 34 (Attribution periods)”.

(18) After the deﬁnition of beneﬁt, the following is inserted: “beneﬁt fund PIE means a deﬁned beneﬁt fund that— “(a) meets the requirements of section HM 7 (Require­ ments); and “(b) does not attribute amounts to investors”.
(19) After the deﬁnition of beneﬁt fund PIE, the following is in­ serted: “best estimate assumptions means assumptions about the fu­ ture that–– “(a) “(b) are actuarially determined; and are made using professional judgement, training and ex­ perience; and are not deliberately overstated or understated”.
“(c) 25 30 35 321 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (20) (21) In the deﬁnition of branch equivalent income, “as that provi­ sion read immediately before being amended by section 122 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2008” is added.
In the deﬁnition of branch equivalent loss, “as that provision 5 read immediately before being amended by section 122 of the Taxation (International Taxation, Life Insurance, and Re­ medial Matters) Act 2008” is added.
(22) After the deﬁnition of calculation method, the following is 10 inserted: “calculation period, for a multi­rate PIE, means a period in which the entity calculates an amount under section HM 47 (Calculation of tax liability or tax credit of multi­rate PIEs) that— “(a) “(b) consists of 1 or more attribution periods: for a calculation under the quarterly calculation option, is a quarter: for a calculation under the exit calculation or provi­ sional tax calculation options, is an income year: for a calculation under the exit calculation option when 20 an exit period arises, is the exit period”.
“(c) “(d) 15 (23) (24) In the deﬁnition of charitable or other public beneﬁt gift, “subpart LD (Tax credits for charitable or other public beneﬁt gifts)” is replaced by “sections LD 1 to LD 3 (which relate to tax credits for charitable or other public beneﬁt gifts)”.

In the deﬁnition of continuity provisions, paragraph (i) is re­ placed by the following: “(i) section OE 10 (which relates to BETA credits for loss of shareholder continuity); and”.

25 (25) The deﬁnition of control is repealed.


(26) After the deﬁnition of controlling shareholder, the following 30 is inserted: “convert, for a New Zealand emissions unit, means the trans­ fer of the emissions unit to an account in the Registry estab­ lished by the Climate Change Response Act 2002 used for the 35 purpose of converting New Zealand emissions units into Ky­ oto emissions units”.
322 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 (27) In the deﬁnition of credit account continuity provisions, paragraph (c) is replaced by the following: “(c) section OE 10 (which relates to BETA credits for loss of shareholder continuity)”.
(28) In the deﬁnition of creditable membership, after subpara­ 5 graph (b)(i), the following is inserted: “(ib) the period beginning on the day which the Com­ missioner nominates when requested by the per­ son, in circumstances where, due to matters out­ side the control of the person, the ﬁrst deduc­ 10 tion of KiwiSaver contributions was delayed, and ending on the day on which securities are ﬁrst al­ lotted by the KiwiSaver scheme for the person:”.
(29) The deﬁnition of current accounting year is repealed.
(30) After the deﬁnition of debenture holder, the following is in­ 15 serted: “deductible foreign equity distribution means a distribution by a foreign company to a company, in relation to a share in the foreign company that is not a ﬁxed­rate foreign equity,— “(a) for which a deduction is allowed in the calculation of the 20 income tax imposed by a country or territory other than New Zealand on the income of the foreign company: sourced directly or indirectly out of an amount paid to the foreign company from another company if— “(i) “(b) “(ii) the foreign company is not liable for income tax 25 imposed by a country or territory other than New Zealand on the amount paid to the foreign com­ pany; and the other company is allowed a deduction, in the calculation of the income tax imposed by a coun­ 30 try or territory other than New Zealand on the in­ come of the other company, for the amount paid to the foreign company”.
(31) The deﬁnition of derivative instrument is replaced by the following: “derivative instrument means a derivative as deﬁned in NZIAS 39”.

35 323 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (32) The deﬁnition of direct income interest is replaced by the following: “direct income interest— “(a) is deﬁned in section EX 9 (Direct income interests) ex­ cept for the FIF rules: is deﬁned in section EX 30 (Direct income interests in FIFs) for the FIF rules”.
5 “(b) (33) In the deﬁnition of dividend, paragraph (a) is replaced by the following: “(a) is deﬁned in sections CD 3 to CD 20 (which relate to 10 income from equity) for the purposes of this Act, except for the deﬁnition of investment society dividend:”.
(34) In the deﬁnition of dividend, paragraph (c)(ii) is replaced by the following: “(ii) includes an amount paid to a shareholder that 15 is a company and a person associated with the company paying the amount, if the amount is ex­ cluded from dividend treatment generally only as a result of sections CD 26(2)(b) (Capital distri­ butions on liquidation or emigration) and CD 44; 20 and”.
(35) In the deﬁnition of dividend, paragraph (d)(i) is replaced by the following: “(i) includes an amount paid to a shareholder that is a company and a person associated with the 25 company paying the amount, if the amount is ex­ cluded from dividend treatment generally only as a result of sections CD 26(2)(b) and CD 44; and”.
(36) After the deﬁnition of emigrating company, the following is inserted: “emissions unit means— “(a) “(b) “(c) a New Zealand unit: a Kyoto unit: a unit issued by an overseas registry that is prescribed under the Climate Change Response Act 2002 as a unit 35 that may be transferred to accounts in the Registry under that Act”.
30 324 10 15 20 (37) (38) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 In the deﬁnition of employee, paragraph (c)(i) is replaced by the following: “(i) a payment referred to in section RD 5(1)(b)(iii), (3), (6)(b) and (c), and (7) (Salary or wages):”.
In the deﬁnition of employer monthly schedule, paragraph 5 (e) is replaced by the following: “(e) for each employee in the month to which the schedule relates,— the amount of gross earnings: “(i) “(ii) the total amount of tax withheld: “(iii) the total amount of payroll donations: “(iv) the total amount of tax credits under section LD 4 (Tax credits for payroll donations): the amount of earnings not liable to the earner premium; and”.
“(v) (39) After the deﬁnition of excess debt entity, the following is in­ serted: “excess debt outbound company is deﬁned in section FE 4 (Some deﬁnitions) for the purposes of subpart FE (Interest ap­ portionment)”.

In the deﬁnition of excluded ancillary tax, paragraph (d) is repealed.
(40) (41) After the deﬁnition of existing privilege, the following are inserted: “exit level, for a multi­rate PIE, means the relationship of the 25 entity’s tax liability to the value of the investor’s interest de­ scribed in section HM 61 (Exit levels for investors) “exit period, for an investor in a multi­rate PIE, means a period set out in section HM 62 (Exit periods)”.
(42) The deﬁnition of fair dividend rate method is replaced by the 30 following: “fair dividend rate method means the method of calculating FIF income or FIF loss under sections EX 52 (Fair dividend rate method: usual method) and EX 53 (Fair dividend rate method for unit­valuing funds and others by choice)”.
35 (43) The deﬁnition of FDP rules is replaced by the following: 325 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “FDP rules means— “(a) section GB 41 (FDPA arrangements for carrying amounts forward): sections LF 1, LF 5, LF 8 to LF 10 (which relate to tax credits for FDP credits): subpart OC (Foreign dividend payment accounts (FDPA)): section YA 2(2)(d) to (f) (Meaning of income tax varied)”.
5 “(b) “(c) “(d) (44) After the deﬁnition of ﬁnancial arrangements rules, the fol­ 10 lowing is inserted: “ﬁnancial asset has the same meaning as in NZIAS 32”.

(45) After the deﬁnition of ﬁnancial assistance, the following is inserted: “ﬁnancial risk is deﬁned in section EY 12 (Meaning of life 15 reinsurance)”.
(46) The deﬁnition of ﬁnancial statements is replaced by the fol­ lowing: “ﬁnancial statements is deﬁned in section 8 of the Financial Reporting Act 1993, but the references in the deﬁnition to an 20 entity and to a reporting entity are to be read as references to a person”.

(47) The deﬁnition of ﬁrst tracking date is repealed.
(48) After the deﬁnition of ﬁxed principal ﬁnancial arrangement, 25 the following is inserted: “ﬁxed­rate foreign equity means an interest (the equity) in the capital of a foreign company held by a company (the holder) in relation to which the foreign company makes distributions— “(a) at a rate that is a speciﬁc ﬁxed percentage of the amount 30 subscribed for the issue of the equity; or at a rate that— “(i) is a percentage of the amount subscribed for the issue of the equity; and “(ii) has a ﬁxed relationship to economic, commodity, 35 industrial, or ﬁnancial indices, to banking rates of interest, or to general commercial rates of inter­ est; or “(b) 326 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(c) “(d) at a rate that would be given by paragraph (a) or (b) but for variations due to— “(i) “(ii) a ﬁxed relationship to a rate of income tax: compensation to the holder for default by the for­ eign company: “(iii) compensation to the holder for expenditure or loss related to the holding of the equity and suf­ fered by the holder or by a person associated with the holder; or 5 equivalent to the payment of interest for money lent, 10 having regard to— “(i) whether or not the equity is redeemable: “(ii) any security provided to the holder, including put or call options over the equity or an amount payable determined by reference to the amount 15 of distributions payable: “(iii) the variability or lack of variability of the distri­ butions payable”.
(49) In the deﬁnition of ﬁxed­rate share, in paragraph (d)(iii), “subparagraphs (i) and (ii):” is replaced by “subparagraphs (i) 20 and (ii)” and paragraph (e) is repealed.

(50) The deﬁnition of foreign dividend is repealed.

(51) The deﬁnition of foreign dividend company is repealed.

(52) The deﬁnition of foreign dividend company net earnings is repealed.

(53) The deﬁnition of foreign group is repealed.


(54) After the deﬁnition of foreign non­dividend income, the fol­ lowing is inserted: “foreign PIE equivalent is deﬁned in section HM 3 (Foreign PIE equivalents)”.

25 30 (55) After the deﬁnition of foreign withholding tax, the following is inserted: “forest land emissions unit means a pre­1990 forest land emissions unit or a post­1989 forest land emissions unit”.
(56) After the deﬁnition of forestry company, the following is in­ 35 serted: “formation loss, for a PIE, means an amount of tax loss or a loss balance arising from a period before the entity became a 327 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill PIE as described in sections HM 65 to HM 69 (which relate to the treatment of formation losses)”.
(57) After the deﬁnition of general insurance, the following is in­ serted: “general insurance contract has the meaning given in IFRS 5 4”.
(58) After the deﬁnition of goods, the following is inserted: “government screen production payment means a payment that— “(a) is in the nature of a large budget screen production grant 10 or New Zealand screen production incentive; and is authorised by the New Zealand Film Commission in relation to a company that— “(i) “(ii) has a permanent establishment in New Zealand”.
15 is resident in New Zealand: “(b) (59) The deﬁnition of grey list company is replaced by the follow­ ing: “grey list company means a company that is resident under section YD 3 (Country of residence of foreign companies) in a grey list country if either— “(a) the company is liable in the country to income tax on the company’s income because the company— is domiciled in the country: “(i) “(ii) is resident in the country: “(iii) is incorporated in the country: “(iv) has its place of management in the country: the company is organised under the laws of the country and the country— “(i) “(b) imposes on persons holding income interests in the company the liability for income tax on the 30 company’s income; and 20 25 “(ii) under the laws of the country, is the source of 80% or more of the income of the company”.
(60) The deﬁnition of grey list dividend is repealed.

(61) In the deﬁnition of holding company, paragraph (a) is re­ 35 placed by the following: “(a) for a forestry company, means a company associated with the forestry company:”.

328 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 (62) After the deﬁnition of home vendor mortgage, the following is inserted: “honorarium is deﬁned in section CW 62B (Voluntary ac­ tivities) for the purposes of that section”.
(63) After the deﬁnition of IFRS, the following is inserted: 5 “IFRS 4 means the IFRS, numbered 4, that relates to insurance contracts”.

(64) After the deﬁnition of IFRS 4, the following is inserted: “IFRSE means an International Financial Reporting Standard approved by the International Accounting Standards Board, as 10 amended from time to time”.

In the deﬁnition of income interest, in paragraph (b), “subpart OE” is replaced by “subparts FE (Interest apportionment on thin capitalisation) and OE”.
In the deﬁnition of income tax liability, paragraph (a)(ii) is 15 replaced by the following: (65) (66) “(ii) income tax for the person and a tax year calcu­ lated under subpart HM (Portfolio investment entities), if the person is a multi­rate PIE; and”.

(67) In the deﬁnition of international tax rules, paragraph (a)(xiii) 20 is replaced by the following: (68) (69) “(xiii) section YA 2 (Meaning of income tax varied):”.
In the deﬁnition of international tax rules, paragraph (a)(xiv) is replaced by the following: “(xiv) subpart YB (Associated persons and nom­ 25 inees):”.

In the deﬁnition of investor, paragraph (b) is replaced by the following: “(b) for a portfolio investment entity, is deﬁned in section HM 4 (Who is an investor?):”.

30 (70) After the deﬁnition of investor, the following are inserted: “investor class, for a portfolio investment entity, is deﬁned in section HM 5 (What is an investor class?)
“investor interest, for an investor in a portfolio investment entity, means an interest in the entity that gives the holder an 35 entitlement to a distribution of proceeds from the entity’s in­ vestments”.
329 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (71) After the deﬁnition of KiwiSaver scheme, the following is inserted: “Kyoto emissions unit means an emissions unit speciﬁed in accordance with the Protocol referred to in the Climate Change Response Act 2002”.
5 (72) After the deﬁnition of land, the following are inserted: is not a portfolio investment entity: “land investment company means a company that, in a tax year,— “(a) “(b) on 80% or more of the days in the tax year on which 10 the company has assets of more than $100,000, 90% of those assets consist of land or shares in a company that meets the description of this deﬁnition, and meet the requirements of section HM 12 (Income sources) “land loss is deﬁned in section HM 64(3) (Use of land losses 15 of investor classes) for the purposes of that section”.
(73) After the deﬁnition of land loss, the following is inserted: “land provisions means the following provisions: “(a) sections CB 7 to CB 11 (which relate to certain land transactions), except CB 8 (Disposal: landﬁll, if notice of election): section CB 15 (Transactions between associated per­ sons): sections FB 3 to FB 5 (which relate to the transfer of land on a settlement of relationship property)”.

land used for 20 25 “(b) “(c) (74) The deﬁnition of large budget screen production grant is repealed.
(75) After the deﬁnition of licence­speciﬁc assets, the following is inserted: “life ﬁnancial reinsurance is deﬁned in section EY 12 30 (Meaning of life reinsurance)”.
(76) After the deﬁnition of life ﬁnancial reinsurance, the follow­ ing is inserted: “life fund PIE means a separate identiﬁable fund forming part of a life insurer that— “(a) meets the requirements of section HM 7 (Require­ 35 ments); and 330 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(b) holds investment subject to life insurance policies under which beneﬁts are directly linked to the value of the investments held in the fund”.
(77) After the deﬁnition of life reinsurer, the following is inserted: “life risk means an actuarially determined risk contingent on 5 human life”.

(78) The deﬁnition of limited partnership net deduction is re­ placed by the following: “limited partnership deduction is deﬁned in section HG 11(12) (Limitations on deductions by partners in limited 10 partnerships) for the purposes of that section”.
(79) After the deﬁnition of listed PAYE intermediary, the follow­ ing is inserted: “listed PIE means a company that— “(a) is listed on a recognised exchange in New Zealand or 15 meets the requirements of section HM 18 (Require­ ments for listed PIEs: unlisted companies); and “(b) meets the requirements of section HM 7 (Require­ ments); and is not a life fund PIE”.

(80) “(c) In the deﬁnition of loan, in paragraph (b), “and subpart LL (Underlying foreign tax credits (UFTC)),” is omitted.
(81) The deﬁnitions of mortality proﬁt and mortality proﬁt for­ 20 mula are repealed.

(82) After the deﬁnition of motor vehicle, the following is inserted: 25 “multi­rate PIE means a company, superannuation fund, or group investment fund that— “(a) meets the requirements of section HM 7 (Require­ ments); and is not a listed PIE; and is not a beneﬁt fund PIE”.
“(b) “(c) 30 (83) After the deﬁnition of natural resource, the following is in­ serted: “net attributable CFC income, for a foreign company and for an accounting period, means the amount calculated for the ac­ 35 counting period under section EX 20C(1)(a) (Net attributable CFC income or loss) 331 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “net attributable CFC loss, for a foreign company and for an accounting period, means the amount calculated for the ac­ counting period under section EX 20C(1)(b) (Net attributable CFC income or loss)”.
In the deﬁnition of new tax rate person, in paragraph (b), 5 “portfolio tax rate entity” is replaced by “multi­rate PIE”.

(84) (85) After the deﬁnition of New Zealand business, the following is inserted: “New Zealand emissions unit means an emissions unit issued under the Climate Change Response Act 2002 and designated 10 a New Zealand emissions unit”.
(86) After the deﬁnition of nominee, the following is inserted: “non­attributing active CFC is deﬁned in section EX 21B (Non­attributing active CFCs) “non­attributing Australian CFC is deﬁned in section EX 15 22 (Non­attributing Australian CFCs)”.

(87) The deﬁnition of non­creditable dividend is repealed.
(88) In the deﬁnition of non­ﬁling taxpayer, paragraph (b) is re­ placed by the following: “(b) a person whose only income derived from New Zealand 20 is schedular payments derived in the person’s capacity as a non­resident entertainer and who chooses not to ﬁle a return for the relevant tax year; or”.

(89) (90) In the deﬁnition of non­refundable tax credit, the following is inserted after paragraph (a): “(ab) a tax credit under section LD 4 (Tax credits for payroll 25 donations):”.
In the deﬁnition of non­refundable tax credit, paragraph (g) is replaced by the following: “(g) a tax credit under sections LS 3(3) and (4) and LS 30 4(3) and (4) (which relate to multi­rate PIEs and certain of their investors) and under section LS 1 (Tax credits for multi­rate PIEs) to the extent to which it arises under section HM 51 (Use of foreign tax credits by PIEs)”.
(91) After the deﬁnition of non­resident person, the following is 35 inserted: 332 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “non­resident seasonal worker means a non­resident person employed under the recognised seasonal employment scheme to undertake work in New Zealand”.
(92) After the deﬁnition of notice period, the following is inserted: “notiﬁed tax rate, for a multi­rate PIE and an investor, means 5 a prescribed investor rate under section HM 59 (Notiﬁed rates)”.

(93) The deﬁnition of offshore development is repealed.

(94) The deﬁnition of onshore development is repealed.

(95) In the deﬁnition of operating lease, “means” is replaced by 10 “means, except in section EW 15I(1)(b)(iib) (Mandatory use of yield to maturity method for some arrangements),”.
(96) After the deﬁnition of outstanding balance, the following is inserted: “outstanding claims reserve means the actuarially deter­ 15 mined amount of a person’s outstanding claims liability for general insurance contracts, excluding contracts having pre­ miums to which section CR 3 (Income of non­resident general insurer) applies, as that liability is measured under Appendix D, paragraphs 5.1 to 5.2.12 of IFRS 4”.
20 (97) After the deﬁnition of overseas pension the following is in­ serted: “overtime is deﬁned in section CW 17C(4) (Payments for overtime meals) for the purposes of that section”.

In the deﬁnition of ownership interest, “that section” is re­ 25 placed by “that section and section YC 18B (Corporate re­ organisations not affecting economic ownership)”.
(98) (99) After the deﬁnition of payment relating to incapacity to work, the following is inserted: “payroll donation is deﬁned in section LD 7 (Meaning and 30 ranking of payroll donation)”.

(100) After the deﬁnition of petroleum mining company, the fol­ lowing is inserted: “petroleum mining development is deﬁned in section EJ 20 (Meaning of petroleum mining development) for the pur­ 35 poses of sections EJ 12 and EJ 12B (which relate to petrol­ eum development expenditure)”.
333 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (101) After the deﬁnition of physical cost of production, the fol­ lowing is inserted: “PIE means a portfolio investment entity”.

(102) After the deﬁnition of plot, the following is inserted: “policy liabilities is deﬁned in section EY 28(9) (Share­ 5 holder base other proﬁt: proﬁt participation policies) for the purposes of sections EY 17, EY 21, and EY 28 (which re­ late to proﬁt participation policies)”.
(103) The deﬁnition of policyholder base is replaced by the follow­ 10 ing: “policyholder base means, for a life insurer, the base for pol­ icyholder base gross income, expenditure or loss, and to which income of a particular source or nature, and tax credits re­ ceived are apportioned under section EY 4 (Apportionment of income of particular source or nature, and of tax credits) “policyholder base gross expenditure or loss means policy­ holder base gross expenditure or loss described in section EY 2(2) (Policyholder base) “policyholder base gross income means policyholder base gross income described in section EY 2(1) (Policyholder 20 base)”.
15 (104) The deﬁnitions of policyholder base income tax liabil­ ity, policyholder credit, policyholder credit account, policyholder debit, policyholder FDP ratio, policyholder income, policyholder income formula, and policyholder 25 net loss are repealed.
(105) The deﬁnitions of portfolio allocation period, portfolio cal­ culation period, portfolio class fraction, portfolio class in­ vestment value, portfolio class net income, portfolio class net loss, portfolio class taxable income, portfolio class tax­ 30 able loss, portfolio deﬁned beneﬁt fund, portfolio entity formation loss, portfolio entity investment, portfolio entity tax liability, portfolio investor allocated income, portfolio investor allocated loss, portfolio investor class, portfolio in­ vestor exit period, portfolio investor interest, portfolio in­ 35 vestor interest fraction, portfolio investor proxy, portfolio investor rate, portfolio land company, portfolio listed com­ pany, and portfolio tax rate entity are repealed.
334 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 (106) The deﬁnition of portfolio investment entity is replaced by the following: “portfolio investment means an investment of an entity in an item of property of a type to which section HM 11 (Invest­ ment types) refers “portfolio investment entity means— “(a) “(b) “(c) “(d) a multi­rate PIE: a listed PIE: a beneﬁt fund PIE: a life fund PIE”.
5 10 (107) In the deﬁnition of portfolio investor rate, in paragraph (b)(ii), “the time; or” is replaced by “the time; and” and the following is inserted: “(iii) the Commissioner has not notiﬁed the entity to disregard the rate that the investor has notiﬁed to 15 the entity; or”.
(108) After the deﬁnition of possession, the following is inserted: “post­1989 forest land means forest land that— “(a) was not forest land on 31 December 1989; or “(b) was forest land on 31 December 1989 but was defor­ 20 ested between 1 January 1990 and 31 December 2007; or “(c) was pre­1990 forest land— “(i) “(ii) that was deforested on or after 1 January 2008; and for which any liability to surrender units arising under the Climate Change Response Act 2002 has been satisﬁed “post­1989 forest land emissions unit, for a person, means an emissions unit— “(a) issued to the person under the Climate Change Re­ sponse Act 2002 for growing trees on post­1989 forest land; and “(b) held continuously by the person since the issue”.
25 30 (109) After the deﬁnition of pre­1983 investments, the following is 35 inserted: “pre­1990 forest land means forest land— “(a) that was forest land on 31 December 1989; and 335 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill that remained as forest land on 31 December 2007; and “(b) “(c) where the forest species on the forest land consisted of exotic forest species “pre­1990 forest land emissions unit, for a person, means an emissions unit— “(a) issued to the person under the Climate Change Re­ sponse Act 2002 in relation to pre­1990 forest land; and “(b) held continuously by the person since the issue”.
5 (110) The deﬁnitions of premium loading and premium loading 10 formula are repealed.

