General policy statement

This bill continues the reform of the way in which the Income Tax Act 2007 applies to gains of New Zealand residents from income interests in overseas entities, or FIFs, and gains of foreign residents from interests in New Zealand companies. For New Zealand residents, different regimes apply to gains from a controlled foreign company (a CFC), which is a FIF controlled by New Zealand residents, and gains from a FIF that is not so controlled. The bill follows the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009, which changed the way in which a resident's “attributed CFC income” from a CFC is calculated.

The bill proposes major changes to the rules relating to residents' “FIF income” from FIFs that are not CFCs. It proposes a new method for calculating FIF income that is aligned with the current method for calculating attributed CFC income from a CFC. Two of the existing methods for calculating FIF income are abolished and the availability of the remaining methods for use by taxpayers is changed. The revaluation, at market value, of some inherited interests in FIFs is proposed.

The bill makes 2 changes to the thin capitalisation rules. The thin capitalisation rules limit the deductions allowed for interest payments by members of a group of companies that contains a CFC or is controlled by non-residents. The bill introduces an optional test based on the ratio of deductible interest expenditure to net cash flow. It also changes the rules relating to the grouping, for the purposes of the thin capitalisation rules, of a registered bank owned by the Crown.

The bill introduces a zero rate for the approved issuer levy on payments made by approved issuers to non-residents under some debt instruments.

The Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 also made changes to aspects of the Income Tax Act 2007 that were inconsistent with the changed approach to calculating attributed CFC income. For example, the Act restricted the availability of new branch equivalent tax account debits and abolished the conduit tax relief regime. It did not, however, abolish branch equivalent tax accounts (BETAs) for companies or conduit tax relief accounts (CTRAs) for conduit tax relief companies. Such accounts were allowed to continue so that companies were not immediately deprived of benefits relating to transactions that took place before the new rules came into force.

The bill provides for the delayed abolition of BETAs for companies and for the abolition of CTRAs. It also makes some remedial amendments to changes already made to the CFC rules.

Regulatory impact statement

In accordance with Cabinet Office Circular CO (09) 08, this explanatory note does not contain a regulatory impact statement for this bill. A copy of the regulatory impact statement for this bill is available at the following internet sites:

• http://taxpolicy.ird.govt.nz/publications/2010-ris-iirm-bill/overview

• http://www.treasury.govt.nz/publications/informationreleases/ris .

Methods of calculating income from foreign investment fund (FIF)

Background: further detail of CFC rules

The Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 introduced a distinction between income of a CFC that is an attributable CFC amount, such as interest or a royalty, and income that is not such an amount. Under the changed CFC rules, a resident receives no attributed CFC income from a CFC if less than 5% of the CFC's income consists of attributable CFC amounts. Such a CFC is called a “non-attributing active CFC”. Generally, if a CFC has income that does not satisfy the test, a resident with an income interest in the CFC is treated as deriving attributed CFC income equal to a proportion of the attributable CFC amounts derived by the CFC.

The rules contain exceptions for certain CFCs resident in Australia. Investors with income interests in such CFCs derive assessable income from them in the form of distributions and gains from the disposal of income interests that are held for sale. The nature of the income derived by those CFCs does not affect the tax treatment of income from income interests in them.

Methods for calculating FIF income

Changes proposed in this bill modify the rules for determining a resident's assessable income from income interests in FIFs that are not CFCs. The proposals reflect the changes already made to the rules for income interests in CFCs.

Currently, residents calculate their FIF income from an income interest in a FIF using 1 of 6 methods. The methods are the branch equivalent method, the accounting profits method, the fair dividend rate method, the cost method, the comparative value method, and the deemed rate of return method.

The branch equivalent method corresponds to the method used, before the changes to the CFC rules, in calculating attributed CFC income from a CFC. The bill proposes to replace the branch equivalent method with the attributable FIF income method, which depends on determining the attributable CFC amounts derived by the FIF. The new method is a modified version of the current method of calculating attributed CFC income. It differs from that method mainly in the detail of determining whether the taxpayer needs to attribute income from a FIF that is part of a group of companies. Under the attributable FIF income method, an investor receives no FIF income from a FIF if less than 5% of the FIF's income consists of attributable CFC amounts. Otherwise, the investor is treated as deriving FIF income equal to a proportion of the attributable CFC amounts derived by the FIF. The method may be used by an investor who is not a portfolio investment entity and whose income interest in a FIF is more than 10%.

The bill proposes that the accounting profits method be abolished. It also proposes that the fair dividend rate method be the default method for income interests other than those for which the attributable FIF income method is used. The cost method may be used instead of the fair dividend rate method for an income interest, if the market value of the income interest is not available.