(111) In the deﬁnition of prescribed investor rate, paragraph (a)(ii) is replaced by the following: “(ii) the person is a resident who derives income as a trustee of a trust other than a trust referred to in 15 paragraph (c)(i) and who chooses to be subject to this paragraph for the tax year; or”.
(112) The deﬁnition of prescribed investor rate is replaced by the following: “prescribed investor rate, for a multi­rate PIE and an in­ 20 vestor, means an applicable tax rate under sections HM 56 to HM 58 (which relate to the default and other tax rates for investors)”.
(113) After the deﬁnition of prescribed rate of interest, the follow­ ing is inserted: “present value means,–– “(a) a present value calculated using the risk­free rate of re­ turn as the discount rate, gross of tax; but face value, gross of tax, if the whole discount period is less than a year”.
“(b) 25 30 (114) After the deﬁnition of proﬁt, the following is inserted: “proﬁt participation policy,–– “(a) means a class of life insurance policy having–– a segregated or identiﬁable asset base; and “(i) “(ii) policyholders who are entitled to a share of 35 proﬁts that is distributed to, or vested in, the pol­ icyholders from the asset base, and the policies provide for the entitlement; and 336 “(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(iii) a ﬁxed formula, expressed in terms of a propor­ tion of a policyholder’s share of proﬁts from the asset base, that calculates a transfer to the beneﬁt of the life insurer’s shareholders from the proﬁts of the asset base, and that ﬁxed formula is con­ 5 sistently applied: includes a class of life insurance policy that substan­ tially meets the requirements of paragraph (a) and that has a guarantee by the life insurer that capital invested will be returned or that a minimum return on capital will 10 be paid, if— “(i) the life insurer has irrevocably chosen that the class be treated as a proﬁt participation policy; and the Commissioner receives a notice of the elec­ 15 tion before the start of the ﬁrst income year to which it relates”.
“(ii) (115) In the deﬁnition of proﬁt­related debenture, “for the pur­ poses of that section” is omitted.

(116) After the deﬁnition of recognised exchange, the following is 20 inserted: “recognised seasonal employment scheme means the recog­ nised seasonal employer policy published by the Department of Labour under section 13A of the Immigration Act 1987”.
(117) The deﬁnition of redundancy payment is replaced by the fol­ 25 lowing: “redundancy payment means a PAYE income payment paid— “(a) to a person whose employment in a position is termin­ ated because the position has become superﬂuous to the 30 requirements of their employer; and in compensation for the loss of the person’s employ­ ment”.
“(b) (118) In the deﬁnition of refundable tax credit, in paragraph (d), “election)” is replaced by “election):” and the following is 35 added: “(e) a tax credit under section LS 1 (Tax credits for portfolio tax rate entities and their investors)”.
337 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (119) In the deﬁnition of refundable tax credit, paragraphs (d) and (e) are replaced by the following: “(d) “(e) a tax credit under sections LS 2, LS 3(2), and LS 4(2) (which relate to multi­rate PIEs and certain of their investors): a tax credit under section LS 1 (Tax credits for multi­ rate PIEs) to the extent to which it arises under section HM 53 or HM 55 (which relate to the use of tax credits other than foreign tax credits)”.
(120) The deﬁnition of related person is repealed.
(121) The deﬁnition of relative, is replaced by the following: “relative,— “(a) except in section HC 36 (Trusts and minor beneﬁciary rule), means a person connected with another person by— “(i) being within the second degree of blood relation­ ship to the other: 5 10 15 “(ii) being in a marriage, civil union, or de facto rela­ tionship with the other: “(iii) being in a marriage, civil union, or de facto rela­ 20 tionship with a person who is within the second degree of blood relationship to the other: “(iv) being adopted as a child of the other or as a child of a person who is within the ﬁrst degree of rela­ tionship to the other: 25 “(v) being the trustee of a trust under which a relative has beneﬁted or is eligible to beneﬁt: “(b) is deﬁned in section HC 36(5) for the purposes of that section”.
(122) After the deﬁnition of replaced area fraction, the following 30 is inserted: “replacement forest land emissions unit means an emissions unit acquired by a person if— “(a) the person has previously disposed of a post­1989 forest land emissions unit; and the person has not since the disposal acquired another emissions unit that— “(i) replaces the post­1989 forest land emissions unit; and “(b) 338 35 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 “(ii) does not replace another emissions unit”.
(123) The deﬁnition of required interest is repealed.

(124) The deﬁnition of retained earnings is repealed.
(125) The deﬁnition of revenue account property is replaced by 5 the following: “revenue account property, for a person, means property that— “(a) “(b) is trading stock of the person: if disposed of, would produce income for the person other than income under section EE 48 (Effect of dis­ 10 posal or event), FA 5 (Assets acquired or disposed of af­ ter deductions of payments under lease) or FA 9 (Treat­ ment when lease ends: lessee acquiring asset): is an emissions unit of the person”.
“(c) (126) After the deﬁnition of salary or wages, the following is in­ 15 serted: “savings product policy means a life insurance policy, other than annuity, that has or will have a surrender value, but the policy may have a life risk component”.

(127) In the deﬁnition of schedular income, paragraph (a) is re­ 20 placed by the following: “(a) schedular policyholder base income:”.

(128) In the deﬁnition of schedular income, paragraph (c) is re­ pealed.
(129) In the deﬁnition of schedular income, the following is in­ 25 serted after paragraph (d): “(db) income derived by a multi­rate PIE:”.

(130) After the deﬁnition of schedular payment, the following is inserted: “schedular policyholder base income means schedular pol­ 30 icyholder base income described in section EY 2(3) (Policy­ holder base)”.

(131) In the deﬁnition of settlor, after paragraph (b), the following is added: “(c) is modiﬁed by section YB 10 (Who is a settlor?)
for 35 the purposes of sections YB 7 to YB 9 (which relate to associated persons)”.

339 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (132) In the deﬁnition of share, after paragraph (e), the following is inserted: “(eb) does not include a ﬁxed­rate foreign equity:”.
(133) The deﬁnition of share purchase agreement is replaced by the following: “share purchase agreement is deﬁned in sections CE 7 (Meaning of share purchase agreement) and CZ 1 (Share purchase agreement income before 19 July 1968) for the pur­ poses of sections CE 1 to CE 4 (which relate to employment income) and section EX 38 (Exemption for employee share 10 purchase scheme of grey list company)”.
5 (134) In the deﬁnition of share reorganisation, “held by the per­ son, including the person, who holds attributing interests in the FIF” is replaced by “held by persons, including the per­ son, who hold attributing interests in the FIF”.
15 (135) After the deﬁnition of shareholder, the following is inserted: “shareholder base means, for a life insurer, the base for share­ holder base gross income, expenditure, or loss, and to which income of a particular source or nature, and tax credits re­ ceived are apportioned under section EY 4 (Apportionment 20 of income of particular source or nature, and of tax credits) “shareholder base gross expenditure or loss means share­ holder base gross expenditure or loss described in section EY 3(2) (Shareholder base) “shareholder base gross income means policyholder base 25 gross income described in section EY 3(1) (Shareholder base)”.
(136) The deﬁnition of shares of the same class is replaced by the following: “shares of the same class means any 2 or more shares of a 30 company— “(a) that carry— “(i) the same shareholder decision­making rights; and the same rights, in terms of priority, amount 35 payable per share, and otherwise, to be paid proﬁts distributed by the company and distribu­ “(ii) 340 “(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 408 tions of assets of the company on a cancellation of its shares: for which either the owner, or the amount paid for the issue, of each share is the same if— “(i) the company gives notice to the Commissioner, 5 in a form approved by the Commissioner, that the company chooses to treat the shares as a separate class; and the company can at all times from the time of issue of each share identify and distinguish the 10 share from any other shares in the company”.
“(ii) (137) The deﬁnition of starting date is repealed.

(138) In the deﬁnition of substituting debenture, “for the purposes of that section” is omitted.

(139) After the deﬁnition of supply, the following is inserted: 15 “surrender, for an emissions unit, means the transfer of the emissions unit to an account in the Registry established under the Climate Change Response Act 2002 for the purpose of holding emissions units that account holders have surren­ dered”.
(140) After the deﬁnition of surrender, the following is inserted: “surrender value means the amount paid when a life insur­ ance policy is cancelled before it reaches the maturity or expiry date contracted for under the policy, but excluding an amount that is the repayment of unexpired premiums”.

20 25 (141) The deﬁnition of tax pooling account is replaced by the fol­ lowing: “tax pooling account is deﬁned in section RP 17B (Tax pooling accounts and their use)”.
(142) The deﬁnition of tax withheld is replaced by the following: 30 “tax withheld means an amount of tax— “(a) withheld from a PAYE income payment under the PAYE rules to the extent to which it is a tax credit under section LB 1 (Tax credits for PAYE income payments): “(b) withheld and paid to the Commissioner under the RWT 35 and NRWT rules to the extent to which it is a tax credit under section LB 3 or LB 5 (which relate to tax credits for passive income): 341 Part 1 cl 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(c) paid under regulations made under section 225 of the Tax Administration Act 1994”.
(143) After the deﬁnition of technology, the following is inserted: “telecommunications service means a service, relating to in­ formation of any kind including pictures, sound, and data, that 5 is— “(a) the transmission, emission, or reception of such infor­ mation in analogue or digital code by a technical system using any equipment, including a cable or satellite and associated equipment, for the transmission through any 10 medium of energy in any form, including electric cur­ rent or electromagnetic radiation: the transfer or assignment of the right to transmit, emit, or receive such information by a system referred to in paragraph (a): the provision of access to a global network for the trans­ mission, emission, or reception of such information”.
15 “(b) “(c) (144) The deﬁnition of tracking account is repealed.

(145) The deﬁnition of tracking associate is repealed.

(146) The deﬁnition of UFTC is repealed.

(147) The deﬁnition of UFTC accounting period is repealed.

(148) After the deﬁnition of unlisted, the following is inserted: 20 “valuation premiums is deﬁned in section EY 28(7) (Share­ holder base other proﬁt: proﬁt participation policies) for the purposes of section EY 28”.
25 (149) After the deﬁnition of valuation premiums, the following is inserted: “volunteer is deﬁned in section CW 62B (Voluntary activ­ ities) for the purposes of that section”.
(150) The deﬁnition of widely­held GIF is replaced by the follow­ 30 ing: “widely­held GIF means a group investment fund that meets the requirements of— “(a) section HM 14(1) (Minimum number of investors), treating the group investment fund as having 1 investor 35 class comprised of all investors in the fund: 342 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 412 “(b) 1 or more of paragraphs (a) and (c) to (e) of the deﬁn­ ition of public unit trust, treating the group investment fund as a unit trust”.
(151) The deﬁnition of widely­held superannuation fund is re­ placed by the following: “widely­held superannuation fund means a superannuation fund that meets the requirements of— “(a) section HM 14(1) (Minimum number of investors), treating the superannuation fund as having 1 investor class comprised of all investors in the fund: “(b) 1 or more of paragraphs (a) and (c) to (e) of the deﬁn­ ition of public unit trust, treating the superannuation fund as a unit trust”.
5 10 (152) After the deﬁnition of working day the following is inserted: “work­related relocation is deﬁned in section CW 17B(4) 15 (Relocation payments)”.

(153) The deﬁnition of zero­rated portfolio investor is replaced by the following: “zero­rated investor, for an investor in an investor class of a PIE, means an investor referred to in section HM 58 (Pre­ 20 scribed investor rates for certain investors: 0%).” 409 Meaning of income tax varied (1) (2) Section YA 2(6) is repealed.
Subsection (1) applies for the 2009–10 and later income years.

25 410 Treatment of qualifying company election tax, FBT, FDP penalty tax, imputation penalty tax, and withdrawal tax Section YA 3 is repealed.

411 Two companies with common control In section YB 2(6), “This section” is replaced by “Subsection 30 (3)”.
412 Two companies with common control: 1988 version provisions After section YB 3(3), the following is inserted: 343 Part 1 cl 413 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Exception for government­related entities “(3B) This section does not apply to make a company an associated person of another company if the ﬁrst company is an entity referred to in section YB 2(6).” 413 Some deﬁnitions 5 Section YB 20(2)(d) is replaced by the following: “(d) section DT 2 (Arrangement for petroleum exploration expenditure and sale of property):”.
414 Table, heading, and sections YB 1 to YB 20 replaced (1) Table Y1, the heading before section YB 1, and sections YB 10 1 to YB 20 are replaced by the following: “Associated persons “YB 1 What this subpart does “Associated person rules and nominee rules “(1) This subpart sets out the rules that— 15 deﬁne when 2 persons are associated persons; and “(a) “(b) determine how nominees are treated.
“(2) “Other references If a rule in this subpart states that 2 persons are associated persons for 1 or more provisions in this Act, a reference in 20 the relevant provision to persons who are associated with each other includes those persons.
“Tests “(3) The tests of association are categorised as follows: “(a) “(b) “(c) “(d) “(e) “(f) “(g) “(h) “(i) two companies, see section YB 2: a company and a person other than a company, see sec­ tion YB 3: two relatives, see section YB 4: a person and a trustee for a relative, see section YB 5: a trustee and a beneﬁciary, see section YB 6: trustees with a common settlor, see section YB 7: a trustee and a settlor, see section YB 8: a settlor and a beneﬁciary, see section YB 9: a trustee and a person with a power of appointment or removal, see section YB 11: 25 30 35 344 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 414 “(j) “(k) “(l) a partnership and a partner, seesection YB 12 : a partnership and an associate of a partner, see section YB 13: two persons who are each associated with the same third person, see section YB 14.
“Application “(4) The sections in this subpart relating to associated persons ap­ ply for the purposes of the whole Act unless a section expressly states otherwise.

“Loss­attributing qualifying companies and shareholders “(5) A special rule provides that a shareholder in a loss­attributing qualifying company and that LAQC are treated as associated persons for the purposes of section DS 4 (Meaning of ﬁlm reimbursement scheme), see section DS 4(5).
“Low­turnover traders “(6) A special rule applies for the purposes of subpart EB (Valu­ ation of trading stock (including dealer’s livestock)) to deter­ mine when a low­turnover trader is associated with a company, see section EB 13(2) (Low­turnover valuation).
“Control interests in foreign companies “(7) A special rule applies for the purposes of section EX 3 (Con­ trol interests: total of direct, indirect, and associated person interests) to determine when a New Zealand resident is asso­ ciated with a non­resident relative, see section EX 4(1) (Limits to requirement to include associated person interests).
“Supplementary dividend holding companies “(8) A special rule applies for the purposes of section LP 2 (Tax credits for supplementary dividends) to determine when a company is associated with a supplementary dividend holding company, see section LP 2(6).
“Deﬁned in this Act: associated person, company, loss­attributing qualifying company, low­turnover trader, New Zealand resident, nominee, non­resident, relative, settlor, shareholder, supplementary dividend holding company, trustee 345 Part 1 cl 414 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “YB 2 Two companies “Common voting interests “(1) Two companies are associated persons if a group of persons exists whose total voting interests in each company are 50% or more.
5 “Common market value interests “(2) Two companies are associated persons if— “(a) “(b) a market value circumstance exists for either company; and a group of persons exists whose total market value inter­ 10 ests in each company are 50% or more.

“Common control by other means “(3) Two companies are associated persons if a group of persons exists who control both companies by any other means.
“Aggregation rule “(4) For the purposes of subsections (1) to (3), if a person (per­ son A) and another person (person B) are associated under any of sections YB 4 to YB 14, person A is treated as hold­ ing anything held by person B.
“Exception for certain government entities “(5) Subsection (3) does not apply to a company that is— 15 20 a state enterprise: “(a) “(b) A Crown Research Institute: “(c) A Crown health enterprise: “(d) a company that is part of the same group of companies 25 as an entity referred to in any of paragraphs (a) to (c).

“(6) “Exception for international tax rules In the international tax rules, 2 companies are not associated persons if 1, but not both, is a non­resident.
“Deﬁned in this Act: associated person, company, Crown Research Institute, 30 group of companies, group of persons, international tax rules, market value cir­ cumstance, market value interest, non­resident, state enterprise, voting interest 346 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 414 “YB 3 Company and person other than company “Application: whole Act other than land provisions “(1) Subsections (2) and (3) apply for the purposes of the Act other than the land provisions.
“Company and 25% voting interest holder 5 “(2) A company and a person other than a company are associated persons if the person has a voting interest in the company of 25% or more.

“Company and 25% market value interest holder “(3) A company and a person other than a company are associated 10 persons if— “(a) “(b) a market value circumstance exists for the company; and the person has a market value interest in the company of 25% or more.
“Aggregation rule “(4) For the purposes of subsections (2) and (3), if a person (per­ son A) and another person (person B) are associated under any of sections YB 4 to YB 14, person A is treated as holding anything held by person B.

“Application: land provisions “(5) Subsections (6) and (7) apply for the purposes of the land provisions.
“Voting interests 15 20 “(6) A company and a person other than a company are associated 25 persons if a voting interest in the company of 25% or more is held by— “(a) “(b) the person: the person’s spouse, civil union partner, or de facto part­ ner: the person’s infant child: the trustee of a trust under which the person, their spouse, their civil union partner, their de facto part­ ner, or their infant child has beneﬁted or is eligible to beneﬁt: any 2 or more of the persons referred to in paragraphs (a) to (d).
30 35 “(c) “(d) “(e) 347 Part 1 cl 414 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Market value interests “(7) A company and a person other than a company are associated persons if— “(a) “(b) a market value circumstance exists for the company; and a market value interest in the company of 25% or more is held by— “(i) “(ii) the person: the person’s spouse, civil union partner, or de facto partner: “(iii) the person’s infant child: “(iv) the trustee of a trust under which the person, their spouse, their civil union partner, their de facto partner, or their infant child has beneﬁted or is eligible to beneﬁt: any 2 or more of the persons referred to in sub­ paragraphs (i) to (iv).
“(v) “(8) “Person other than company In this section, a person other than a company includes a com­ pany acting in its capacity as a trustee of a trust.
“Deﬁned in this Act: associated person, company, land provisions, market value circumstance, market value interest, trustee, voting interest “YB 4 Two relatives “Degree of relationship “(1) Two persons are associated persons if — “(a) “(b) “(c) they are within 2 degrees of blood relationship: they are married, in a civil union, or in a de facto rela­ tionship: 1 person is within 2 degrees of blood relationship to the other person’s spouse, civil union partner, or de facto 30 partner.
“Land provisions: blood relationships “(2) For the purposes of the land provisions, subsection (1)(a) and (c) does not apply, and persons are associated persons because of a blood relationship only if 1 is the infant child of 35 the other.

348 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 414 “Treatment of adoption “(3) For the purposes of this section, a child by adoption is treated as a natural child.
“Deﬁned in this Act: associated person, land provisions “YB 5 Person and trustee for relative Two persons (person A and person B) are associated persons if person A is the trustee of a trust under which a person asso­ ciated under section YB 4 with person B has beneﬁted or is eligible to beneﬁt.

“Deﬁned in this Act: associated person, trustee “YB 6 Trustee and beneﬁciary “Association “(1) A trustee of a trust and a person who has beneﬁted or is eligible to beneﬁt under the trust are associated persons.
“Land provisions “(2) This section does not apply for the purposes of the land provi­ sions.

“Deﬁned in this Act: associated person, land provisions 5 10 15 “YB 7 Two trustees with common settlor A trustee of a trust and a trustee of another trust are associated 20 persons if the same person is a settlor of both trusts.

“Deﬁned in this Act: associated person, settlor, trustee “YB 8 Trustee and settlor A trustee of a trust and a settlor of the trust are associated persons.
25 “Deﬁned in this Act: associated person, settlor, trustee “YB 9 Settlor and beneﬁciary “Association “(1) A settlor of a trust and a person who has beneﬁted or is eligible to beneﬁt under the trust are associated persons.

30 349 Part 1 cl 414 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Land provisions “(2) This section does not apply for the purposes of the land provi­ sions.
“Deﬁned in this Act: associated person, land provisions, settlor, trustee “YB 10 Who is a settlor?

For the purposes of sections YB 7 to YB 9, settlor has the meaning set out in section HC 27 (Who is a settlor?)

but does not include a person who provides services to a trust for less than market value.
“Deﬁned in this Act: settlor “YB 11 Trustee and person with a power of appointment or removal A trustee of a trust and a person who has a power of appoint­ ment or of removal of the trustee are associated persons.

“Deﬁned in this Act: associated person, trustee “YB 12 Partnership and partner “Association “(1) A partnership and a partner in the partnership are associated persons.
“Limited partnerships “(2) Subsection (1) does not apply in the case of a limited part­ nership, and a limited partnership and a limited partner are as­ sociated persons only if the limited partner has a partnership share of 25% or more in a right, obligation, or other property, status, or thing of the limited partnership.
“Deﬁned in this Act: associated person, limited partner, limited partnership, partnership share “YB 13 Partnership and associate of partner “Association “(1) A partnership and a person associated with a partner other than 30 under this section are associated persons.
350 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 414 “Limited partnerships “(2) Subsection (1) does not apply in the case of a limited part­ nership, and a limited partnership and a limited partner are as­ sociated persons only if the limited partner has a partnership share of 25% or more in a right, obligation, or other property, 5 status, or thing of the limited partnership.
“Deﬁned in this Act: associated person, limited partner, limited partnership, partnership share “YB 14 Tripartite relationship “Test 10 “(1) Two persons (person A and person B) are associated persons if— “(a) person B is associated with a third person (person C) under any of sections YB 2 to YB 13; and “(b) person C is associated with person A under any of sec­ 15 tions YB 2 to YB 13.
“Exceptions “(2) Subsection (1) does not apply if 2 persons are both associated with a third person under— “(a) section YB 2 (which relates to the association of 2 20 companies): “(b) section YB 3 (which relates to the association of a company and a person other than a company): section YB 4 (which relates to the association of 2 relatives): “(c) “(d) section YB 12 (which relates to the association of a “(e) partner and a partnership): section YB 13 (which relates to the association of a partnership and an associate of a partner).
25 “Association for purposes of research and development tax credits 30 “(3) Subsection (1) does not apply in relation to the association of a company and a person, for the purposes of section LH 1(2) (Who this subpart applies to).
“Deﬁned in this Act: associated person, company, tax credit 35 351 Part 1 cl 414 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “YB 15 Exceptions for employee trusts “Beneﬁciaries “(1) Section YB 6(1) does not apply if— “(a) the trust is only for the beneﬁt of employees of an em­ ployer; and 5 “(b) neither the beneﬁciary nor any person associated with the beneﬁciary directly or indirectly controls the trust.
“Non­corporate settlors “(2) For a settlor that is not a company, sections YB 7, YB 8, and YB 9(1) do not apply if— “(a) the settlor settles property on the terms of the trust only for the beneﬁt of employees of the settlor; and “(b) neither the settlor nor any person associated with the settlor directly or indirectly controls the trust.
“Corporate settlors 10 15 “(3) For a settlor that is a company, sections YB 7, YB 8, and YB 9(1) do not apply if— “(a) the settlor settles property on the terms of the trust only for the beneﬁt of its employees; and “(b) none of the following directly or indirectly controls the 20 the settlor: a person associated with the settlor: trust: “(i) “(ii) “(iii) an executive of the settlor: “(iv) a director of the settlor: “(v) “(vi) a person holding a direct voting interest of 25% or more in the settlor: if a market value circumstance exists for the set­ tlor, a person holding a direct market value inter­ est of 25% or more in the settlor.
“Deﬁned in this Act: associated person, company, direct voting interest, em­ ployee, employer, market value circumstance, market value interest, settlor”.
Subsection (1) applies, for the purposes of— (a) provisions other than the land provisions, 2009–10 and later income years: the land provisions other than section CB 11, for land acquired on or after 1 April 2009: for the (b) (2) 352 25 30 35 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 416 (c) section CB 11, for land on which improvements are be­ gun on or after 1 April 2009.

415 Section YC 1 repealed (1) (2) Section YC 1 is repealed.
Subsection (1) applies for the 2009–10 and later income 5 years.
416 New section YC 18B inserted After section YC 18, the following is inserted: “YC 18B Corporate reorganisations not affecting economic ownership “When subsection (3) applies “(1) Subsection (3) applies if — 10 “(a) “(b) “(c) “(d) a company (the initial parent) executes an arrangement described in subsection (2) (the arrangement); and the initial parent is a limited attribution company that 15 is treated under section YC 11(3) as holding all owner­ ship interests in another company immediately before the beginning of the arrangement’s execution; and as a result of the arrangement the ownership of the ini­ tial parent is reorganised so that another company (the 20 new parent) holds all ownership interests in the initial parent; and the new parent continues to hold all ownership interests in the initial parent after end of the execution of the arrangement.
25 “Description of arrangement “(2) The description of the arrangement for the purposes of sub­ section (1) is as follows: “(a) “(b) as a result of the arrangement, the ownership of the ini­ tial parent is reorganised so that the new parent holds 30 all ownership interests in the initial parent: the ownership interests in the new parent are all held by those people who held ownership interests in the initial parent immediately before the beginning of the arrange­ ment’s execution.
Ownership interests in the new par­ 35 ent that are not held by those people are ignored for the 353 Part 1 cl 416 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill purposes of this paragraph, if the Commissioner decides it is reasonable to ignore those ownership interests, and the interests— “(i) are for the facilitation of the arrangement only; and “(ii) have a market value that is merely nominal rela­ tive to the value of the ownership interests in the new parent held by those people: 5 no person holding ownership interests in the new parent receives a dividend, gift, or other beneﬁt as a result of 10 the arrangement’s execution: as a result of the arrangement, the new parent is, imme­ diately after the end of the arrangement’s execution, a limited attribution company that is treated under section YC 11(3) as holding all ownership interests in the initial 15 parent.
“(c) “(d) “Loss balance and credit account continuity “(3) For the purposes of Part I and subparts OB, OC, and OP (which relate to loss balances and memorandum accounts), starting from when the initial parent is ﬁrst treated under section YC 20 11(3) as holding all ownership interests in another company, the new parent is treated as— “(a) existing and having the shareholders it has after the end of the arrangement’s execution: “(b) holding all ownership interests that the initial parent 25 holds: holding all ownership interests in the initial parent.
“(c) “Effect of subsection (3) “(4) Subsection (3) does not prevent a change in shareholders, the holdings of ownership interests, or other circumstances after 30 the end of the arrangement’s execution from having an effect on the application of the continuity provisions after the end of the arrangement’s execution.

“(5) “Meaning of ownership interest In this section, ownership interest has the same meaning as 35 in section YC 18(6).
“Deﬁned in this Act: company, continuity provision, dividend, limited attribu­ tion company, ownership interest, shareholder”.

354 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 420 417 Residence of natural persons (1) Section YD 1(9) and (10) are repealed.
(2) After section YD 1(8), the following is added: “Treatment of non­resident seasonal workers “(11) Despite subsection (3), a non­resident seasonal worker is 5 treated for the duration of their employment under the recog­ nised seasonal employment scheme as a non­resident.” In section YD 1, in the list of deﬁned terms, “transitional resi­ dent” is omitted.

In section YD 1, in the list of deﬁned terms, “non­resident sea­ 10 sonal worker” and “recognised seasonal employment scheme” are inserted.
Subsections (2) and (4) apply for the 2009–10 and later in­ come years.

(3) (4) (5) 418 Classes of income treated as having New Zealand source 15 In the compare note to section YD 4, “s OE 1(4)” is replaced by “ss FB 2(2), OE 1(4)”.
419 Apportionment of income derived partly in New Zealand (1) After section YD 5(1), the following is inserted: “Relationship with source rules 20 “(1B) This section does not apply to limit the effect of— “(a) “(b) any of the source rules in section YD 4 other than those in section YD 4(2) and (3); or the source rules in section YD 4(2) and (3) to the extent to which the income referred to is also income referred 25 to in any source rule other than those in section YD 4(2) and (3).” (2) In section YD 5, in the compare note, “FB 2” is replaced by “FB 2(1A)”.
420 General rules for currency conversion (1) Section YF 1(1)(c) is replaced by the following: “(c) this Act does not contain a speciﬁc currency conversion rule that requires the conversion of the amount into New Zealand currency under a method other than those in this section.” 30 35 355 Part 1 cl 421 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) (3) (4) In section YF 1(3), the heading is replaced by “Alternative use of monthly average rates”.
Section YF 1(3)(b) is replaced by the following: “(b) Section YF 1(4) is repealed.

a provision in this Act speciﬁcally allows it.” 421 Schedule 1—Basic tax rates: income tax, ESCT, RWT, (1) (2) (3) (4) and attributed fringe beneﬁts In schedule 1, part A, clause 8,— (a) in the heading “policyholder income” is replaced by “schedular policyholder base income”: in the words after the heading, “policyholder income” is replaced by “schedular policyholder base income”.
(b) In schedule 1, part E, the list of sections is replaced by “CB 28, CD 53, CS 1, EK 8, EK 12, EK 23, EX 20, EX 50, EY 43, FE 22, FM 28, HA 15, HA 24, HC 22, HC 34, HF 1, HL 29, 15 LC 1, LC 2, LE 2, LJ 5, LP 8, LP 10, OA 18, OB 19, OB 42, OB 46, OB 69, OB 73, OB 75, OB 78, OB 80, OC 36, OC 38, OE 7, OE 8, OP 100, OP 102, RD 50, RD 51, RD 66, RD 67, RD 69, RD 70, RD 72, RE 11–RE 19, RF 9, RF 12, RM 21, YA 1.” Subsection (1) applies for income years beginning on and after 1 April 2009.
Subsection (2) applies for the 2009–10 and later income years.
20 5 10 25 422 Schedule 2—Basic tax rates for PAYE income payments (1) “8 In schedule 2, part A, the following is inserted after clause 7: If an employee has notiﬁed their employer that the employee’s tax code is ‘NSW’ under section 24B(3) of the Tax Adminis­ tration Act 1994, the basic tax rate amount for a payment for employment as a non­resident seasonal worker is set by apply­ 30 ing the rate of 0.19 for each dollar of the payment.” Subsection (1) applies for the 2009–10 and later income years.
(2) 423 Schedule 13—Depreciable land improvements (1) In schedule 13, after item 16, the following is added: 35 356 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 1 cl 426 17 pipes and conduits (2) In schedule 13, after item 17, the following is added: 18 purpose­built surfaces for outdoor sports grounds (3) Subsections (1) and (2) apply for the 2008–09 and later in­ come years.
424 Schedule 21—Expenditure and activities related to (1) “8 (2) “7 research and development Schedule 21, part A, clause 8 is replaced by the following: Expenditure on materials to be processed or transformed for the purposes of testing or trialling as part of the research and development activities.” In schedule 21, part B, clause 7 is replaced by the following: Expenditure or amount of depreciation loss incurred in pro­ ducing materials or items (other than a trial model or prelim­ inary version of a product or plant) for the purposes of testing or trialling as part of the research and development activities to the extent to which it is less than or equal to— “(a) the sale proceeds of the materials or items sold other than to an associated person: the market value of the materials or items not sold or sold to an associated person.” “(b) 5 10 15 (3) Subsections (1) and (2) apply for the 2008–09 and later in­ 20 come years.
425 Schedule 24—International tax rules: grey list countries (1) In schedule 24, the shoulder reference is replaced by the fol­ lowing: “ss DZ 1, YA 1”.

Subsection (1) applies for the 2009–10 and later income 25 years.

(2) 426 Schedule 27—Countries and types of income with (1) unrecognised tax In schedule 27, the shoulder reference is replaced by the fol­ lowing: “ss LJ 1, LK 2”.
30 357 Part 1 cl 427 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for the 2009–10 and later income years.

427 Schedule 32—Recipients of charitable or other public (1) (2) (3) beneﬁt gifts In schedule 32, the following is omitted: “Bright Hope Inter­ 5 national Trust”.
In schedule 32, the following are inserted: “Educational Aid for International Development Trust Board”, “Global Hope”, “Ingwavuma Orphan Trust Fund of New Zealand”, “Kyrgyzs­ tan New Zealand Rural Trust”, “L Women of Africa Fund”, 10 “Partners Relief and Development NZ”, “Tender Trust”, “The Band Aid Box”, “The Destitute Children’s Home, Pokhara, Charitable Trust”, “The Palestine Children’s Relief Fund Charitable Trust”, “Triyog Himalaya Trust”, and “UNHCR (United Nations High Commissioner for Refugees)”.
Subsections (1) and (2) apply for the 2008–09 and later in­ come years.

15 428 Schedule 49—Enactments amended In the amendments to the Injury Prevention, Rehabilitation, and Compensation Act 2001 (2001 No 49),— (a) the second item amending section 204(1)(b) relating to section HG 16 of the Income Tax Act 2004 is omitted: in the item amending schedule 4, clause 1(c), “an amount of tax, amount of tax” is replaced by “an amount of tax, which amount”.
(b) 429 Schedule 50—Amendments to Tax Administration Act 1994 The item amending section 3(4)(b) is repealed.

The item inserting the new Part 2B is repealed.

The item amending section 125(d) is repealed.


(1) (2) (3) 430 Schedule 52—Comparative tables of old and rewritten provisions In schedule 52, part A, the entry for “FB 2(1), (2)” is replaced by— (1) 358 20 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 433 (a) (b) an entry for “FB 2(1), (1A)” having “YD 5” in the sec­ ond column: an entry for “FB 2(2)” having “YD 4” in the second column.
(2) (3) (4) (5) In schedule 52, part A, the entry for “HH 1(1)­(4), (8), (10)” 5 is replaced by— (a) an entry for “HH 1(1)” having “YB 21” in the second column: an entry for “HH 1(2)­(4), (8), (10)” having “HC 28” in the second column.

(b) 10 In schedule 52, part B, in the second column of the entry for YB 21, “OD 9” is replaced by “HH 1(1), OD 9”.

In schedule 52, part B, in the second column of the entry for YD 4, “OE 4(1)” is replaced by “FB 2(2)”.
In schedule 52, part B, in the second column of the entry for 15 YD 5, “FB 2” is replaced by “FB 2(1A)”.

431 Consequential amendments: associated person and list of deﬁned terms In the sections listed in schedule 1, the list of deﬁned terms is amended in the manner indicated in the schedule.

20 Part 2 Amendments to Tax Administration Act 1994 432 Tax Administration Act 1994 This Part amends the Tax Administration Act 1994.

25 Interpretation This section amends section 3(1).
433 (1) (2) After the deﬁnition of disclosure notice, the following is in­ serted: “discovery obligation means an order of a court or Taxation 30 Review Authority, or notice of discovery in proceedings be­ fore a court or Authority, requiring the disclosure of informa­ tion to the Commissioner in relation to proceedings before the court or Authority”.
359 Part 2 cl 434 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (3) (4) (5) (6) (7) In section 3(1), the deﬁnition of response period, is replaced by the following: “response period is deﬁned in section 89AB”.

In the deﬁnition of tax, paragraphs (a)(iii)(A) and (d)(iii)(A) are repealed.

Subsection (2) applies for challenges commenced on or after the date on which this Act receives the Royal assent.

Subsection (3) applies for the 2008–09 and later income years.
Subsection (4) applies for the 2009–10 and later income 10 years.

5 434 Construction of certain provisions Section 4A(2)(a) is repealed.

(1) In section 4A(2)(c), “paragraph (a) or” is omitted.

(2) In section 4A(2)(d), “paragraph (a) or” is omitted.
(3) In section 4A(2)(d), “unpaid tax.” is replaced by “unpaid tax:” (4) and the following is added: “(e) Despite paragraph (d), and only for the purposes of Part 10B, the amount of tax deemed to be withheld referred to in paragraph (b) is treated as tax paid although it 20 may not have been paid to the Commissioner by the due date.” 15 (5) (6) In section 4A(4), in the words before paragraph (a), “RF 13, RG 3, or RG 6” is replaced by “or RF 13”.
Subsections (1) to (3) and (5) apply for the 2009–10 and 25 later income years.
435 New Part 2B (1) After section 15B, the following is inserted: 360 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 435 “Part 2B “Intermediaries for PAYE, provisional tax, and resident passive income “PAYE intermediaries “15C PAYE intermediaries and listed PAYE intermediaries “(1) A person who meets the requirements of section 15F may apply under section 15D to the Commissioner for approval to become a PAYE intermediary.
5 “(2) A PAYE intermediary may apply under section 15G to the Commissioner to become a listed PAYE intermediary.

To 10 make an application, the PAYE intermediary must meet, on a continuing basis, the requirements for a PAYE intermediary.
“Compare: 2004 No 35 ss NBA 1, NBB 3 “15D Application for approval as PAYE intermediary “(1) In order to become a PAYE intermediary, a person must— “(a) meet the requirements of section 15F; and “(b) have established a trust account that meets the require­ ments of section RP 6 of the Income Tax Act 2007; and operate systems to protect the personal information and payment details that are obtained in the course of run­ 20 ning the account.
“(c) 15 “(2) The Commissioner may approve an application if the Com­ missioner is satisﬁed that the applicant— “(a) will comply with the PAYE rules and the ESCT rules if they assume an employer’s obligations under those 25 rules; and “(b) has systems to allow them to make payments and pro­ vide information in the format required by the Commis­ sioner.

“(3) The Commissioner may approve a person as a PAYE inter­ 30 mediary for a set period.
“Compare: 2004 No 35 s NBA 2(1)(a)–(c), (2), (3) “15E Revocation of approval “(1) The Commissioner may revoke an approval given under sec­ tion 15D if the person— “(a) does not comply with the PAYE rules: 35 361 Part 2 cl 435 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) does not comply with the ESCT rules when they have “(c) assumed an employer’s obligations under those rules: is no longer ﬁt to be a PAYE intermediary because they do not meet the requirements of section 15F: “(d) when they are not a natural person, has been put into 5 liquidation or receivership: “(e) when they are a company, is no longer registered in New Zealand.
“(2) If the Commissioner revokes an approval under subsection (1)(b), the Commissioner must notify the person, and any em­ 10 ployer for whom the person is a PAYE intermediary, of the revocation and its effective date.

The effective date must not be less than 14 days from the date of notiﬁcation.

“(3) A decision by the Commissioner under this section is not open to challenge.
“Compare: 2004 No 35 s NBA 2(4) 15 “15F Fitness of applicants “(1) This section applies for the purposes of section 15D to the following: “(a) an applicant who is a natural person or a corporation 20 sole: each member of an applicant that is an unincorporated body: an ofﬁcer of an applicant that is a body corporate: a principal of an applicant.
25 “(b) “(c) “(d) “(2) The applicant, member, ofﬁcer, or principal, as applicable,— “(a) must not be a discharged or undischarged bankrupt; or “(b) must not have been convicted of an offence involving fraud; or “(c) must be eligible to be a company director.
“Compare: 2004 No 35 s NBA 2(1)(c) “15G Application for approval as listed PAYE intermediary “(1) In order to become a listed PAYE intermediary, a PAYE inter­ mediary must— “(a) meet the requirements of section 15D; and “(b) have completed and ﬁled the returns of income required from them; and 30 35 362 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 435 “(c) paid the required amounts of tax due from them.
“(2) A PAYE intermediary is a listed PAYE intermediary only for a period that is no more than the period for which they have been approved as a PAYE intermediary.
“(3) On approval of an application under this section and before 5 acting as a listed PAYE intermediary for an employer, the listed PAYE intermediary must inform an employer who contracts their services as a listed PAYE intermediary that the Commis­ sioner does not guarantee payment by the intermediary to an employee of the employer, or the performance of a service pro­ 10 vided by them.

“(4) The Commissioner may approve a PAYE intermediary as a listed PAYE intermediary for a set period.
“Compare: 2004 No 35 s NBB 2 “15H Grounds for revocation of listing 15 The Commissioner may revoke the listing of a listed PAYE intermediary if— “(a) an approval of the person as PAYE intermediary is re­ voked: the person no longer meets the requirements of section 20 15F: the person does not provide a subsidy claim form by the date and in the format required by the Commissioner: the person does not comply with an obligation of a listed PAYE intermediary: the Commissioner considers revocation is necessary in order to protect the integrity of the tax system.
25 “(b) “(c) “(d) “(e) “Compare: 2004 No 35 s NBB 4(1) “15I Procedure for revocation of listing “(1) The Commissioner must notify a listed PAYE intermediary of 30 an intended revocation under section 15H, and must provide reasons for the intended revocation.
If the listed PAYE intermediary who is notiﬁed by the Com­ missioner under subsection (1) does not resolve the matters set out in the notice to the satisfaction of the Commissioner 35 “(2) 363 Part 2 cl 435 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill within 30 days of the date on which they are notiﬁed, the Com­ missioner may give 14 days notice of revocation.
“(3) At the end of the 14­day notice period under subsection (2), the listing of the listed PAYE intermediary is revoked.

“(4) A decision by the Commissioner under this section is not open 5 to challenge under Part 8A.
“Compare: 2004 No 35 s NBB 4(2)–(5) “15J Employers’ arrangements with PAYE intermediaries “(1) An employer who wishes to enter an arrangement with a PAYE intermediary must notify the Commissioner of the proposed 10 arrangement, providing— “(a) “(b) the name of the PAYE intermediary: the period for which the PAYE intermediary is to act for the employer: the bank account number of the PAYE intermediary into 15 which the employer will deposit amounts: “(c) “(d) whether the proposed arrangement requires the PAYE intermediary to collect amounts under the ESCT rules.
“(2) On approval of the arrangement, the Commissioner must no­ tify the employer, and the approval applies to pay periods that 20 begin on or after 14 days after the date on which the notice is given.

“(3) An employer or a PAYE intermediary may end the arrange­ ment by notifying the other party and the Commissioner.

The notice must state the date that is after the notiﬁcation for the 25 end of the arrangement.
“(4) An employer or a listed PAYE intermediary may end an ar­ rangement by notifying the other party and the Commissioner.

The notice must state the date on which the arrangement is to end that must begin on or after 14 days after the date on which 30 the notice is given.
“Compare: 2004 No 35 ss NBA 3, NBA 8, NBB 7 364 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 435 “15K Privacy requirements The PAYE intermediary must operate and maintain systems to protect the personal information and payment details that they acquire in running the systems.
“Compare: 2004 No 35 s NBA 5(3) 5 “15L Amended monthly schedules The PAYE intermediary may make an amended monthly schedule relating to the employee and a pay period, and is then responsible for the accuracy of the amendments.

“Compare: 2004 No 35 s NBA 5(4) 10 “15M Subsidy claim forms “(1) A listed PAYE intermediary must ﬁle a subsidy claim form within 1 month of the date of ﬁling an employer monthly schedule to which the form relates.
“(2) The Commissioner may amend the details in a subsidy claim 15 form to correct an error.