Under the proposed changes, investors are required to use the comparative value or deemed rate of return methods for income interests that produce returns similar to interest from a loan. Only natural persons and trustees are allowed to use those methods for other income interests in FIFs. If they choose to do so, they are not allowed to use the fair dividend rate method or cost method for any other income interest in a FIF.

None of the methods are required to be used for income interests in certain FIFs resident in Australia. These exceptions correspond to the exceptions in the CFC rules.

The bill also proposes that PIEs be required to use a FIF method for all their interests in foreign entities, including interests in CFCs. The requirement is prompted by the idea that a PIE's investment in a CFC should be treated consistently with small direct investments in the CFC by the individual investors in the PIE.

The above changes come into force on 1 July 2011 and apply for income years beginning on or after that date.

Revaluation of inherited FIF interests

Another proposal will result in more people having FIF income from inherited interests in FIFs. A person with attributing interests in FIFs does not have FIF income if the interests are valued at less than $50,000. For the purposes of this exemption, the value of the interests is often their cost to the person. For people who have inherited interests in FIFs, the value may be zero or the cost of the interests to the person from whom the interests are inherited. As a consequence, people can own interests in FIFs having a significant market value but not derive FIF income, because the value of the interests is treated as being less than the $50,000 threshold. Such a situation commonly involves attributing interests in FIFs that were grey list companies. Formerly, owners of such interests did not receive FIF income from them because the interests were not attributing interests. When the grey list exemption was abolished, people who had inherited their interests benefited from a different exemption. The bill proposes a revaluation to market value for interests in grey list companies inherited before 1 July 2007, when the grey list was abolished. The change comes into force on the day that the bill receives the Royal assent.

Thin capitalisation rules

Background

The thin capitalisation rules in the Income Tax Act 2007 limit the availability to a resident of deductions for interest payments on loans if the resident is part of a group that is controlled by non-residents or includes a controlled foreign company. The rules require the comparison of a New Zealand group, consisting of the resident and resident companies controlled by the same people, with a worldwide group, consisting of the resident and all companies controlled by the same people. The test compares a figure for the New Zealand group with the corresponding figure for the worldwide group. The calculation of the figures differs for: (a) a group controlled by non-residents; (b) a group controlled by residents; and (c) a group that includes a registered bank. For the first 2 types of group, the figures that are compared express the accounting value of debts as a proportion of the accounting value of assets. If the figures suggest that the New Zealand group has an excessive ratio of debt to assets in comparison with the worldwide group, the resident is treated as deriving an amount of income corresponding to the excessive deductions for interest payments.

Alternative test: interest expenditure as proportion of income

Some resident companies have items of income-earning property, such as goodwill, that are not recognised as assets for accounting purposes but are nevertheless treated by lenders as valuable security for loans. The current thin capitalisation rules rely on accounting rules and so do not attribute any value to such property. They consequently give misleading results for groups containing such companies, producing high figures for the ratio of debts to assets. The bill proposes an alternative test that recognises such a possibility. The method may be chosen for a group that does not include a registered bank, is controlled by residents, and satisfies other requirements.

The proposed test requires the calculation of a figure expressing the deductible interest expenditure of a group as a proportion of an amount equal to the accounting net profit of the group, after adjustments that include the addition of deductible interest expenditure and of depreciation and amortisation, which do not affect cash flow. If the calculated figure for the New Zealand group exceeds a threshold determined from the calculated figure for the worldwide group, the person in the New Zealand group claiming the interest deductions is treated as deriving an amount of income determined from the amount by which the threshold is exceeded. If the figure for the New Zealand group does not exceed the threshold, the person's tax situation is not affected.

Test for group including state-owned bank

The thin capitalisation rules use a test for a group including a registered bank that is different from the tests for other groups, because a test relating the accounting value of debts to the accounting value of assets is not appropriate for a banking business. Changes to the thin capitalisation rules by the Taxation (Budget Measures) Act 2010 extended the application of the usual test, for a group controlled by residents, to all groups having a member that owns a CFC. One such group includes a state-owned registered bank that does not itself have interests in a CFC. Under the current rules, the registered bank must be included in the group to which the usual test will apply. The bill proposes that the registered bank and the group members associated with the banking business be separated from the rest of the group for the purposes of applying the thin capitalisation rules.

Both the new income-based test and the change to the grouping rules will be treated as having come into effect on 1 July 2009 and apply to income years beginning on or after that date.