The amendment must be made within 2 years of receiving the form.

“(3) For the purposes of subsection (2), the Commissioner must give the listed PAYE intermediary 14 days notice of a proposed amendment.

20 “(4) For the purposes of section 22, a listed PAYE intermediary must keep the necessary records to verify the information in a subsidy claim form.
“Compare: 2004 No 35 ss NBB 3(2), NBB 5(1)–(3) “Tax pooling intermediaries “15N Establishing tax pooling accounts A person who meets the requirements of section 15Q may apply under section 15P to the Commissioner to establish a tax pooling account.

“Compare: 2004 No 35 s MBA 3(1) 25 30 “15O Role of Commissioner “(1) The Commissioner is not required to oversee or audit the op­ eration of a tax pooling account.
365 Part 2 cl 435 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(2) The Commissioner is not liable for any loss related to the op­ eration of a tax pooling account through— “(a) the failure of a tax pooling intermediary to deposit in a tax pooling account an amount paid to them by a tax­ payer: the unauthorised withdrawal by a tax pooling intermedi­ ary from a tax pooling account: the failure of a tax pooling intermediary to ask for a transfer of funds from a tax pooling account to a tax­ payer’s tax account with the Commissioner.
“(b) “(c) “Compare: 2004 No 35 s MBA 4(5), (6) “15P Applications to establish tax pooling accounts “(1) hold the account in their name; and In order to establish and maintain a tax pooling account, an intermediary must— “(a) “(b) operate systems to protect the personal information and payment details that are obtained in the course of run­ ning the tax pooling account; and record the balance in the tax pooling account con­ tributed by each taxpayer.
“(c) “(2) A tax pooling account continues until it is wound up under section 15S.

“Compare: 2004 No 35 s MBA 4 “15Q Fitness of applicants “(1) This section applies for the purposes of section 15P to— an applicant who is a natural person; and an ofﬁcer of an applicant who is not a natural person; and a principal of an applicant.
“(a) “(b) “(c) “(2) The applicant— “(a) must not be a discharged or undischarged bankrupt; or “(b) must not have been convicted of an offence involving dishonesty; or “(c) must be eligible to be a company director.
“Compare: 2004 No 35 s MBA 3(d) 366 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 435 “15R Requirements for applications to establish tax pooling accounts “(1) An application to establish a tax pooling account must con­ tain— “(a) “(b) “(c) “(d) the applicant’s full name, address, and tax ﬁle number; 5 and a statement that the applicant— “(i) will operate systems that allow them to meet the requirements set out in section 15P(1); and “(ii) will maintain and operate the systems to meet 10 those requirements; and conﬁrmation that the applicant will establish a trust ac­ count into which they agree to pay amounts received in their role as intermediary; and an undertaking that, before acting as intermediary for a 15 taxpayer, the applicant will inform the taxpayer of the following matters: “(i) the operation of the tax pooling account is not subject to the Commissioner’s oversight or audit: the Commissioner has no liability for any loss 20 related to the tax pooling account: “(ii) “(iii) the applicant is ﬁt to operate the tax pooling ac­ “(iv) count as required by section 15Q: the applicant has met the requirements set out in paragraphs (a) to (c).
25 “(2) The Commissioner may approve an application to establish a tax pooling account if the Commissioner is satisﬁed that the applicant— “(a) “(b) has systems to allow them to make payments and pro­ 30 vide information in the format required by the Commis­ sioner.

is able to operate the account correctly; and “Compare: 2004 No 35 s MBA 3 “15S Winding up tax pooling accounts “(1) An intermediary may wind up their tax pooling account at any 35 time.
“(2) The Commissioner may require an intermediary to wind up their tax pooling account if— 367 Part 2 cl 435 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) “(c) “(d) “(e) the intermediary’s actions are preventing a taxpayer from effectively managing their liability to pay provi­ sional tax and use of money interest; or the intermediary is or has breached their obligations under this Part; or the tax pooling account is in deﬁcit; or fewer than 100 taxpayers are, or are likely to be, making deposits in the tax pooling account; or the intermediary does not meet the requirements of sec­ tion 15P; or “(f) when they are not a natural person, the intermediary has been put into liquidation or receivership.
“(3) For the purposes of subsection (2),— “(a) “(b) the Commissioner may require the winding up immedi­ ately or may set another date for the winding up: the Commissioner must give 30 days’ notice to the intermediary of any intended action using subsection (2)(d).

5 10 15 “(4) On the winding up of a tax pooling account, the Commissioner may refund the balance of the account to the former holder 20 of the account, or may apply to a court for directions for the disposal of the balance of the account.
“Compare: 2004 No 35 s MBA 8 “RWT proxies “15T RWT proxies “(1) If the requirements in subsection (2) are met, a person may choose to become an RWT proxy for a person who pays resi­ dent passive income that consists of a dividend by notifying the Commissioner.
“(2) The requirements are that— 25 30 “(a) “(b) “(c) the person paying the resident passive income is a non­ resident unit trust; and the person receiving the resident passive income is a natural person or a trustee of a qualifying trust who has asked the person referred to in subsection (1) to act as 35 an RWT proxy in relation to the payment; and the person has agreed to act as the RWT proxy; and 368 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 438 “(d) the payment of resident passive income is made while the notice is effective.
“(3) For the purposes of subsection (1), the notiﬁcation to the Commissioner must contain the person’s election, their name, postal address, and the date from which the election applies.

5 “(4) The RWT proxy may cancel their election by notifying the Commissioner.

The election stops applying from the later of— “(a) “(b) the date set out in the notice of cancellation: the date on which the Commissioner receives a notice of cancellation.

“Compare: 2004 No 35 s NF 2AA”.


Subsection (1) applies for the tax on income derived in the 2008–09 or later income years.

10 Information to be furnished on request of Commissioner In section 17(1C)(a)(ii), “paragraph (b)” is replaced by “para­ 15 graph (a)”.
Section 17(1C)(a) is replaced by the following: “(a) in determining whether a non­resident is controlled by a New Zealand resident, the New Zealand resident is treated as holding anything held by a person who is resi­ 20 dent in New Zealand, or is a controlled foreign com­ pany, and is associated with the New Zealand resident; and”.
(2) 436 (1) (2) 437 No requirement to disclose tax advice document (1) In section 20B(1), “or under a discovery obligation” is inserted 25 after “under 1 or more of sections 16 to 19”.

Subsection (1) applies for challenges commenced on or after the date on which this Act receives the Royal assent.

(2) 438 Treatment of book or document (1) In section 20C(1), “request for information” is replaced by “re­ 30 quest for, or discovery obligation for disclosure of, informa­ tion”.
Section 20C(2)(a) is replaced by the following: “(a) from the time of the request for, or discovery obligation for disclosure of, information:”.
35 (2) 369 Part 2 cl 439 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (3) Section 20C(3)(a) is replaced by the following: “(a) the book or document is ruled not to be a tax advice document for the person by— the District Court: “(i) a court or Taxation Review Authority, if the claim 5 “(ii) is made in response to a discovery obligation in proceedings before the court or Authority:”.
(4) Subsections (1) to (3) apply for challenges commenced on or after the date on which this Act receives the Royal assent.
439 Claim that book or document is tax advice document (1) In section 20D(4)(d), “information.” is replaced by “informa­ tion:” and the following is added: “(e) if the requirement to disclose information is under a discovery obligation, by the date by which the discovery obligation requires the disclosure of information.” Subsection (1) applies for challenges commenced on or after the date on which this Act receives the Royal assent.
(2) 10 15 440 Person must disclose tax contextual information from tax (1) advice document In section 20F(2)(d), “information.” is replaced by “informa­ 20 tion:” and the following is added: “(e) if the requirement to disclose information is under a discovery obligation, by the date by which the discovery obligation requires the disclosure of information.” (2) In section 20F(5), the words before paragraph (a) are replaced 25 by the following: “(5) The Commissioner may apply to a District Court Judge, or to a court or Taxation Review Authority in relation to a tax advi­ sor making a statutory declaration considered in proceedings before the court or Authority, that a tax advisor be barred from 30 making statutory declarations under this section, if the tax ad­ visor is convicted of an offence under—”.
(3) After section 20F(5), the following is added: “(6) An application under subsection (5) may be made in the course of proceedings before a court or Taxation Review Authority.” 35 370 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 443 (4) Subsections (1) to (3) apply for challenges commenced on or after the date on which this Act receives the Royal assent.
441 Challenge to claim that book or document is tax advice (1) (2) (3) document In section 20G(1), in the words before paragraph (a), “District 5 Court Judge” is replaced by “District Court Judge, or to the court or Taxation Review Authority hearing the proceedings giving rise to the claim,”.

Section 20G(1)(b) is replaced by the following: “(b) information provided or withheld by the person is tax 10 contextual information in relation to the book or docu­ ment:”.
In section 20G(2), in the words before paragraph (a), “District Court Judge” is replaced by “District Court Judge, court, or Taxation Review Authority” in both places where it appears.

(4) After section 20G(3), the following is added: “(4) An application under this section may be made in the course of proceedings before a court or Taxation Review Authority.” Subsections (1) to (4) apply for challenges commenced on or after the date on which this Act receives the Royal assent.
(5) 15 20 442 Keeping of business and other records (1) After section 22(2)(ec), the following is inserted: “(ed) is an employer to whom section RD 13B of the Income Tax Act 2007 applies in relation to the treatment of a tax credit for a payroll donation:”.

25 Section 22(2)(j) is repealed.

(2) (3) After section 22(2)(kd), the following is inserted: “(ke) the transfer under section 24Q of an amount of an em­ ployee’s payroll donation to the recipient of the dona­ tion:”.
30 (4) Subsection (2) applies for the 2009–10 and later income years.

443 Records to be kept by employer or PAYE intermediary In section 24(1), “withheld from it,” is replaced by “withheld from it, and the amount of any payroll donation”.

35 371 Part 2 cl 444 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 444 PAYE tax codes (1) In section 24B(3), the following is inserted after paragraph (g): “(gb) ‘NSW’ for salary or wages for employment as a non­ resident seasonal worker:”.
(2) Subsection (1) applies for the 2009–10 and later income 5 years.

445 Special tax code certiﬁcates (1) After section 24F(5), the following is inserted: “(5B) This section does not apply to an employee who is a non­ (2) resident seasonal worker.” Subsection (1) applies for the 2009–10 and later income years.

10 446 Variation of requirements In section 24P, “sections 24B, 24H, and 24I” is replaced by “sections 24B, 24H, 24I, and 24L”.
15 447 New heading and section 24Q inserted After section 24P, the following is inserted: “Payroll donations “24Q Transfer of payroll donations by employers “(1) This section applies for a pay period when a person asks their 20 employer to transfer an amount of a payroll donation from the person’s PAYE income payment to an entity described in sec­ tion LD 3(2) of the Income Tax Act 2007 or listed in schedule 32 of that Act.
“(2) The employer or PAYE intermediary must transfer the amount 25 to the recipient of the donation within 3 months from the end of the pay period.
“(3) Before making the transfer referred to in subsection (2) the employer must also ensure that the recipient is an entity de­ scribed in section LD 3(2) or listed in schedule 32.” 30 448 Section 28B replaced (1) Section 28B is replaced by the following: 372 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 450 “28B Notiﬁcation of investors’ tax rates A New Zealand resident who is an investor in a multi­rate PIE must provide their tax ﬁle number to the PIE within 1 month of the date of a request from the PIE for the number.” Subsection (1) applies for the 2009–10 and later income 5 years.
(2) 449 Portfolio tax rate entity to give statement to investors and (1) (2) (3) request information Section 31B(1) is repealed.

In section 31B(2B), “subsection (1) or (2)” is replaced by “sub­ 10 section (2)”.

In section 31B(3), “subsections (1) and (2) do not apply” are replaced by “subsection (2) does not apply”.
Section 31B is replaced by the following: 450 Section 31B replaced (1) “31B Notiﬁcation requirements for PIEs “(1) An entity choosing under section HM 70 of the Income Tax Act 2007 to become a PIE must notify the Commissioner of the election.

The notice must be in the prescribed electronic format.

15 20 “(2) A PIE choosing under section HM 29 of that Act to cancel PIE status must notify the Commissioner of the election.

The notice must be in the prescribed electronic format.
“31C Notiﬁcation requirements for multi­rate PIEs “(1) This section sets out the notice requirements for a multi­rate 25 PIE in relation to its investors or a proxy for investors in a multi­rate PIE.

The notices must contain the information that the Commissioner considers relevant for a calculation period.
“(2) For an exiting investor and a PIE that calculates and pays tax using the quarterly calculation option under section HM 43 of 30 the Income Tax Act 2007, the notice must be provided for each calculation period in which the exit period falls.

The notice must be given by the end of the month following the quarter in which the exit period ends.
373 Part 2 cl 451 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(3) For a zero­rated investor and a PIE that calculates and pays tax using the exit calculation or quarterly calculation options under section HM 42 or HM 43 of that Act, other than an exiting investor that is zero­rated under section HM 60, the notice must be provided— “(a) for each quarter in which the exit period falls, if the calculation period is more than 1 day; and for each tax year in which the exit period falls, if the calculation period is a day.
“(b) 5 “(4) For an investor to whom subsection (3) applies, the PIE must 10 provide the notice by the end of the 1­month period that starts after the end of the period to which the notice relates.
“(5) For an investor to whom subsection (2) or (3) does not apply, the PIE must notify the investor of the relevant information by the 30 June after the end of the tax year or, if the PIE’s cor­ 15 responding income year ends after the tax year, by the end of the second month after the month in which that corresponding income year ends.

“(6) The PIE must, at least once in a tax year, ask an investor to provide their prescribed investor rate under sections HM 56 20 to HM 58 of that Act.
“(7) The PIE must ask a person when they become an investor to provide their tax ﬁle number to the PIE.

For each investor for whom no tax ﬁle number is held, the PIE must, at least once in a tax year, ask the investor to provide their tax ﬁle number.” Subsection (1) applies for the 2009–10 and later income years.
(2) 25 451 Applications for RWT exemption certiﬁcates Section 32E(2)(i)(ii) is replaced by the following: “(ii) whose annual gross income for the tax year for 30 which they last ﬁled a return of income is more than $2,000,000:”.

452 Section 32N repealed (1) (2) Section 32N is repealed.

Subsection (1) applies for the 2009–10 and later income 35 years.
374 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 454 453 Returns of income (1) “(1) Section 33(1) is replaced by the following: In each tax year, a taxpayer, other than a taxpayer to whom sec­ tion 33A applies or a multi­rate PIE that calculates income tax using the exit calculation or quarterly options under sections 5 HM 42 and HM 43 of the Income Tax Act 2007, must furnish to the Commissioner a return of income in the prescribed form for the preceding tax year, together with such other particulars as may be prescribed.” Section 33(1C) is replaced by the following: 10 (2) “(1C) A multi­rate PIE or a proxy for an investor in the entity that calculates income tax using the exit calculation or quarterly calculation options under sections HM 42 and HM 43 of that Act must provide returns for which the entity is responsible under section 57B.” Subsections (1) and (2) apply for the 2009–10 and later in­ come years.
(3) 15 454 Annual returns of income not required (1) After section 33A(1)(b)(ixa), the following is inserted: “(ixb) salary or wages from employment as a non­resi­ 20 dent seasonal worker if the employee has used the ‘NSW’ tax code; and”.

(2) After section 33A(1)(b)(ixb), the following is inserted: “(ixc) salary or wages from employment as a non­resi­ dent seasonal worker; and”.
(3) (4) (5) (6) In section 33A(1)(i), “Student Loan Scheme Act 1992.” is re­ placed by “Student Loan Scheme Act 1992; and” and the fol­ lowing is added: is a non­resident seasonal worker.” “(j) Section 33A(2)(a) is replaced by the following: “(a) is a non­resident other than a non­resident seasonal worker employed under the recognised seasonal em­ ployment scheme; or”.

Subsections (1) and (4) apply for the 2009–10 and later in­ come years.

Subsection (2) applies for the 2008–09 income year.
25 30 35 375 Part 2 cl 455 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (7) Subsection (3) applies for the 2008–09 and later income years.
455 Electronic format of employer monthly schedule and PAYE income payment form Section 36A(2B) is replaced by the following: 5 “(2B) An employer or PAYE intermediary to whom section RD 22(1) of the Income Tax Act 2007 applies must provide their employer monthly schedules and PAYE income payment forms to the Commissioner by electronic means and in the required format.
But the requirement to ﬁle electronically 10 does not apply if the employer— “(a) is not a new employer and has gross amounts of tax for PAYE income payments and employer’s superannu­ ation contributions payable for the preceding tax year of less than $100,000: is a new employer but only in relation to the months in the income year for which the total amounts of tax for PAYE income payments and employer’s superannu­ ation contributions remain under the $100,000 thresh­ old: is authorised under section 36B to provide the schedule and form in a format other than an electronic format.” “(b) “(c) 456 Section 36AB replaced (1) “36AB Electronic return requirements for multi­rate PIEs Section 36AB is replaced by the following: The Commissioner must prescribe 1 or more electronic for­ mats in which a return required under section 57B must be provided by a multi­rate PIE or a proxy for an investor in the PIE.
The Commissioner may specify conditions relating to the format, either general or in a particular case.” Subsection (1) applies for the 2009–10 and later income years (2) 15 20 25 30 Section 38(1B) is replaced by the following: 457 Returns to annual balance date (1) “(1B) A multi­rate PIE that does not calculate and pay tax using the 35 provisional tax calculation option under section HM 44 of 376 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 459 the Income Tax Act 2007 must not make an election under subsection (1).” Subsection (1) applies for the 2009–10 and later income years.
(2) 5 10 458 Returns by persons with tax credits for housekeeping payments and charitable or other public beneﬁt gifts Section 41A(1) is replaced by the following: (1) “(1) A person who has a tax credit under section LC 7 or sections LD 1 to LD 3 of the Income Tax Act 2007 may apply to the Commissioner for 1 or more refunds.” Section 41A(3) is replaced by the following: (2) “(3) The sum of the housekeeping payments under section LC 7 of that Act and charitable or other public beneﬁt gifts under sections LD 1 to LD 3 of that Act made by a person must be no more than their taxable income in the tax year in which the 15 payment or gift, or both, is made.” Section 41A(5)(b) is replaced by the following: “(b) the amount of a charitable or other public beneﬁt gift to which sections LD 1 to LD 3 of that Act apply.” (3) Section 41A(10) is replaced by the following: (4) “(10) When the Commissioner has considered an application, the Commissioner must notify the person of the amount of the tax credit under section LC 7 or sections LD 1 to LD 3 of that Act and of the amount of refund allowed.” 20 459 Return by person claiming rebate on redundancy 25 (1) payment The section heading to section 41B is replaced by “Return by person applying for tax credit on redundancy payment”.
Section 41B(1) is replaced by the following: (2) “(1) A person who has a tax credit under section ML 2 of the In­ 30 come Tax Act 2007 may apply to the Commissioner for a re­ fund.” Section 41B(4) is replaced by the following: (3) “(4) When the Commissioner has considered an application for a refund, the Commissioner must, by notice, inform the taxpayer 35 of the amount of the tax credit the taxpayer has under sections 377 Part 2 cl 460 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill ML 1 to ML 3 of the Income Tax Act 2007 and the amount of refund allowed.” 460 Portfolio tax rate entities and portfolio investor proxies to make returns, ﬁle annual reconciliation statement (1) After section 57B(3), the following is inserted: “(3B) A person who is required to perform responsibilities under subsection (3)(a) for a portfolio investor exit period must per­ form them by the day that is— “(a) 5 “(b) the end of the 1­month period beginning from the end of the portfolio investor exit period, if paragraphs (b) 10 and (c) do not apply; or the 15 January following the end of the portfolio in­ vestor exit period, if the portfolio investor exit period ends in November; or the end of the month beginning from the end of the 15 month in which the portfolio investor exit period ends, if the day given by paragraph (a) does not exist.” In section 57B(6)(c), “by the end of the second month” is re­ placed by “by the end of the third month”.
Section 57B(7) is repealed.

“(c) 20 (2) (3) Section 57B is replaced by the following: 461 Section 57B replaced (1) “57B Return requirements for multi­rate PIEs “(1) This section sets out the return requirements for a multi­rate PIE or a proxy for an investor in the PIE.
“(2) The responsibilities for each period are— 25 “(a) to ﬁle a return in the prescribed form showing— “(i) the amount of the tax liability of the entity for the period; and further information that the Commissioner con­ 30 siders relevant; and “(ii) “(b) to pay an amount of tax equal to the PIE’s tax liability for the investor for the period.
“(3) If the PIE does not calculate and pay its tax liability using the exit calculation or provisional tax calculation option in sec­ 35 tion HM 42 or HM 44 of the Income Tax Act 2007 for a tax 378 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 461 “(4) “(5) “(6) year, the PIE must carry out their responsibilities for a calcula­ tion period in the tax year by the end of the month that follows the month in which the calculation period ends.
If the PIE calculates and pays its income tax liability using the provisional tax calculation option under section HM 44 5 of that Act for a tax year, the PIE must carry out their respon­ sibilities for the tax year as a person with a provisional tax liability under the provisional tax rules.
If the PIE calculates and pays its income tax liability using the exit calculation option under section HM 42 of that Act for a 10 tax year, the PIE must carry out their responsibilities— “(a) for an exiting investor whose exit period falls in the tax year, for the exit period by— “(i) the end of the month that follows the month in which the exit period ends: “(ii) 15 January after the end of the exit period, if the period ends in November; and “(b) for an investor who holds an investor interest at the end of the tax year, for the tax year by the end of the month after the end of the tax year.
If the PIE voluntarily makes a payment of income tax under section HM 45 of that Act for a period in a tax year that is not included in a return required under subsection (5), the PIE must ﬁle a return in the prescribed form as described in subsection (2)— “(a) the end of the month that follows the month in which the period ends: “(b) 15 January after the end of the period, if the period ends in November.
15 20 25 “(7) For a tax year, the PIE must ﬁle a return in the prescribed form 30 in relation to information prescribed by the Commissioner— by the 30 June after the end of the tax year if— “(a) “(i) “(ii) the PIE has a corresponding income year that does not end after the end of the tax year; and the PIE continues to meet the requirements for 35 PIE status at the end of the corresponding income year; or “(b) by the end of the 2nd month after that in which the PIE’s corresponding income year ends, if— 379 Part 2 cl 462 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) “(ii) the PIE has a corresponding income year that ends after the end of the tax year; and the PIE continues to meet the requirements for PIE status at the end of the corresponding income year; or 5 “(c) by the end of the 3rd month after that in which the PIE loses PIE status, if the cessation occurs in the corres­ ponding income year.” (2) Subsection (1) applies for the 2009–10 and later income years 10 462 Disclosure of trust particulars In section 59(2),— (a) “sections HC 27(4) and YB 21” is replaced by “section YB 21”: “section HH 1(1) of that Act” is replaced by “section 15 YB 21 of that Act”.
(b) 463 Disclosure of interest in foreign company or foreign (1) investment fund In section 61(1), the words before paragraph (a) are replaced by the following: 20 “(1) Where any person has at any time in an income year an in­ come interest or a control interest in a foreign company or an attributing interest in a foreign investment fund, that per­ son shall disclose to the Commissioner, in the prescribed form and with that person’s return of income for the relevant tax 25 year,—”.
In section 61(1), the words before paragraph (a) are replaced by the following: (2) “(1) Where any person has at any time in an income year an in­ come interest or a control interest in a foreign company or an 30 attributing interest in a foreign investment fund, that person shall disclose to the Commissioner, in the prescribed form and within the time allowed by section 37 for providing the per­ son’s return of income for the relevant tax year,—”.
Section 61(1C) is replaced by the following: (3) “(1C) A portfolio tax rate entity that does not make payments of tax under section HL 23 of the Income Tax Act 2007 is re­ 35 380 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 467 quired to make a disclosure under subsection (1) in the pre­ scribed form by the due date for the entity’s return under sec­ tion 57B(5) for the tax year.” Section 61(1C) is replaced by the following: (4) “(1C) A multi­rate PIE that does not calculate and pay tax using 5 the provisional tax calculation option under section HM 44 of the Income Tax Act 2007 must make a disclosure under subsection (1) in the prescribed form within the time allowed by section 37 for ﬁling its return for the corresponding tax year under section 57B(5).” Subsection (4) applies for the 2009–10 and later income years.
10 (5) 464 Section 66 repealed (1) (2) Section 66 is repealed.

Subsection (1) applies for income years beginning on and 15 after 1 April 2009.

465 Tax credit relating to KiwiSaver and complying superannuation fund members: member credit form Section 68C(3)(b) is repealed.

466 Statements in relation to research and development tax 20 (1) (2) (3) (4) credits: single persons Section 68D(1) is repealed.
In section 68D(2), “The person” is replaced by “A person who is not a member of an internal software development group”.

Section 68D(4) is repealed.

Subsections (1) to (3) apply for the 2008–09 and later in­ come years.
467 Section 68E replaced (1) “68E Statements in relation to research and development tax Section 68E is replaced by the following: credits: internal software development groups “(1) The nominated member of an internal software development group must furnish, in the electronic format prescribed by the Commissioner, a statement relating to the research and devel­ 25 30 381 Part 2 cl 468 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill opment tax credits that the members of the group have under section LH 2 of the Income Tax Act 2007 for a tax year.
“(2) The statement described in subsection (1) must be furnished to the Commissioner no later than— “(a) the day that is— “(i) 5 30 days after the latest day for a member of the group to furnish a return of income or joint return of income under section 37 for the relevant tax year; or a later day allowed by the Commissioner, if the 10 Commissioner considers that a failure to meet the requirements of subparagraph (i) is a result of simple oversight; or “(ii) “(b) the day that is 2 years after the latest day for a member of the group to furnish a return of income under section 15 37 for the relevant tax year if— “(i) the tax year is the 2008–09 or 2009–10 tax year; and “(ii) no member has an amount of a research and de­ velopment tax credit under section LH 2 in a re­ 20 turn of income for that tax year.” Subsection (1) applies for the 2008–09 and later income years.
(2) 468 Section 78E repealed (1) (2) Section 78E is repealed.

Subsection (1) applies for the 2009–10 and later income years.

25 469 Section 78F repealed (1) (2) Section 78F is repealed.

Subsection (1) applies for the 2009–10 and later income 30 years.
470 Ofﬁcers to maintain secrecy (1) Section 81(4)(p) is replaced by the following: “(p) communicating, for the purpose of section 85F, infor­ mation to a person who is an ofﬁcer, employee, or agent 35 382 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 471 of the New Zealand Film Commission responsible for the administration of a scheme under which government screen production payments are made and who is au­ thorised to receive the information by the Chief Execu­ tive of the New Zealand Film Commission:”.
5 (2) In section 81(4)(s)(ii), “section 85K.” is replaced by “section 85K:” and the following is added: “(t) communicating to any person who is an employee of the Treasury (as deﬁned in section 2 of the Public Finance Act 1989), any information communicated to that per­ 10 son for the purposes of section LH 15 of the Income Tax Act 2007.” 471 Disclosure of information for veriﬁcation of large budget (1) screen production grant entitlement In the heading to section 85F, “large budget screen produc­ 15 tion grant” is replaced by “government screen production payment”.
Section 85F(1) and (2) are replaced by the following: (2) “(1) The purpose of this section is to facilitate the exchange of information between the Commissioner and the Commission 20 for the purpose of providing to the Commission information which the chief executive considers necessary to enable the Commission to determine the entitlement of a company to a government screen production payment.
“(2) For the purposes of subsection (1), on request from the chief 25 executive, the Commissioner may, at any time, provide to any authorised ofﬁcer of the Commission all of the following in­ formation that is held by the Department: “(a) particulars relating to the amount of expenditure in­ curred in relation to a project that is the subject of an ap­ 30 plication for a government screen production payment: “(b) particulars relating to the amount of expenditure in­ curred in New Zealand in relation to a project that is the subject of an application for a government screen production payment: the Commissioner’s opinion as to the accuracy of any information provided by an applicant in relation to the “(c) 35 383 Part 2 cl 472 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill application for a government screen production pay­ ment.” (3) In section 85F(3), in the deﬁnition of company, “refers:” is replaced by “refers.” and the deﬁnition of large budget screen production grant is repealed.
5 472 Disclosure of information in relation to Working for Families tax credits In section 85G(1)(b), “sections MD 1, or MD 1 and ME 1” is replaced by “sections MD 1, or MD 1 and ME 1 of the Income Tax Act 2007”.
10 473 Further secrecy requirements Section 87(5)(d) is replaced by the following: “(d) being a person who is an ofﬁcer, employee, or agent of the New Zealand Film Commission responsible for the administration of a scheme under which government 15 screen production payments are made and who is au­ thorised to receive information provided under section 85F; or”.
474 New section 89AB inserted (1) After section 89A, the following is inserted: “89AB Response periods “(1) This section applies for the purposes of Parts 4A and 8A to set the period for a notice in response to another notice (the initiating notice).

The period is called the response period.

“(2) When the initiating notice is a notice of proposed adjustment, 25 the response period is a 2­month period starting on the date of issue of the notice.
20 “(3) When the initiating notice is a notice of assessment issued by a taxpayer, the response period for a notice of proposed adjust­ ment under section 89DA is— “(a) 30 a 4­month period starting on the date on which the ini­ tiating notice is received in an ofﬁce of the department; or if the notice of proposed adjustment relates solely to the amount of a tax credit under section LH 2 of the Income 35 “(b) 384 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 474 Tax Act 2007, a period starting on the date the initiating notice is received in an ofﬁce of the department and ending 1 year after the latest date to provide a return of income for the relevant tax year.
“(4) When the initiating notice is either a notice of disputable deci­ 5 sion or a notice revoking or varying a disputable decision that is not an assessment, the response period for a notice is— “(a) “(b) “(c) 10 a 2­month period starting on the date the initiating no­ tice is received in an ofﬁce of the department, unless paragraphs (b) or (c) apply; or for a notice of proposed adjustment to which para­ graph (c) does not apply, a 4­month period starting on the date the initiating notice is received in an ofﬁce of the department; or for a notice of proposed adjustment relating solely to 15 the amount of a tax credit under section LH 2 of that Act, a period starting on the date the notice of proposed adjustment is received in an ofﬁce of the department and ending on the later of— “(i) “(ii) 1 year after the latest date to provide a return of 4 months after the date of the initiating notice: 20 income for the relevant tax year.
“(5) When the initiating notice is a disclosure notice, a notice issued by the Commissioner rejecting an adjustment proposed by a disputant, or a disputant’s statement of position, the response 25 period is a 2­month period starting on the date of issue of the initiating notice.
“(7) “(6) For the purposes of subsections (3)(b) and (4)(c)(ii), if the taxpayer is a member of an internal software development group to which section 68E applies, the latest date for provid­ 30 ing a return means the latest date for any member of the group.
In subsections (3)(b) and (4)(c)(ii), a temporary extension applies for tax credits for research and development expend­ iture arising in the 2008–09 and 2009–10 income years, with the time limit of 1 year extended to 2 years.” Subsection (1) applies for the 2008–09 and later income years.
(2) 35 385 Part 2 cl 475 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 475 Taxpayers and others with standing may issue notices of proposed adjustment (1) After section 89D(2D), the following is added: “(2E) If the Commissioner makes an assessment of an amount of research and development credit, a taxpayer who has not pro­ 5 vided a statement under section 68D or 68E in relation to an assessment period may dispute the assessment only by provid­ ing a statement for the period.” Subsection (1) applies for the 2008–09 and later income years.
10 (2) 476 Taxpayer may issue notice of proposed adjustment for taxpayer assessment (1) After section 89DA(2), the following is added: “(3) A taxpayer who makes an assessment of an amount of research and development credit but does not provide a statement under 15 section 68D or 68E in relation to the tax year referred to in subsection (1), may dispute the assessment only by providing a statement for the tax year.” Subsection (1) applies for the 2008–09 and later income years.
20 (2) 477 Completing the disputes process (1) Section 89N(1)(c)(iii) is replaced by the following: “(iii) the Commissioner has reasonable grounds to be­ lieve that a person who is an associated person of the disputant may take steps in relation to the 25 existence or location of the disputant’s assets to avoid or delay the collection of tax from the dis­ putant:”.
(2) Section 89N(1)(c)(v) is replaced by the following: “(v) a person who is an associated person of the dis­ 30 putant and is involved in another dispute with the Commissioner involving similar issues has be­ gun judicial review proceedings in relation to the other dispute:”.
386 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 479 478 Determination on economic rate (1) After section 91AAF(1), the following is inserted: “(1B) For the purposes of subsection (1), the rate set by the Commis­ sioner may be a default rate for kinds of items of depreciable property.” Section 91AAF(4)(b) is replaced by the following: “(b) (2) 5 is, for an item of property to which section EE 27, EE 28, EE 30, or EZ 23 of the Income Tax Act 2007 applies, reacquired after the date on which the new determin­ ation is issued, by the person who disposed of it before 10 the date on which the new determination is issued.” (3) After section 91AAF(5), the following is inserted: “(6) The Commissioner may revoke a determination setting an eco­ nomic rate.
The revocation takes effect on the day after the date of publication of the Gazette in which notiﬁcation under 15 section 91AAK is made.” Subsections (1) and (2) apply for the 2005–06 and later in­ come years.

Subsection (3) applies for the 2008–09 and later income years.
(5) (4) 20 479 Determination on special rates and provisional rates Section 91AAG(1)(b) is replaced by the following: (1) “(b) a provisional rate when no applicable rate, other than a default rate, is set in a determination under section 91AAF.” (2) In section 91AAG(3), the words before the paragraphs are re­ placed by the following: “(3) The Commissioner may issue a determination setting a special rate or a provisional rate using, as applicable,—”.
25 (3) After section 91AAG(3)(c), the following is inserted: 30 (4) “(cb) the formula in section EZ 23 of that Act; or”.

Section 91AAG(4)(a) is replaced by the following: “(a) determining a ﬁgure using the applicable formula from subsection (3); and”.
(5) After section 91AAG(6), the following is added: “(7) The Commissioner may revoke a provisional determination if it no longer applies to an item or if the item is no longer 35 387 Part 2 cl 480 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill in use or available for use.

The revocation takes effect on the day after the date of publication of the Gazette in which notiﬁcation under section 91AAM(4) is made.” Subsections (1) to (4) apply for the 2005–06 and later in­ come years.
Subsection (5) applies for the 2008–09 and later income years.
(6) (7) 480 Commissioner may decline to issue special rate or (1) provisional rate Section 91AAH(3)(a) is replaced by the following: “(a) an economic rate, other than a default rate, already ap­ plies to the item; or 5 10 “(ab) if a default rate applies to the item, the provisional rate would differ from the default rate by an amount that is less than 50% of the amount by which the next highest 15 or lowest rate, as applicable, set out in schedule 12 of the Income Tax Act 2007 is more or less than the default rate; or”.
(2) Subsection (1) applies for the 2008–09 and later income years.

20 481 Notice of setting of economic rate (1) In section 91AAK, “of issuing a determination” is replaced by “of issuing or revoking a determination”.

Subsection (1) applies for the 2008–09 and later income years.
(2) 482 Applications for determinations (1) In section 91AAM(4), “of issuing a determination under sec­ tion 91AAG(4)” is replaced by “of issuing a determination under section 91AAG(4) or revoking a determination under section 91AAG(7)”.

Subsection (1) applies for the 2008–09 and later income years.
(2) 388 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 484 483 Determination on type of interest in FIF and use of fair dividend rate method In section 91AAO(1), “section EX 40 of the Income Tax Act 2004” is replaced by “section EX 46 of the Income Tax Act 2007”.
Section 91AAO(2)(b)(i) is replaced by the following: 5 (1) (2) “(i) are loans, ﬁxed­return foreign equity as deﬁned in section YA 1 of the Income Tax Act 2007, or arrangements with a ﬁxed economic return:”.

(3) Subsection (2) applies for the 2009–10 and later income 10 years.
484 New heading and section 91AAQ inserted After section 91AAP, the following is inserted: “Determinations relating to non­attributing active CFCs 15 “91AAQ Determination on insurer as non­attributing active CFC “(1) A person may apply in writing to the Commissioner for a de­ termination that a CFC is a non­attributing active CFC for the purposes of section EX 21B of the Income Tax Act 2007 if 20 the CFC— “(a) is controlled by a company resident in New Zealand that— “(i) “(ii) has a business of insurance registered and rated under the Insurance Companies (Ratings and In­ 25 spection) Act 1994: is in the same group of companies as a company resident in New Zealand that has a business of in­ surance registered and rated under the Insurance Companies (Ratings and Inspection) Act 1994; 30 and “(b) has a business of insurance in a country or territory out­ side New Zealand that is registered under the legislation of the country or territory relating to the business of in­ surance; and had the business before 1 October 2008.
“(c) 35 389 Part 2 cl 485 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(2) In deciding whether or not to grant an application, the Com­ missioner must consider whether the CFC’s business— “(a) is carried on with the main purpose of producing a com­ mercial return on the CFC’s capital; and “(b) produces all or nearly all of the CFC’s income from— 5 “(i) premiums from insurance contracts covering risks in the country or territory in which the CFC’s business is located: “(ii) proceeds from investment assets having a total value commensurate with the value of those in­ 10 surance contracts.
“(3) For the purposes of subsection (2), the Commissioner may take into account the following: “(a) “(b) “(c) “(d) 15 the nature and extent of the activities undertaken by the CFC in the business of insurance: the nature and extent of the risks arising in the country or territory that are assumed by the CFC in the business: the nature and value of the assets used by the CFC in the business compared with the nature and extent of the risks assumed by the CFC in the business: the nature and amount of deductions that the company controlling the CFC has for expenditure or loss incurred in giving support in relation to the business compared with the nature and amount of the assessable income that the company has from the CFC in relation to the 25 business.
20 “(4) A determination may be made for tax years speciﬁed in the determination.

“(5) A determination may provide for the extension, limitation, variation, cancellation, or revocation of an earlier determin­ 30 ation.
“(6) A determination must be published in the Gazette within 30 days of the making of the determination.” 485 New heading and section 91AAR inserted (1) After section 91AAQ, the following is inserted: 35 390 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 485 “Determinations relating to relocation payments “91AAR Determination relating to eligible relocation expenses “(1) The Commissioner may determine that a type of expenditure is an eligible relocation expense for the purposes of section 5 CW 17B of the Income Tax Act 2007, section CW 13B of the Income Tax Act 2004, and section CB 12(1B) of the Income Tax Act 1994.
“(2) The determination may set out the income year or income “(3) years for which it is to apply, but may not apply for income 10 years before the 2002–03 income year.
In determining whether a type of expenditure is an eligible relocation expense, the Commissioner may take into account whether the expenditure necessarily arises from a work­related relocation of an employee, rather than arising as a cost, includ­ 15 ing a private or capital cost, that an employee has incurred, or will incur, gradually over time irrespective of whether the em­ ployee would have relocated.
In this regard, the Commissioner may bear in mind— “(a) whether the expenditure amounts to a substitution for 20 an employee’s salary or wages: “(b) whether employers generally treat the type of expend­ “(c) iture as a relocation expense: the difﬁculty of and costs in measuring any element of private beneﬁt.

25 “(4) The determination may provide for the extension, limitation, variation, cancellation, or revocation of an earlier determin­ ation.
The Commissioner must give at least 30 days notice of the implementation date of any change to the determination.

“(5) A person affected by a determination made under this section 30 may dispute or challenge the determination under Parts 4A and 8A.
“(6) Within 30 days of issuing or changing a determination under this section, the Commissioner must publish a notice in the Gazette that— “(a) gives notice that the determination has been issued or changed, as applicable; and 35 391 Part 2 cl 486 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) states where copies of the determination can be ob­ tained.” (2) Subsection (1) applies for the 2002–03 and later income years.
486 Section 102 repealed (1) (2) Section 102 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

5 487 Section 103 repealed (1) (2) Section 103 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

10 488 Section 103A repealed (1) (2) Section 103A is repealed.

Subsection (1) applies for the 2009–10 and later income 15 years.

489 Section 104 repealed (1) (2) Section 104 is repealed.

Subsection (1) applies for the 2009–10 and later income years.
20 490 Time bar for amendment of income tax assessment Section 108(1B)(b) is replaced by the following: (1) “(b) 1 year has passed from the latest date to provide a return of income for the relevant tax year and, for a member of an internal software development group to which sec­ 25 tion 68E applies, the latest date means the latest date for any member of the group; and”.
Section 108(1B)(c) is replaced by the following: “(c) the taxpayer— “(i) has not issued a notice of proposed adjustment to 30 the Commissioner for an amount of a tax credit for research and development expenditure for the (2) 392 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 492 relevant tax year within the relevant response period; and “(ii) has not asked for an assessment to be amended under section 113, having provided a detailed re­ search and development statement under section 5 68D or 68E, as applicable, within the time limit referred to in paragraph (b).” (3) After section 108(1B), the following is inserted; “(1C) In subsection (1B)(b), a temporary extension applies for tax credits for research and development expenditure arising in the 10 2008–09 and 2009–10 income years, with the time limit of 1 year extended to 2 years.” Subsections (1) to (3) apply for the 2008–09 and later in­ come years.
(4) 491 Amended assessments for research and development tax 15 (1) “(2) (2) credits In section 113D, the following is added as subsection (2): If a taxpayer asks for an assessment to be amended under sec­ tion 113, having provided a detailed research and development statement under section 68D or 68E, as applicable, within the 20 time limit referred to in section 108(1B)(b), the Commissioner may not increase the amount of the credit by more than the amount set out in the taxpayer’s request.” Subsection (1) applies for the 2008–09 and later income years.
25 492 Deﬁnitions In section 120C(1), the deﬁnition of tax paid, is replaced by the following: “tax paid, at a time, means— an amount of tax that— “(a) “(i) is paid or credited by the time for a tax liability; and “(ii) has not been refunded or applied by the Commis­ sioner to satisfy another tax liability: 30 393 Part 2 cl 493 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(b) “(c) an amount credited by the time to a tax pooling account under sections RP 17 to RP 21 of the Income Tax Act 2007: an amount credit or transferred by the time to a tax­ payer’s account with the Commissioner from a tax pool­ 5 ing account under sections RP 17 to RP 21 of that Act.” 493 Section 120EA repealed (1) (2) Section 120EA is repealed.
Subsection (1) applies for income years beginning on and after 1 April 2009.

10 494 Instalments of and due dates for provisional tax In section 120KE(1)(b), “$35,000” is replaced by “$50,000”.

495 Where provisional tax paid by company does not count as overpaid tax In section 120M(a), “but for that section” is replaced by “but 15 for those sections”.

496 Variation to deﬁnition of date interest starts (1) (2) Section 120O(e) is repealed.

Subsection (1) applies for the 2009–10 and later income years.
20 497 Section 120R repealed (1) (2) Section 120R is repealed.

Subsection (1) applies for the 2009–10 and later income years.

498 Certain rights of objection not conferred Section 125(d) is replaced by the following: “(d) any decision or determination of the Commissioner ap­ proving or not approving a sickness, accident, or death beneﬁt fund for the purposes of section CW 34 of the Income Tax Act 2007; or”.
25 30 394 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 504 499 (1) Imposition of late payment penalties when ﬁnancial relief sought Section 139BA(3)(b) is replaced by the following: “(b) the last day of the response period allowed by section 177(4) if the taxpayer does not provide the information 5 sought or respond to a counter offer.” (2) Subsection (1) applies for the 2008–09 and later income years.

500 Section 140C repealed (1) (2) Section 140C is repealed.
Subsection (1) applies for the 2009–10 and later income years.

10 501 Section 140CA repealed (1) (2) Section 140CA is repealed.

Subsection (1) applies for the 2009–10 and later income 15 years.

502 Tax shortfalls (1) Section 141(7)(c) is replaced by the following: the 2 taxpayers are associated persons.” “(c) In section 141(7D), “of this Act” is omitted.
(2) 20 503 Abusive tax position Section 141D(3B)(b) is replaced by the following: “(b) the sum of the tax shortfall from the arrangement for the taxpayer and the tax shortfalls from the arrangement for persons with whom the taxpayer is associated is less 25 than $50,000; and”.

504 Evasion or similar act Section 141E(1)(c) is replaced by the following: “(c) knowingly does not make a deduction, withholding of tax, or transfer of payroll donation required to be made 30 by a tax law; or”.
395 Part 2 cl 505 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 505 Due dates for payment of imputation penalty tax, FDP (1) (2) (3) penalty tax, and underestimation penalty tax The heading to section 142E is replaced by “Due dates for payment of imputation penalty tax”.

Section 142E(2) is repealed.

Subsections (1) and (2) apply for the 2009–10 and later in­ come years.

5 506 Knowledge offences (1) (2) Section 143A(3) and (6) are repealed.
Subsection (1) applies for the 2009–10 and later income 10 years.

507 Evasion or similar offence Section 143B(3) is repealed.

(1) Subsection (1) applies for the 2009–10 and later income (2) years.
15 In section 173D, the following is added as subsection (2): 508 Taxes that may be recovered (1) “(2) For the purposes of this Part, assistance in the recovery of taxes includes assistance in the recovery of charges associated with the taxes, whether interest, administrative penalties, costs of 20 collection or conservancy, or another related amount.” Subsection (1) applies in relation to events and periods oc­ curring before or after 1 April 2008.
(2) 509 Transfer of excess tax within taxpayer’s accounts (1) After section 173L(2)(b), the following is inserted: 25 “(bb) in the case of a tax credit for expenditure on research and development, a day after the end of the accounting year to which the credit relates:”.
Section 173L(3) is replaced by the following: (2) “(3) Despite subsection (2)(b) and (bb), a taxpayer who has an 30 early balance date must, for tax withheld or deducted on their behalf or a tax credit for expenditure on research and develop­ ment, choose a day after the end of the tax year in which the 396 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 2 cl 515 amount was withheld or deducted or the tax year correspond­ ing to the accounting year to which the credit relates.” Subsections (1) and (2) apply for the 2008–09 and later in­ come years.
(3) 510 Transfer of excess tax to another taxpayer (1) After section 173M(2)(f), the following is inserted: 5 “(fb) a tax pooling intermediary’s tax pooling account; or”.

(2) After section 173M(4)(a), the following is inserted: “(ab) if subsection (2)(fb) applies, a date that occurs on or after the date of the original deposit by the taxpayer:”.
10 Instalment arrangements 511 (1) After section 177B(6), the following is added: “(7) Despite sections LA 6(2) and LH 2(6) of the Income Tax Act 2007, a taxpayer with an instalment arrangement who is meet­ ing their obligations under it may choose to have an amount 15 of refundable tax credit remaining for a tax year paid to them rather than used under the ordering rules set out in those sec­ tions.” Subsection (1) applies for the 2008–09 and later income years.
(2) 20 512 Section 181 repealed (1) (2) Section 181 is repealed.

Subsection (1) applies for the 2009–10 and later income years.

513 Section 183 repealed Section 183 is repealed.

514 Remission for reasonable cause (1) (2) Section 183A(1)(e) is repealed.

Subsection (1) applies for the 2009–10 and later income years.

515 Remission on application (1) Section 183H(a)(ii) is repealed.
397 25 30 Part 2 cl 516 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for the 2009–10 and later income years.
516 Payments into, and out of, Listed PAYE Intermediary Bank Account Section 185D(1) is replaced by the following: 5 “(1) All payments received by the Commissioner from a listed PAYE intermediary and made under sections RP 2 to RP 5 of the Income Tax Act 2007 must be paid into the Listed PAYE Intermediary Bank Account.” 517 Power to make interim payments of WFF tax credit 10 In section 225A(2)(b)(iii) and (iv), “of that Act” is omitted.
15 20 Part 3 Amendments to Goods and Services Tax Act 1985 518 Goods and Services Tax Act 1985 This Part amends the Goods and Services Tax Act 1985.

Interpretation This section amends section 2(1).


519 (1) (2) After the deﬁnition of dwelling, the following is inserted: “emissions unit means— “(a) “(b) “(c) a New Zealand unit as deﬁned in section YA 1 of the Income Tax Act 2007: a Kyoto unit as deﬁned in section YA 1 of that Act: a unit issued by an overseas registry that is prescribed under the Climate Change Response Act 2002 as a unit 25 that may be transferred to accounts in the Registry under that Act”.
(3) After the deﬁnition of local authority, the following is in­ serted: “loyalty programme means a consumer incentive scheme 30 under which a customer can obtain loyalty points that are redeemable for goods or services:”.
398 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 3 cl 523 (4) In the deﬁnition of public authority “and includes ofﬁces of Parliament;” is replaced by “and includes ofﬁces of Parlia­ ment, the Parliamentary Service, and the Ofﬁce of the Clerk of the House of Representatives;”.
520 Meaning of term supply Section 5(14) is replaced by the following: “(14) If a supply is charged with a tax under section 8, but section 11, 11A, 11AB, 11B, or 11C requires part of the supply to be charged at the rate of 0%, that part of the supply is treated as being a separate supply.” 5 10 521 Time of supply After section 9(8), the following is added: “(9) Despite subsection (1), an operator of a loyalty programme who meets the requirements of section 11C may treat a sup­ ply of services in a loyalty transaction as taking place at the 15 time at which the loyalty points are redeemed for reward.
But this subsection does not apply to a token, stamp, or voucher to which section 5(11D) to (11H) applies.” 522 Value of supply of goods and services In section 10(4), “section 11(3)” is replaced by “section 11(3) 20 or (3C)”.
523 Zero­rating of goods After section 11(3), the following is inserted: “(3B) Subsection (3)(a) does not apply to a supply of goods if the recipient gives the supplier at or before the time of the sup­ 25 ply an undertaking in writing that neither the recipient nor an associated person will cause the goods to be reimported into New Zealand in a condition that is substantially the same as the condition the goods were in when the supply was charged with tax under subsection (1)(a) to (1)(l).
30 “(3C) Despite subsection (3B), a registered person is treated as having supplied goods in the course or furtherance of a taxable activity and must be charged with tax at the rate speciﬁed in section 8 if— 399 Part 3 cl 524 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) “(c) the supply of the goods by the registered person was charged with tax under subsection (1)(a) to (l); and the goods are imported into New Zealand; and the goods are reacquired by the registered person in sub­ stantially the same condition as the condition the goods 5 were in when the supply was charged with tax under subsection (1)(a) to (l); and the registered person deducted under section 20(3) in­ put tax as deﬁned in section 3A(1)(c) in relation to the original supply of the goods under subsection (1)(a) to 10 (l).
“(3D) Subsection (3C)— “(d) “(a) applies at the time the goods are reacquired by the reg­ istered person: “(b) does not apply if tax is paid under section 12 on the 15 importation of the goods into New Zealand.” 524 Zero­rating of services In section 11A(1)(r)(ii), “paragraph (q).” is replaced by “para­ graph (q); or” and the following is added: “(s) the services are an emissions unit and the supply is the 20 issue of the emissions unit, if the issue is under an ar­ rangement entered on or after 1 January 2009; or the services are supplied as consideration for a supply that is chargeable at the rate of 0% under paragraph (s).” “(t) 25 525 New section 11C inserted After section 11B, the following is inserted: “11C Treatment of supplies by operators of loyalty programmes “(1) This section applies when an operator of a loyalty programme makes a supply of services by entering into an arrangement 30 (a loyalty transaction) with another person (the purchaser) through which the operator receives consideration for provid­ ing loyalty points to a third person as directed by the purchaser.
“(2) The operator may defer the time of the supply of the services under section 9(9) to the time at which loyalty points are re­ 35 deemed for reward if they meet the requirements of subsec­ tions (3) to (5).

400 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 3 cl 527 “(3) The ﬁrst requirement is that 25% or more of the operator’s tax­ able supplies must be zero­rated supplies of goods or services.
The 25% threshold— “(a) may be met by including the taxable activity of an as­ sociated person: 5 “(b) must be met for the 12­month period that ends with the month in which the supply of services under the loy­ alty transaction is made, and the operator must have rea­ sonable grounds for believing the threshold will be met for the 12­month period that begins with the month in 10 which that supply of services is made.
“(4) The second requirement is that — “(a) “(b) the operator or an associated person must make supplies of goods or services in a business activity (the main business activity) that is an activity other than a busi­ 15 ness of operating a loyalty programme; and the loyalty points supplied by the operator must only be able to be redeemed for reward as part of the main business activity.
“(5) The third requirement is that when the loyalty points are re­ 20 deemed, the operator must be able to identify whether— “(a) tax under section 8 has been imposed on the supply of the loyalty points: the time of supply has been deferred under section 9(9).
“(b) “(6) If the operator has a partner in an associated loyalty pro­ gramme, the second requirement is still treated as met if, in addition to those requirements, loyalty points supplied by the operator are able to be redeemed for reward by the partner.” 526 Taxable periods In section 15(2)(a), “$250,000” is replaced by “$500,000”.

527 Persons making supplies in course of taxable activity to be registered In section 51(1)(a), “$40,000” is replaced by “$50,000”.
401 25 30 Part 3 cl 528 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 528 Group of companies In section 55(1)(a)(iii), “portfolio tax rate entity” is replaced by “multi­rate PIE”.

Part 4 Amendments to KiwiSaver Act 2006 5 529 KiwiSaver Act 2006 This Part amends the KiwiSaver Act 2006.
530 Interpretation In section 4(1), in the deﬁnition of PAYE period, “in para­ graph (a) of the deﬁnition of payment period in section MK 10 10” is replaced by “payment period as deﬁned in section MK 10(3)”.

531 Section 13 repealed Section 13 is repealed.
532 Eligibility to be exempt employer Section 25(1)(b) is replaced by the following: “(b) the scheme must be a registered superannuation scheme that is registered on or before the day after the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2008 receives the Royal assent; and “(bb) the relevant participation agreement must be entered into by the employer before the day after the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2008 receives the Royal assent; and”.
15 20 533 What happens when initial back­dated validation ends, 25 with no conﬁrmed back­dated validation?

In section 59D(4), “paragraph” is replaced by “subsection (3)”.

534 How and when interest is paid on refunds Sections 89(3) and (4) are repealed.

30 402 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 4 cl 538 535 Refunds of employer contribution by Commissioner if employee opts out In section 100, “may” is replaced by “must”.
536 General After section 101A(2), the following is inserted: 5 “(2B) Despite subsection (1), an employer does not have to pay a compulsory employer contribution as provided in sections 101FB and 101FC.” 537 Compulsory employer contribution amount: general rule In section 101D(5)(b)(iii)(B), “; and” is replaced by “; or”, and 10 the following is inserted: “(C) one that has had contributions paid or cred­ ited to the contributions scheme or a prior scheme for the contributions scheme by a previous employer, and those contribu­ 15 tions met the requirements described in paragraph (b)(i) to (iii); and”.
538 New sections 101FB and 101FC inserted After section 101F, the following is inserted: “101FB Grace periods: employers “(1) An employer does not have to pay a compulsory employer contribution for a payment of gross salary or wages to an em­ ployee in a grace period described in subsection (2), if, for the whole of the relevant grace period,— “(a) 20 “(b) “(c) “(d) the automatic enrolment rules apply to the employee; 25 and the employer does not receive a notice under section 34(2) or 39 that the employee has opted in; and the employer does not deduct any amount of contribu­ tions required to be deducted from an employee’s salary 30 or wages; and the employer does not receive a notice under section 61 that requires the deduction of contributions for the employee.
“(2) The grace periods for the purposes of subsection (1) are— 35 403 Part 4 cl 539 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) “(b) the period starting on the day that the employee starts new employment and ﬁnishing on the earlier of the day— “(i) that is 1 year after the day that the employee starts new employment: that the employee ceases employment: “(ii) the period starting on the day that is 1 year after the day that the employee starts new employment and ﬁnishing on the earliest of— “(i) 5 the day that is before the day on which the em­ 10 ployer receives a notice under section 34(2) or 39 that the employee has opted in: the day that is before the day on which the em­ ployer receives a notice under section 61 that re­ quires the deduction of contributions for the em­ 15 ployee: “(ii) “(iii) the day that the employee ceases employment.
“101FC De minimis: other contributions For a payment of gross salary or wages to an employee, an employer does not have to pay a compulsory employer con­ 20 tribution for the employee if, for the payment of gross salary or wages, the amount of other contributions that meet the re­ quirements of section 101D(5)(b) is calculated using the same percentage as the relevant CEC rate in section 101D(4).” 539 Rules: providers (1) In section 101G(3),— (a) (b) “or complying superannuation fund” is omitted: “or a rule the same as that clause” is omitted.
25 (2) After section 101G(3), the following is added: “(4) If a member of a complying superannuation fund will be en­ 30 titled within 2 months to withdraw an amount from the fund under a rule the same as clause 4(3) of the KiwiSaver scheme rules, the provider must send a notice to the member’s em­ ployer stating the date on which the member will be entitled to withdraw.” 35 404 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 543 540 Crown contribution (1) (2) “(4) In section 226(1), “a contribution” is replaced by “1 contribu­ tion”.
Section 226(4) is replaced by the following: If A ceases being a member of the ﬁrst KiwiSaver scheme of 5 which they are a member because the Commissioner accepts an opt­out notice outside the time limit in section 16 or because A’s enrolment is invalid, and the amount of the contribution under this section was never paid, then the next KiwiSaver scheme of which A is a member is treated as their ﬁrst one, 10 for the purposes of this section and entitlement to the contri­ bution.” 541 Regulations relating to mortgage diversion facility In section 229(2)(i), in the words before the subparagraphs, “a ﬁxed dollar amount, and” is omitted.
15 Part 5 Amendments to Income Tax Act 2004 542 Income Tax Act 2004 This Part amends the Income Tax Act 2004.

543 Foreign investment fund income (1) In section CD 26, before paragraph (a), “Amount not dividend” is inserted as a subsection heading.

In section CD 26(b)(iv), “method; and” is replaced by “method.”, and paragraph (c) is repealed.
(2) 20 (3) After section CD 26(b), the following are inserted as subsec­ 25 tions (2) and (3): “Exclusion for interests in grey list companies “(a) “(b) “(2) Subsection (1)(b)(iv) does not apply if— the FIF is a grey list company; and the person holds a direct income interest of 10% or more 30 in the FIF at the beginning of the income year in which the period falls.
“Application of rule for certain managed funds “(3) Subsection (2) does not apply if— 405 Part 5 cl 544 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and the FIF is a foreign investment vehicle.” “(b) In section CD 26, in the list of deﬁned terms, “direct income 5 interest”, “foreign investment vehicle”, “life insurance”, and “portfolio investment entity” are inserted.
(4) 544 Amounts derived in connection with employment (1) In section CE 1, before paragraph (a), “Income” is inserted as a subsection heading.

Section CE 1(c) is replaced by the following: “(c) the market value of accommodation that the person receives in connection with their employment or ser­ vice:”.
(2) 10 (3) After section CE 1(g), the following is inserted as subsection 15 (2): “Meaning of accommodation “(2) For the purposes of this section, accommodation means board (4) or lodging, or the use of a house or part of a house.” In section CE 1, in the list of deﬁned terms, “accommodation” 20 is inserted.
545 Meaning of expenditure on account of an employee After section CE 5(3)(b), the following is inserted: “(bb) an amount paid under section CW 13B (Relocation payments) or section CW 13C (Payments for overtime 25 meals):”.
546 New section CR 3 added (1) After section CR 2, the following is added: “CR 3 Income for general insurance outstanding claims reserve “When this section applies “(1) This section applies for— 30 “(a) an insurer who uses IFRS 4, Appendix D for general insurance contracts; and 406 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 547 “(b) general insurance contracts, excluding contracts having premiums to which section FC 14 applies.
“Formula for insurer’s income “(2) For an income year (the current year), an insurer has income of the amount by which the result of the following calculation 5 is more than zero: opening outstanding claims reserve − closing out­ standing claims reserve.
“(3) “Deﬁnition of items in formula In the formula,,— “(a) opening outstanding claims reserve is— “(i) “(ii) the amount of the insurer’s closing outstanding 10 claims reserve for the income year before the current year; or the amount of the insurer’s outstanding claims re­ serve for general insurance contracts, calculated at the beginning of the current year, if the insurer 15 has no closing outstanding claims reserve for the income year before the current year: “(b) closing outstanding claims reserve is the amount of the insurer’s outstanding claims reserve for general in­ surance contracts, calculated at the end of the current 20 year.
“Deﬁned in this Act: amount, general insurance contract, IFRS 4, income, in­ come year, insurer”.

Subsection (1) applies for the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting 25 and later income years.
(2) 547 Expenditure on account, and reimbursement, of employees After section CW 13(3), the following is added: “Relationship with sections CW 13B and CW 13C “(4) This section does not apply to an amount referred to in section CW 13B (Relocation payments) or section CW 13C (Pay­ ments for overtime meals).” 30 407 Part 5 cl 548 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 548 New sections CW 13B and CW 13C inserted After section CW 13, the following is inserted: “CW 13B Relocation payments “Exempt income “(1) An amount that an employer pays to or on behalf of an em­ 5 ployee in connection with the expenses of the employee in a work­related relocation is exempt income of the employee.
“Actual expenditure “(2) The amount paid must be no more than the actual cost incurred by or on behalf of the employee on an expense that the Com­ 10 missioner lists as an eligible relocation expense in a determin­ ation made under subsection (6).

“Time limit “(3) Subsection (1) applies only to expenditure incurred for the period from the start of the income year in which the employee 15 relocates or undertakes work at the new location to the end of the next income year.
However, this subsection does not apply in the case of a temporary move when— “(a) an employee moves temporarily to a new location and then relocates permanently to that place; and the temporary move was not treated as a work­related relocation under this section.
“(b) 20 “Meaning of work­related relocation “(4) For the purposes of this section, work­related relocation means a relocation of the place where an employee lives that 25 is required— “(a) because the employee’s workplace is not within reason­ able daily travelling distance of their residence; and as a result of the employee— “(i) taking up new employment with a new employer; 30 or taking up new duties at a new location with their existing employer; or “(ii) “(iii) continuing in their current position but at a new location.
35 “(b) 408 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 548 “Exemption from distance test “(5) The requirement in subsection (4)(a) for a workplace to be beyond reasonable travelling distance of the person’s residence does not apply to a person whose accommodation forms an integral part of their work.
5 “Determinations “(6) The Commissioner may issue a determination for the purposes of this section under section 91AAR of the Tax Administra­ tion Act 1994 to provide a list of eligible relocation expenses, and may extend or modify the list from time to time as re­ 10 quired.

The Commissioner must give at least 30 days notice of the implementation date of any alteration.
“Deﬁned in this Act: amount, Commissioner, employee, employer, exempt in­ come, income year, work­related relocation “CW 13C Payments for overtime meals “Exempt income “(1) An amount that an employer pays to or on behalf of an em­ ployee for a meal for the employee when the employee is working overtime is exempt income of the employee.
“Eligibility: agreement or established practice “(2) Subsection (1) applies only if— “(a) “(b) the employee’s employment agreement provides for pay for overtime hours worked; or the employer has an established policy or practice of paying for overtime meals.
15 20 25 “Actual cost or reasonable estimate “(3) The amount paid must be— “(a) “(b) the actual cost to the employee, with documentation re­ quired for amounts over $20 per meal; or a reasonable estimate of the expenditure likely to be 30 incurred by the employee or a group of employees for whom an amount is payable.
“Meaning of overtime “(4) For the purposes of this section, overtime, for a person and a day, means time worked for an employer on the day beyond the 35 person’s ordinary hours of work as set out in their employment 409 Part 5 cl 549 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill agreement when the employee has worked more than 2 hours beyond their ordinary hours on that day.

“Deﬁned in this Act: amount, employee, employer, exempt income, overtime, pay”.
549 Beneﬁts provided instead of allowances In section CX 17(1)(b), “transport costs).” is replaced by “transport costs); or” and the following is added: “(c) an amount that, if it had been paid, would have been ex­ empt income under section CW 13B (Relocation pay­ ments).” 5 10 550 Gifts of money by company (1) Section DB 32(3) is replaced by the following: “Amount of deduction “(3) The deduction for the total of all gifts made in an income year is limited to the amount that would be the company’s net in­ 15 come in the corresponding tax year in the absence of this sec­ tion.” Subsection (1) applies for the 2007–08 and later income years.
(2) 551 New section DT 1A inserted (1) “DT 1A Ring­fenced allocations Before section DT 1, the following is inserted: “When this section applies 20 “(1) This section applies to an amount of a person’s deductions, expenditure and loss for an income year to the extent to which 25 it is— “(a) “(b) petroleum development expenditure: “(c) petroleum exploration expenditure: residual expenditure.
“Basis for allocation of deductions If, but for this subsection, an amount that relates to petrol­ eum mining operations undertaken outside New Zealand is al­ located to an income year (the current year), including an amount carried forward and allocated to the current year, the 30 “(2) 410 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 552 amount that is allocated to the current year is no more than the amount of the person’s income derived from those operations for the current year.
“Excess allocations: carrying forward and re­instating next year 5 “(3) Any excess not able to be allocated to the current year because of the basis for allocation described in subsection (2) is car­ ried forward and treated as— “(a) relating to petroleum mining operations outside New Zealand for the next income year; and allocated to that next income year.
“(b) 10 “Restriction on reinstating excess allocations “(4) Despite subsection (3), the excess is not allocated to the next income year, and no deduction is allowed or allocated to any income year in respect of the excess, if section IF 1 (Net losses 15 may be offset against future net income) would not have al­ lowed the excess to be carried forward to that next income year, treating the excess as a net loss for the current year.
“Deﬁned in this Act: deduction, income year, net loss, New Zealand, petrol­ eum development expenditure, petroleum exploration expenditure, petroleum 20 mining operation, residual expenditure”.

Subsection (1) applies for expenditure incurred on or after 4 March 2008.
(2) 552 Arrangement for petroleum exploration expenditure and (1) sale of property In section DT 2(1)(c), paragraphs (ii) and (iii) are replaced by the following: 25 a petroleum permit; or “(ii) “(iii) material or a permit that relates to petroleum min­ ing operations undertaken outside New Zealand, 30 and that material or permit are substantially the same as those described in subparagraphs (i) or (ii), with necessary modiﬁcations made to this subpart and the Crown Minerals Act 1991.” (2) Subsection (1) applies for expenditure incurred on or after 1 35 December 2007.
411 5 10 15 Part 5 cl 553 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 553 Petroleum development expenditure (1) Section DT 5(1) and (2) is replaced by the following: “Deduction “(1) A petroleum miner is allowed a deduction for petroleum de­ velopment expenditure incurred by them.
“Timing of deduction “(2) For an income year, an amount of the deduction is allocated to that year, as provided by— “(a) section EJ 11 (Petroleum development expenditure: default allocation rule); or “(b) section EJ 11B (Petroleum development expenditure: reserve depletion method).” (2) Subsection (1) applies for expenditure incurred on or after 1 April 2008.
554 Disposal of petroleum mining asset to associate (1) Section DT 9(1)(b) is replaced by the following: “(b) section EJ 14(2) (Disposal of petroleum mining asset to associate) prevents the miner from taking the full amount of a deduction allocated under section EJ 11 or EJ 11B (which relate to petroleum development ex­ 20 penditure) to the income year in which the miner dis­ poses of the asset.” (2) (3) Section DT 9(2)(b) is replaced by the following: “(b) the amount of the deduction allocated under section EJ 11 or EJ 11B to the income years after the income 25 year in which the miner disposes of the asset.” Subsections (1) and (2) apply for expenditure incurred on or after 1 April 2008.
555 New section DW 3 added (1) After section DW 2, the following is added: “DW 3 Deduction for general insurance outstanding claims 30 reserve “When this section applies “(1) This section applies for— 412 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 555 “(a) an insurer who uses IFRS 4, Appendix D for general insurance contracts; and “(b) general insurance contracts, excluding contracts having premiums to which section FC 14 applies.
“Formula for insurer’s deduction “(2) For an income year, an insurer is allowed a deduction for the amount by which the result of the following calculation is less than zero: opening outstanding claims reserve − closing out­ standing claims reserve.
“(3) “Deﬁnition of items in formula In the formula,— “(a) opening outstanding claims reserve is— “(i) 5 10 “(ii) the amount of the insurer’s closing outstanding claims reserve for the income year before the current year; or the amount of the insurer’s outstanding claims re­ 15 serve for general insurance contracts, calculated at the beginning of the current year, if the insurer has no closing outstanding claims reserve for the income year before the current year: “(b) closing outstanding claims reserve is the amount of 20 the insurer’s outstanding claims reserve for general in­ surance contracts, calculated at the end of the current year.
“Link with subpart DA “(4) This section supplements the general permission.

The general 25 limitations still apply.

(2) “Deﬁned in this Act: amount, deduction, general insurance contract, general limitation, general permission, IFRS 4, income year”.

Subsection (1) applies for the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting 30 and later income years.
413 Part 5 cl 556 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 556 Economic rate for plant, equipment, or building, with (1) (2) high residual value Section EE 25E(1)(b) is replaced by the following: “(b) the estimated residual market value for the item is more than 13.5% of cost; and”.

5 Subsection (1) applies for the 2005–06 and later income years.
557 Annual rate for item acquired in parson’s 1995–96 or (1) later income year In section EE 26(2), paragraph (a) and the words in paragraph 10 (b) before subparagraph (i) are replaced by the following: “(a) the item’s economic rate, special rate, or provisional rate, for an item not described in either paragraph (b) or (c): the item’s economic rate, special rate, or provisional 15 rate multiplied by 1.2, for an item that—”.

“(b) (2) Subsection (1) applies for the 2005–06 and later income years.
558 Section EJ 11 replaced (1) “EJ 11 Petroleum development expenditure: default allocation Section EJ 11 is replaced by the following: 20 rule “What this section applies to “(1) This section applies to petroleum development expenditure that relates to a petroleum mining development and that is in­ 25 curred after 1 April 2008 when, for that development, the pet­ roleum miner has not chosen to apply section EJ 11B to any petroleum development expenditure for the development.
“Default allocation rule “(2) For the purposes of section DT 5(2)(a) (Petroleum develop­ 30 ment expenditure), a deduction for the petroleum development expenditure is allocated in equal amounts over a period of 7 in­ come years.

The period of 7 years starts with the income year in which the expenditure is incurred.
414 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 558 “Relationship with other petroleum mining provisions “(3) Sections EJ 12 to EJ 14 override subsection (2).

Sections DT 7, DT 8, DT 10, DT 11, DT 16, and IH 3 (which relate to petroleum miners) override this section.
“Deﬁned in this Act: amount, deduction, income year, petroleum development 5 expenditure, petroleum mining development “EJ 11B Petroleum development expenditure: reserve depletion method “What this section applies to “(1) This section applies to petroleum development expenditure 10 that relates to a petroleum mining development and that is in­ curred after 1 April 2008, if the petroleum miner has chosen to apply this section for the ﬁrst income year in which the pet­ roleum mining development ﬁrst produces petroleum in com­ mercial quantities.
15 “Choice “(2) The choice described in subsection (1) is made in a return of income, and applies this section to petroleum development expenditure that relates to a petroleum mining development for the income year of the return and for all subsequent income 20 years.
“Reserve depletion method expense allocation rule “(3) For the purposes of section DT 5(2)(b) (Petroleum develop­ ment expenditure), the deduction allocated to an income year for the petroleum development expenditure is calculated using 25 the formula— (reserve expenditure − previous deductions) × reserve depletion for the year probable reserves.

“Deﬁnition of items in formula “(4) The items in the formula are deﬁned in subsections (5) to (8).
415 Part 5 cl 559 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Reserve expenditure “(5) Reserve expenditure is the total of petroleum development expenditure to which this section applies for the income year or an earlier income year.

“Previous deductions “(6) Previous deductions is the total amount of petroleum devel­ opment expenditure that relates to the relevant petroleum min­ ing development and that has been allocated to an earlier in­ come year.
“Reserve depletion for the year “(7) Reserve depletion for the year is the amount of petroleum produced from the relevant petroleum mining development for the income year, expressed in barrels of oil equivalent.
5 10 “Probable reserves “(8) Probable reserves is the amount of the reserves of petroleum 15 for the petroleum mining development that are not yet proven but are estimated, at the beginning of the income year, to have a better than 50% chance of being technically and commercially producible, expressed in barrels of oil equivalent.

“Relationship with other petroleum mining provisions “(9) Sections EJ 12 to EJ 14 override subsection (3).
Sections DT 7, DT 8, DT 10, DT 11, DT 16, and IH 3 (which relate to petroleum miners) override this section.

“Deﬁned in this Act: amount, deduction, income year, petroleum development expenditure, petroleum mining development”.

Subsection (1) applies for expenditure incurred on or after 1 April 2008.
(2) 20 25 559 Relinquishing petroleum permit (1) Section EJ 12(2)(b) is replaced by the following: “(b) any part of the deduction allocated to earlier income 30 years under section EJ 11(2) or EJ 11B(3).” Subsection (1) applies for expenditure incurred on or after 1 April 2008.
(2) 416 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 560 560 New sections EJ 12B and EJ 12C inserted (1) After section EJ 12, the following is inserted: “EJ 12B Dry well drilled “When this section applies “(1) This section applies when— 5 “(a) the petroleum miner has petroleum development ex­ penditure for a well, the drilling of which is completed in an income year, and, from the time of completion, the well— “(i) will never produce petroleum in commercial 10 quantities; and is abandoned; and “(ii) “(b) part of a deduction under section DT 5 (Petroleum de­ velopment expenditure) for the petroleum development expenditure described in paragraph (a) has not been 15 allocated under section EJ 11 or EJ 11B.
“Allocation “(2) The part of the deduction described in subsection (1) is allo­ cated to the income year.
“Deﬁned in this Act: amount, deduction, income year, petroleum development 20 expenditure “EJ 12C Well not producing “When this section applies “(1) This section applies when— “(a) “(b) “(c) the petroleum miner has petroleum development ex­ 25 penditure for a well that, in an income year— “(i) stops producing petroleum in commercial quan­ tities; and is abandoned; and “(ii) the petroleum miner has elected to apply section EJ 30 11B for the petroleum development expenditure de­ scribed in paragraph (a) before the start of the income year; and part of a deduction under section DT 5 (Petroleum de­ velopment expenditure) for the petroleum development 35 417 Part 5 cl 561 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill expenditure described in paragraphs (a) and (b) has not been allocated under section EJ 11B.
“Allocation “(2) The part of the deduction described in subsection (1) is allo­ cated to the income year.

“Deﬁned in this Act: amount, deduction, income year, petroleum development expenditure”.

Subsection (1) applies for expenditure incurred on or after 1 April 2008.
(2) 561 Disposal of petroleum mining asset (1) Section EJ 13(2)(b) is replaced by the following: “(b) it has not been allocated under section EJ 11 or EJ 11B to the income year in which the miner disposes of the asset or to an earlier income year.” 5 10 (2) Subsection (1) applies for expenditure incurred on or after 1 15 April 2008.
562 Sections EJ 17 and EJ 18 replaced (1) “EJ 18 Meaning of petroleum mining development Section EJ 17 and EJ 18 are replaced by the following: “(1) “Meaning In sections EJ 11 and EJ 11B, petroleum mining develop­ ment means a place where 1 or more of the activities described in subsection (2) is carried out.
“Activities: inclusions “(2) The activities are those carried out in connection with— developing a permit area for producing petroleum: “(a) “(b) producing petroleum: “(c) processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, reﬁnery, or user: removal or restoration operations.
“(d) “Activities: exclusions “(3) The activities do not include further treatment to which all the following apply: 418 20 25 30 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 564 “(a) “(b) “(c) it occurs after the well stream has been separated and stabilized into crude oil, condensate, or natural gas; and it is done— “(i) “(ii) “(iii) for the production of derivative products; and it is not treatment at the production facilities.
by liquefaction or compression; or for the extraction of constituent products; or 5 “Deﬁned in this Act: permit area, petroleum, removal or restoration oper­ ations”.

Subsection (1) applies for expenditure incurred on or after 1 10 April 2008.

(2) IFRS taxpayer method 563 (1) After section EW 15B(4)(b)(ii), the following is inserted: “(iib) is a lease that is a ﬁnance lease, and under NZIAS 17 and in the person’s ﬁnancial statements, the 15 lease is classiﬁed as an operating lease:”.
(2) (3) In section EW 15B, in the list of deﬁned terms, “ﬁnance lease” and “NZIAS 17” are inserted.
Subsections (1) and (2) apply for— (a) (b) (c) the 2007–08 and later income years, unless paragraph 20 (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS 25 taxpayer method in a return of income for that ﬁrst year; or the 2008–09 and later income years, if a person’s 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of 30 ﬁnancial reporting before 1 January 2007.
IFRS method 564 (1) After section EW 15C(3)(a), the following is inserted: “(ab) the IFRS method must be applied using New Zealand dollars, even if another currency may be used as the 35 functional currency under IFRSs:”.
419 Part 5 cl 565 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (2) Subsection (1) applies for— (a) (b) (c) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income 5 years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; or the 2008–09 and later income years, 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007. if a person’s 10 565 Determination alternatives to IFRS (1) In section EW 15D(1)(d), the words before subparagraph (i) 15 are replaced by the following: “(d) the ﬁnancial arrangement is not treated under IFRSs as a hedge of a ﬁnancial arrangement, or is treated as a hedge of a ﬁnancial arrangement (ﬁnancial arrangement A) and—”.
20 (2) (3) In section EW 15D(1)(d)(ii), “fair value method” is replaced by “modiﬁed fair value method”.

In section EW 15D(2), the words before paragraph (a) are re­ placed by the following: “(2) The person must use 1 of the following methods for the ﬁnan­ 25 cial arrangement, as modiﬁed by subsection (3) or (4):”.
(4) After section EW 15D(3), the following is added: “Determination alternatives to IFRS: G27 modiﬁed “(4) When a person applies a determination alternative to IFRS that is Determination G27, the following modiﬁcations are made: “(a) method C must be used, and not methods A, B, or D: “(b) for method C, if relevant, Determination G9C and not Determination 9A must be used.” 30 Subsections (1), (3), and (4) apply for— (a) the 2007–08 and later income years, unless paragraph 35 (b) or (c) applies; or (5) 420 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 567 (b) (c) the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; 5 or the 2008–09 and later income years, if a person’s 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007.
10 566 Expected value method and equity­free fair value method In section EW 15E(1)(c), the words before subparagraph (i) (1) are replaced by the following: “(c) the ﬁnancial arrangement is not treated under IFRSs as a hedge of a ﬁnancial arrangement, or is treated as a hedge 15 of a ﬁnancial arrangement (ﬁnancial arrangement A) and—”.
(2) (3) In section EW 15E(3), the ﬁrst sentence is replaced by “If the person chooses under subsection (1)(f) to use the equity­free IFRS method for the ﬁnancial arrangement, the person must 20 use a method that is the fair value method under section EW 15C.” Subsections (1) and (2) apply for— (a) 25 the 2007–08 and later income years, unless paragraph (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; 30 or the 2008–09 and later income years, if a person’s 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007.
35 (b) (c) 567 Change of spreading method (1) Section EW 26(1) is replaced by the following: 421 Part 5 cl 568 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “Requirements for change from straight­line and market value method (2) (3) “(1) A person may change from the straight­line method or the mar­ ket value method if they change to a method that is not the IFRS taxpayer method, and the Commissioner has given writ­ 5 ten authorisation for the change.” In section EW 26(2), the ﬁrst sentence is replaced by “A person may change from any spreading method to any other method if the Commissioner’s written authorisation under subsection (1) is not required for the change, and they have a sound com­ 10 mercial reason for the change.” In section EW 26(6), the ﬁrst sentence is replaced by “Despite subsection (3), that subsection, subsection (4), and section EW 27 do not apply to the extent to which the person’s spreading method change involves, for a ﬁnancial arrangement, a change 15 from the fair value method under the IFRS method described in section EW 15C or a change from the market value method to the IFRS taxpayer method.” Section EW 26(7)(a) is replaced by the following: “(a) starting to use or ceasing to use IFRSs to prepare ﬁ­ 20 nancial statements at the same time as starting to use or ceasing to use the IFRS taxpayer method:”.
(4) (5) Subsections (1) to (4) apply for— (a) (b) (c) 25 the 2007–08 and later income years, unless paragraph (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; 30 or the 2008–09 and later income years, if a person’s 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007.
35 568 When calculation of base price adjustment required (1) Section EW 29(13), other than the heading, is replaced by the following: 422 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 570 “(13) A party to a ﬁnancial arrangement who, for the ﬁnancial ar­ rangement, changes from the fair value method under the IFRS method described in section EW 15C to any other method or from the market value method to the IFRS taxpayer method must calculate a base price adjustment as at the date of the 5 change.” Subsection (1) applies for— (a) (2) (b) (c) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs 10 for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; or if a person’s the 2008–09 and later income years, 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007.
15 569 Exemptions: direct income interests in FIF in grey list 20 (1) (2) country In section EX 33(4)(d), the words before subparagraph (i) are replaced by the following: “(d) at all times in the year, the grey list company holds more than 50% of the voting interests in a company (the resi­ 25 dent company) resident in New Zealand that, for 12 months or more, has—”.
Section EX 33(4)(e) is replaced by the following: “(e) the year begins less than 10 years after the grey list com­ pany ﬁrst held more than 50% of the voting interests in 30 the resident company; and”.

(3) In section EX 33, in the list of deﬁned terms, “voting interest” is inserted.
570 Use of particular calculation methods required Section EX 40B(b) is replaced by the following: “(b) the deemed rate of return method, if use of the com­ parative value method is not practical because the per­ 35 423 Part 5 cl 571 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill son cannot determine the market value of the attributing interest at the end of the income year.” 571 Comparative value method Section EX 44(5), other than the heading, is replaced by the following: 5 “(5) Opening value is the market value of the person’s interest in the FIF at the end of the previous income year, calculated using the exchange rate applying under subsection (7) for that previous year.
The value is zero if the person did not hold the interest then or was then applying another calculation method 10 to it.” 572 Fair dividend rate method: usual method (1) After section EX 44C(4), the following is inserted: “Exclusion for certain managed funds “(4B) Subsection (4)(c) does not apply if— 15 “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and the FIF is a foreign investment vehicle.” “(b) In section EX 44C, in the list of deﬁned terms, “company”, 20 “foreign investment vehicle”, “life insurance”, and “portfolio investment entity” are inserted.
(2) 573 Fair dividend rate method: method for unit valuers and persons valuing interests daily (1) After section EX 44D(4), the following is inserted: 25 “Exclusion for certain managed funds “(4B) Subsection (4)(c) does not apply if— “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and the FIF is a foreign investment vehicle.” “(b) In section EX 44D, in the list of deﬁned terms, “company”, “foreign investment vehicle”, “life insurance”, and “portfolio investment entity” are inserted.
30 (2) 424 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 577 574 Cost method (1) In section EX 45B(4)(ac)(ii), “income year; or” is replaced by “income year; and” and the following is inserted: “(iii) the interest was not an attributing interest for the income year before the relevant income year; or”.

5 (2) In section EX 45B, in the list of deﬁned terms, “attributing interest” is inserted.
(1) 575 Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method Section EX 47(1)(c) is replaced by the following: “(c) the fair dividend rate method:”.
(2) After section EX 47(1), the following are inserted: “Exclusion for interests in grey list companies “(1B) Subsection (1)(c) does not apply if— “(a) “(b) the FIF is a grey list company; and the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls.
“Application of rule for certain managed funds “(1C) Subsection (1B) does not apply if— 10 15 20 “(a) the person is a portfolio investment entity, an entity eli­ gible to be a portfolio investment entity, or a life insur­ ance company; and the FIF is a foreign investment vehicle.” “(b) In section EX 47, in the list of deﬁned terms, “direct income 25 interest”, “foreign investment vehicle”, “life insurance”, and “portfolio investment entity” are inserted.
(3) 576 Measurement of cost Section EX 56(2B) is repealed.

577 Transitional rule for IFRS ﬁnancial reporting method (1) In section EZ 50(1)(b), “EW 18(f)” is replaced by “EW 18(1)(f)”.

In section EZ 50(2), “EW 18(f)” is replaced by “EW 18(1)(f)”.
(2) 30 425 Part 5 cl 578 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 578 New sections EZ 51 and EZ 52 added After section EZ 50, the following is added: “EZ 51 Transitional rule for ﬁnancial reporting method “(1) This section applies for a ﬁnancial arrangement when–– “(a) “(b) the ﬁrst income year for which a person adopts IFRSs 5 for the purposes of ﬁnancial reporting is before the 2007–08 income year and the person has not chosen to apply the IFRS taxpayer method in a return of income for any year before the 2008–09; and the income year is that ﬁrst income year or any subse­ 10 quent income year that is before the 2008–09 income year.
“(2) Despite sections EW 21(e) and EW 23, for an income year de­ scribed in subsection (1)(b), the person may apply a method that is not used by the person for ﬁnancial reporting purposes if 15 it is a method that they would be allowed to use if they had not adopted IFRSs.

The requirements for using a ﬁnancial report­ ing method, other than the requirement in section EW 21(e), must still be met by the person.
“Deﬁned in this Act: ﬁnancial arrangement, IFRS, IFRS taxpayer method, in­ 20 come year, return of income “EZ 52 Transitional rule for changes from the fair value method “(1) This section applies for a ﬁnancial arrangement when–– “(a) “(b) “(c) the person chooses to apply the IFRS taxpayer method in a return of income for the 2005–06 income year; and 25 the person uses the fair value method under the IFRS method described in section EW 15C in the 2005–06 income year; and the income year is the 2006–07 or 2007–08 income year.
“(2) The deﬁnition of sound commercial reason in section EW 30 26(7) (Change of spreading method) includes the choice of the person to change from the fair value method to another method under the IFRS taxpayer method.

“Deﬁned in this Act: ﬁnancial arrangement, IFRS taxpayer method, income year, return of income, sound commercial reason”.

35 426 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 581 579 Section GC 14EB repealed Section GC 14EB is repealed.
580 Dividends from qualifying company (1) Section HG 13(3)(a) is replaced by the following: “(a) the maximum imputation credit which may be attached 5 to that dividend by virtue of section ME 8(1); and”.
(2) Section HG 13(4)(a) is replaced by the following: “(a) the maximum dividend withholding payment credit which may be attached to that dividend by virtue of sec­ tions MG 8(1) and MG 10(1) (after taking into account 10 for the purposes of section MG 10(1) any imputation credit attached to that dividend under subsection (3)); and”.
581 Effect of failure to meet eligibility requirements for (1) (2) 15 entities Section HL 4(1)(a) is replaced by the following: “(a) Section HL 4(2)(a) is replaced by the following: “(a) referred to in sections HL 2(2) and HL 3; and”.
the portfolio investor class of the entity fails to meet a requirement under section HL 6 or HL 9 on the last day 20 of a quarter— “(i) “(ii) beginning 6 months or more after the date on which the portfolio investor class is formed; and ending more than 3 months before an announce­ ment by the entity to its investors that portfolio investor class is winding up within 12 months of the announcement; and “(ab) the entity fails to meet a requirement under section HL the 25 10 on the last day of a quarter— “(i) “(ii) beginning 6 months or more after the date on 30 which the entity becomes a portfolio investment entity; and ending more than 3 months before an announce­ ment by the entity to its investors that the entity is winding up within 12 months of the announce­ 35 ment; and”.
(3) Section HL 4(2)(b)(ii) is replaced by the following: 427 Part 5 cl 582 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(ii) is repeated on the last day of the quarter fol­ lowing the quarter referred to in paragraph (a) and ending more than 3 months before the an­ nouncement referred to in paragraphs (a)(ii) and (ab)(ii).” Investor membership requirement 582 (1) After section HL 6(1)(i), the following is inserted: (2) (3) “(ib) Auckland Regional Holdings:”.
In section HL 6(1)(j)(iii), “entity:” is replaced by “entity” and paragraph (k) is repealed.

Section HL 6(4)(a) and (b) are replaced by the following: “(a) “(b) the investor is not listed in subsection (1)(b) to (ib); and the associated person is not listed in subsection (1)(b) to (ib); and”.

Investor interest size requirement 583 (1) After section HL 9(4)(h), the following is inserted: (2) (3) “(hb) Auckland Regional Holdings:”.
In section HL 9(4)(j), “subsection (5):” is replaced by “sub­ section (5)” and paragraph (k) is repealed.

Section HL 9(6)(a) and (b) are replaced by the following: “(a) “(b) the investor is not listed in subsection (4)(a) to (hb); and the associated person is not listed in subsection (4)(a) to (hb); and”.
5 10 15 20 584 Further eligibility requirements relating to investments Section HL 10(2)(b)(iii) is replaced by the following: 25 “(iii) an amount of income from a lease of land, but this subparagraph does not apply if the lessee under the lease is associated with the entity deriving the amount:”.

585 Unlisted company may choose to become portfolio listed 30 company Section HL 11B(1)(a) is replaced by the following: “(a) has at least 100 shareholders; and”.
428 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 588 586 Becoming portfolio investment entity Section HL 12(1)(b) is replaced by the following: “(b) the entity, if treated as becoming a portfolio invest­ ment entity when the election would be effective, would cease under section HL 4 to be eligible through a failure 5 to meet 1 or more of the requirements in section HL 6, HL 9, or HL 10 in each quarter of the 12­month period.” 587 Credits received by portfolio tax rate entity or portfolio investor proxy In section HL 27(7), the words before paragraph (a) are re­ 10 placed by the following: “(7) The investor is treated as receiving for the allocated credits, for the tax year corresponding to the investor’s income year or, in the case of an investor having a portfolio investor exit period, for the quarter to which the portfolio investor exit period re­ 15 lates,—”.
588 Determination of amount of credit in certain cases Section LB 1(1)(c) to (e) is replaced by the following: “(c) in the case of an imputation credit attached to a divi­ dend that has an imputation ratio greater than the ratio 20 calculated in accordance with the formula stated in sec­ tion ME 8(1), so much of the imputation credit as would arise if the imputation ratio of the dividend were the ra­ tio so calculated: in the case of a dividend withholding payment credit at­ 25 tached to a dividend with a dividend withholding pay­ ment ratio greater than the ratio calculated in accord­ ance with the formula stated in section MG 8(1), so much of the dividend withholding payment credit as would arise if the dividend withholding payment ratio 30 of the dividend were the ratio so calculated: in the case of a dividend with a combined imputation and dividend withholding payment ratio greater than the ratio calculated in accordance with the formula stated in section MG 8(1), so much of the dividend withholding 35 payment credit and the imputation credit as remain af­ ter any reduction of the dividend withholding payment “(d) “(e) 429 Part 5 cl 589 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill credit or the imputation credit in accordance with sub­ section (5):”.
Section LB 2(2) is replaced by the following: 589 Credit of tax for imputation credit (1) “(2) Any such credit of tax is credited, in so far as it extends, against 5 the income tax liability of the taxpayer for the income year.” In section LB 2(8), “from an interest in an attributing interest in a foreign investment fund” is replaced by “from an attributing interest in a foreign investment fund”.
(2) 590 Credit of tax for dividend withholding payment credit in 10 hands of shareholder Section LD 8(1)(a) is replaced by the following: “(a) the taxpayer is entitled to a credit of tax equal to the dividend withholding payment credit so included in as­ sessable income; and”.

15 591 Credits in respect of dividends to non­resident investors Section LE 2(13) is repealed.
592 Special rules for holding companies In section LE 3(6), item T is replaced by the following: “T is the basic rate of income tax for companies, expressed as a 20 percentage, stated in schedule 1, part A, clause 5, and applying in respect of the income year”.

593 Allocation rules for imputation credits Section ME 8(7) is repealed.

594 Amount of imputation credit to be attached to cash 25 distribution Section ME 31(3) is repealed.
595 Notional distribution deemed to be dividend Section ME 33(4) is repealed.

430 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 601 596 Amount of imputation credit to be attached to cash distribution Section ME 36(3) is repealed.

597 Notional distribution deemed to be dividend or taxable Maori authority distribution Section ME 38(3) is repealed.

598 Branch equivalent tax account of company Section MF 3(3) is repealed.
599 Credits and debits arising to branch equivalent tax account of company Section MF 4(7) is repealed.

600 Debits and credits arising to group branch equivalent tax account Section MF 8(7) is repealed.

5 10 601 Use of consolidated group credit to reduce dividend 15 withholding payment, or use of group or individual debit to satisfy income tax liability Section MF 10(4B) to (4D) are repealed.
(1) (2) After section MF 10(4), the following are inserted: “(4B) An election made for a consolidated group under section MF 20 10(3) by any company described in section MF 10(3)(a) to (c) for an income year is invalid to the extent to which the total of all those elections is greater than an amount calculated for the consolidated group for the year using the formula in section MF 8(2)(a) (but treating item e as zero).
25 “(4C) An election made for a company (the ﬁrst company) by any consolidated group under section MF 10(4) for an income year is invalid to the extent to which the total of all those elections and any other elections for the ﬁrst company under section MF 5(4) for the year is greater than an amount calculated for the 30 ﬁrst company for the year using the formula in section MF 4(1)(a) (but treating the item e as zero).
431 Part 5 cl 602 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(4D) An amount of election that is invalid under subsections (4B) or (4C)— “(a) “(b) is not recorded as a credit in the branch equivalent tax account of the company or the consolidated group, as the case may be, that makes the election: is not an amount of debit balance for which the election is made: does not relate to the election.” “(c) Subsections (1) and (2) apply for the 2005–06 and later in­ come years.
(3) 602 Allocation rules for dividend withholding credits Section MG 8(9) is repealed.

603 Dividend with both imputation credit and dividend withholding payment credit attached Section MG 10(3) is repealed.

604 Conduit tax relief account Section MI 3(3) is repealed.

605 Credits arising to conduit tax relief account Section MI 4(3) is repealed.

5 10 15 606 Debits arising to conduit tax relief account 20 Section MI 5(8) is repealed.
607 Consolidated group conduit tax relief account Section MI 15(2) is repealed.

608 Credits arising to group conduit tax relief account Section MI 17(3) is repealed.

25 609 Debits arising to group conduit tax relief account Section MI 18(5) is repealed.
432 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 613 610 Retirement scheme contributors (1) In section NEB 6(2), the words before paragraph (a) are re­ placed by the following: “(2) An entity may choose to become a retirement scheme con­ (2) tributor for a person for an income year if,—”.

Subsection (1) applies for the 2007–08 and later income years.

5 611 Application of RWT rules Section NF 1(2)(b)(xii) is repealed.
612 Resident withholding tax deductions from dividends deemed to be dividend withholding payment credits Section NF 8(1)(a) is replaced by the following: “(a) sections LB 1 and LD 9:”.

613 Deﬁnitions (1) (2) After the deﬁnition of accident insurance contract, the fol­ This section amends section OB 1. lowing is inserted: “accommodation is deﬁned in section CE 1(2) (Amounts derived in connection with employment) for the purposes of that section”.
Before the deﬁnition of actuary, the following is inserted: “actuarially determined— “(a) means, for an amount, a requirement that is met when (3) an actuary has— “(i) “(ii) calculated the amount: certiﬁed that the amount is calculated by them no later than the last day for furnishing the return of income to which the amount relates: “(iii) provided to the Commissioner in writing, in the 10 15 20 25 form prescribed by the Commissioner (if any), all 30 assumptions, methodologies, bases and working calculations necessary to support the calculation of the amount: “(b) does not include when the calculation of an amount— 433 Part 5 cl 613 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill “(i) does not accurately reﬂect the relevant taxpayer’s business experience: is not made according to usual business practice: “(ii) “(iii) is, or is part of, a tax avoidance arrangement”.
In the deﬁnition of creditable membership, subparagraph 5 (b)(i) is replaced by the following: (4) “(i) the period ending on the day on which securities are ﬁrst allotted by the KiwiSaver scheme for the person, and beginning on the earliest of— “(A) “(B) “(C) the ﬁrst day of the month in which contri­ 10 butions are ﬁrst received by the Commis­ sioner for the person: the ﬁrst day of the month in which Kiwi­ Saver contributions are ﬁrst deducted for the person: the day which the Commissioner nomin­ ates in answer to a request by the per­ son for such nomination, in circumstances where, due to matters outside the control of the person, the ﬁrst deduction of Kiwi­ 20 Saver contributions was delayed:”.
15 (5) After the deﬁnition of general insurance, the following is in­ serted: “general insurance contract has the meaning given in IFRS 4”.

25 (6) After the deﬁnition of identical share, the following is in­ serted: “IFRS means a New Zealand equivalent to International Fi­ nancial Reporting Standard, approved by the Accounting Stan­ dards Review Board, and as amended form time to time or an 30 equivalent standard issued in its place “IFRS 4 means the IFRS, numbered 4, that relates to insurance contracts”.
The deﬁnition of offshore development is repealed.

The deﬁnition of onshore development is repealed.

In the deﬁnition of operating lease, “means” is replaced by “means, except in section EW 15B(4)(b)(iib) (IFRS taxpayer method),”.
35 (7) (8) (9) 434 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 5 cl 613 (10) After the deﬁnition of outstanding balance, the following is inserted: “outstanding claims reserve means the actuarially deter­ mined amount of a person’s outstanding claims liability for general insurance contracts, excluding contracts having 5 premiums to which section FC 14 applies, as that liability is measured under Appendix D, paragraphs 5.1 to 5.2.12 of IFRS 4”.
(11) After the deﬁnition of overseas pension, the following is in­ serted: “overtime is deﬁned in section CW 13C(4) (Payments for overtime meals) for the purposes of that section”.

10 (12) After the deﬁnition of petroleum mining company, the fol­ lowing is inserted: “petroleum mining development is deﬁned in section EJ 15 18 (Meaning of petroleum mining development) for the pur­ poses of sections EJ 11 and EJ 11B (which relate to petrol­ eum development expenditure)”.
In the deﬁnition of prescribed investor rate, paragraph (a)(ii) is replaced by the following: 20 (13) “(ii) the person is a resident who derives income as a trustee of a trust other than a trust referred to in paragraph (c)(i) and who chooses to be subject to this paragraph for the tax year; or”.

(14) After the deﬁnition of working day, the following is inserted: 25 “work­related relocation is deﬁned in section CW 13B(4) (Relocation payments) for the purposes of that section”.
(15) Subsections (7), (8), and (12) apply for expenditure in­ curred on or after 1 April 2008.
(16) Subsection (9) applies for— 30 (a) (b) the 2007–08 and later income years, unless paragraph (b) or (c) applies; or the ﬁrst income year for which a person adopts IFRSs for the purposes of ﬁnancial reporting and later income years, if that ﬁrst income year is before the 2007–08 35 income year and the person chooses to apply the IFRS taxpayer method in a return of income for that ﬁrst year; or 435 Part 5 cl 614 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill (c) if a person’s the 2008–09 and later income years, 2008–09 income year starts before 1 January 2008 and the person has not adopted IFRSs for the purposes of ﬁnancial reporting before 1 January 2007.
614 Schedule 16—Depreciable land improvements (1) In schedule 16, after item 16, the following is added: 5 17 pipes and conduits (2) Subsection (1) applies for the 2005–06 and later income years.

Part 6 Amendments to other Acts and regulations Income Tax Act 1994 10 615 Income Tax Act 1994 amended Sections 616 to 620 amend the Income Tax Act 1994.
616 Exempt income—Employee allowances and expenditure 15 on account of employee (1) After section CB 12(1), the following are inserted: “(1B) An amount, not being an amount or part of an amount that is exempt income under subsection (1), is exempt income to the extent to which— “(a) 20 the amount is paid to or on behalf of an employee in respect of the costs to the employee in a work­related relocation; and the amount paid does not exceed the actual cost in­ curred by or on behalf of the employee on an expense 25 that is listed as an eligible relocation expense in a de­ termination made by the Commissioner under section 91AAR of the Tax Administration Act 1994; and the expenditure is incurred from the start of the in­ come year in which the employee relocates or under­ 30 takes work at the new location to the end of the fol­ “(b) “(c) 436 5 10 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 6 cl 617 lowing income year unless, in the case of a temporary move,— “(i) the employee moves temporarily to a new loca­ tion and then relocates permanently to that place; and the temporary move was not treated as a work­ related relocation under this subsection.
“(ii) “(1C) An amount, not being an amount or part of an amount that is exempt income under subsection (1), is exempt income to the extent to which— “(a) the amount is paid to or on behalf of an employee for a meal for the employee when the employee is working overtime; and the amount paid— “(i) “(b) “(c) does not exceed the actual cost to the employee, 15 with documentation required for amounts over $20 per meal; or is a reasonable estimate of the expenditure likely to be incurred by the employee or a group of employees for whom an amount is payable; and 20 “(ii) either— “(i) “(ii) the employment agreement provides for pay for overtime hours; or the employer’s established practice or policy pro­ vides for pay for overtime hours worked.” 25 (2) Subsection (1) applies for the 2002–03 to 2004–05 income years.
617 Meaning of “fringe beneﬁt” (1) After section CI 1(o)(v), the following is inserted: “(vb) it removes a need which would otherwise exist for 30 the employer of the employee to pay the employee an amount in respect of a work­related relocation as described in section CB 12(1B) or a payment for an overtime meal as described in section CB 12(1C):”.

Subsection (1) applies for the 2002–03 to 2004–05 income 35 years.
(2) 437 Part 6 cl 618 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill 618 Special and provisional economic rates (1) Section EG 10(1)(b) is replaced by the following: “(b) a provisional basic economic rate, where no applicable economic depreciation rate other than a default eco­ nomic depreciation rate is speciﬁed in a determination 5 under section EG 4.” (2) Subsection (1) applies for the 1995–96 and later income years.

619 Deﬁnitions (1) (2) This section amends section OB 1.
In the deﬁnition of expenditure on account of an employee, the following is added after paragraph (d): “(e) an amount paid under section CB 12(1B):”.

(3) After the deﬁnition of overseas company, the following is inserted: “overtime, for a person and a day, means time worked for an employer on the day beyond the person’s ordinary hours of work as set out in their employment agreement when the employee has worked more than 2 hours beyond their ordinary hours on that day:”.
(4) After the deﬁnition of working partner, the following is in­ 10 15 20 serted: “work­related relocation,— “(a) for an employee other than an employee whose accom­ modation forms an integral part of their work, means a 25 relocation of the place where the employee lives that is required because the employee’s workplace is not within reasonable daily travelling distance of their resi­ dence as a result of the employee— “(i) taking up new employment with a new employer; 30 or taking up new duties at a new location with their existing employer; or “(ii) “(iii) continuing in their current position but at a new location: 35 “(b) for an employee whose accommodation forms an inte­ gral part of their work, means a relocation of the place 438 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Part 6 cl 622 where the employee lives that is required as a result of the employee— “(i) taking up new employment with a new employer; or taking up new duties at a new location with their 5 existing employer; or “(ii) “(iii) continuing in their current position but at a new location.” (5) Subsections (2) to (4) apply for the 2002–03 to 2004–05 income years.
10 620 Schedule 16—Depreciable land improvements (1) In schedule 16, after item 16, the following is added: 17.

Pipes and conduits.

(2) Subsection (1) applies for the 1995–96 and later income years.
Income Tax Act 1976 15 621 Special and provisional economic rates (1) Section 108I(1)(b) of the Income Tax Act 1976 is replaced by the following: “(b) a provisional basic economic rate, where no applicable economic depreciation rate other than a default eco­ 20 nomic depreciation rate is speciﬁed in a determination under section 108C of this Act.” (2) Subsection (1) applies for the 1993–94 and later income years.
622 Schedule 21–Depreciable land improvements (1) In schedule 21 of the Income Tax Act 1976, after item 16, the following is added: 25 17.

Pipes and conduits.

(2) Subsection (1) applies for the 1993–94 and later income years.
439 Part 6 cl 623 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Taxation (Business Taxation and Remedial Matters) Act 2007 623 Use of consolidated group credit to reduce dividend withholding payment or use of group or individual debit to satisfy income tax liability In section 287(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007, “2005–06” is replaced by “1997–98”.
5 Acts referring to associated person 624 Consequential amendments to other Acts: associated 10 person The enactments listed in schedule 2 are amended in the man­ ner indicated in the schedule.

Amendment to Income Tax (Depreciation Determinations) Regulations 1993 625 (1) (2) (3) Income Tax (Depreciation Determinations) Regulations 1993 In regulations 2(a), 3(1)(c), 3(2), 6(1)(a), and 9(1) of the In­ come Tax (Depreciation Determinations) Regulations 1993, “91AE” is replaced by “91AAG”.
In regulations 2(b) and 6(1)(b) of the Income Tax (Depreci­ ation Determinations) Regulations 1993, “91AJ” is replaced by “91AAL”.

Subsections (1) and (2) apply for the 2005–06 and later in­ come years.
Amendment to Goods and Services Tax (Grants and Subsidies) Order 1992 626 Schedule—Non­taxable grants and subsidies In the schedule of the Goods and Services Tax (Grants and Subsidies) Order 1992, clause 5,— (a) “under the Income Tax Act 2004” is replaced by “under the Income Tax Act 2007, Income Tax Act 2004,”: 15 20 25 30 440 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Schedule 1 (b) “under subpart KJ of the Income Tax Act 2004” is re­ placed by “under subpart MK of the Income Tax Act 2007 or subpart KJ of the Income Tax Act 2004”.
Schedule 1 Consequential amendments to lists of deﬁned terms: associated person s 431 5 Section reference in Income Tax Act 2007 Term to be omitted from list CD 44 Available capital distribution amount related person CW 12 Proceeds of share disposal by qualifying foreign equity investor EW 43 Consideration when debt sold at discount to associate of debtor EW 49 Income and deduction when debt sold at discount to associate of debtor 1990 version provisions 1988 version provisions 1988 version provisions EX 1 Meaning of controlled foreign company control EX 7 Indirect control interests control FA 3 Recharacterisation of certain dividends: recovery of cost of shares held on revenue account control FE 1 What this subpart does control FE 2 When this subpart applies control FE 9 Elections control 441 Schedule 1 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill FE 12 Calculation of debt percentages control FE 21 Banking group’s New Zealand net equity 1973 version provisions, 1988 version provisions, 1990 version provisions FE 25 New Zealand group for excess debt entity that is a company control FE 26 Identifying New Zealand parent control FE 27 Establishing companies under parent’s control FE 28 Identifying members of New Zealand group FE 30 Ownership interests in companies outside New Zealand group FE 35 Persons who may be excluded from banking groups FE 39 Direct ownership interests GB 28 Interpretation of terms used in section GB 27 GB 48 Deﬁned terms for sections GB 45 and GB 46 control
 control control control control 1973 version provisions, 1988 version provisions, 1990 version provisions 1973 version provisions, 1988 version provisions, 1990 version provisions HC 15 Taxable distributions from non­complying and foreign trusts 1973 version provisions, 1988 version provisions, 1990 version provisions 442 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Schedule 2 HD 6 When relationship effectively that of principal and agent HD 19 Persons receiving absentees income HL 6 Investor membership requirement control control 1988 version provisions RF 11 Dividends paid to companies/under control of/associated with non­residents control Schedule 2 Consequential amendments to other Acts: associated person s 624 Fisheries Act 1996 (1996, No 88) Section 59(10)(c): “paragraphs (c) and (d) of the deﬁnition of that term” is replaced by “paragraph (c) of the deﬁnition of that term, as it was before the enactment of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2008”.
Section 59(10)(d): replaced by the following: 5 10 “(d) any person who would be an associated person under subpart YB of the Income Tax Act 2007.” Insolvency Act 2006 (2006 No 55) Section 182(1): replaced by the following: “(1) If authorised by the court, the assignee or a person appointed 15 by the assignee may exercise the power set out in subsection (2) in relation to a company that is associated with the bankrupt under subpart YB of the Income Tax Act 2007.” 443 Schedule 2 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Misuse of Drugs Amendment Act 2005 (2005 No 81) Section 31, deﬁnition of manufacturer: “(to the extent to which those rules apply for the whole of that Act excluding the 1973, 1988, and 1990 version provisions)” is omitted.
Privacy Act 1993 (1993, No 28) Section 6, principle 12(2): “(to the extent to which those rules apply for the whole of that Act excluding the 1973, 1988, and 1990 version provisions)” is omitted.
5 Public Service Investment Society Management Act (No 2) 1979 (1979 No 9) Section 2(2): replaced by the following: “(2) For the purposes of section 4 of this Act a company shall be deemed to be associated with another company if those com­ panies would be associated with each other under subpart YB of the Income Tax Act 2007.” 10 15 Radiocommunications Act 1989 (1989 No 148) Section 153(2): “(to the extent to which those rules apply for the whole of that Act excluding the 1973, 1988, and 1990 version provi­ sions)” is omitted.
Section 161(2): “(to the extent to which those rules apply for the 20 whole of that Act excluding the 1973, 1988, and 1990 version provi­ sions)” is omitted.

Smoke­free Environments Act 1990 (1990 No 108) Section 2(1), deﬁnition of manufacturer: “(to the extent to which those rules apply for the whole of that Act excluding the 1973, 1988, 25 and 1990 version provisions)” is omitted.
Trustee Companies Management Act 1975 (1975 No 25) Section 2(2): replaced by the following: “(2) For the purposes of section 3 of this Act a company is associ­ ated with another company if those companies would be asso­ 30 ciated with each other under subpart YB of the Income Tax Act 2007.” 444 Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill Schedule 2 Unit Trusts Act 1960 (1960 No 99) Section 3(4): replaced by the following: “(4) A trustee corporation or company or bank must not act as a trustee of a unit trust, and a company must not act as manager of a unit trust if those 2 persons are associated with each other 5 under subpart YB of the Income Tax Act 2007.” 12 Wellington, New Zealand: Published under the authority of the New Zealand Government—2008 445