Approved issuer levy

In general, residents who pay non-resident passive income to a non-resident are required to withhold non-resident withholding tax from the payment. There is an exception to this requirement for approved issuers, who may instead pay the approved issuer levy imposed by the Stamp and Cheque Duties Act 1971 on a payment of interest to a non-resident who is not associated with the approved issuer. Currently, section 86J of that Act provides for a rate of 2% for the approved issuer levy. The bill proposes that there be a rate of 0% for the approved issuer levy on payments of interest on securities meeting certain requirements. The requirements include that the securities have been offered to the public, are not asset-backed securities, and are either listed on an exchange registered under the Securities Market Act 1988 or were issued to a group of at least 100 persons, with no person or group of associated persons receiving 10% or more of the total securities.

The proposed changes come into effect on the day that the bill receives the Royal assent.

Abolition of BETAs for companies and CTRAs

Branch equivalent tax accounts are memorandum accounts used to keep track of the relationship between foreign dividend payments (FDPs), which are payments that a resident is required to make when receiving dividends from a foreign company, and the income tax liability arising from attributed CFC income of the resident from the foreign company. They are no longer required for companies under the new CFC and FIF regimes. For a resident company, dividends received from a foreign company are now exempt income and no attributed CFC income or FIF income now arises from income of a FIF that is not an attributable CFC amount or attributable FIF amount. The abolition of BETAs will be delayed to allow for delays in the calculation of income relating to income years before the changes to the international rules came into effect. The bill proposes to close BETAs for companies at the beginning of the first income year beginning on or after 1 July 2012. Until then, debit balances in the BETA will be available to offset against attributed CFC income arising in or before the previous income year.

Conduit tax relief accounts are memorandum accounts used to keep track of the relief given to a resident company on tax liabilities for income that the resident receives from an associated foreign company and passes on to non-resident owners. The accounts are no longer required for companies under the new CFC and FIF regimes, as conduit tax relief was repealed for income years beginning on or after 1 July 2009. The abolition of CTRAs was postponed to allow for the payment of dividends from tax-relieved income. The bill proposes to abolish CTRAs from the first income year beginning on or after 1 July 2011.

Remedial amendments

The bill proposes various amendments to details of existing legislation governing gains by residents from FIFs and CFCs. The more significant are described below.

The Commissioner is currently able to issue a determination that an insurer is a non-attributing active CFC. The bill proposes that the authorising provision be amended to expressly give the Commissioner an ability to impose conditions for the application of the determination.

When the conduit tax relief regime was repealed, an anti-avoidance rule was inserted in the Income Tax Act 2007. The provision applied to arrangements that involved conduit tax relief credits, reduced the tax liability of resident shareholders, and were entered between the announcement of the repeal and the date of the repeal. The provision was not intended to apply, but may do so, to arrangements between resident holding companies in a chain of such companies for the benefit of their non-resident owners. An amendment is proposed to cater for such a situation.

Currently, qualifying companies cannot hold attributing interests of 10% or more in FIFs. However, the restriction does not apply to some interests in foreign companies because they are not attributing interests. Qualifying companies should not be able to hold such interests because, unlike distributions from other resident companies, distributions to shareholders in a qualifying company are not assessable income. The bill proposes to prevent qualifying companies from holding interests of 10% or more in FIFs. For similar reasons, portfolio investment entities should not receive foreign dividends as exempt income. Currently, however, only multi-rate PIEs are excluded from the exemption. The bill proposes to widen the current exclusion to include all PIEs.

Several provisions refer to the residence of a FIF as being determined by a liability to tax in a foreign jurisdiction. This causes problems for resident investors in some types of entity that New Zealand treats as CFCs but that are not treated as taxable entities by the relevant foreign jurisdiction. It also causes problems in determining the members of the group of companies to which a CFC belongs. The bill widens the criteria used in determining the residence of a CFC for those purposes.

There are also some types of entity in foreign jurisdictions that are not treated by New Zealand as companies but are recognised as taxable entities by the relevant jurisdiction, which may treat them as being members of a group of companies. This causes problems for applying provisions in the Income Tax Act 2007 that depend on recognising that a deduction for expenditure has been allowed by the jurisdiction to a member of a group of foreign companies. The bill amends the definition of “deductible foreign equity distribution” to solve such a problem in the context of exempting, from income tax, dividends received by resident companies from foreign companies.

The above changes, except for the last, are treated as coming into force on 1 July 2009, when the current treatment of attributed CFC income came into force. The last change comes into force on 27 October 2010.

Clause by clause analysis

Clause 1 gives the title of the Act.

Clause 2 gives the dates on which clauses will come into effect.

Clause 3 gives the numbers of the clauses that affect the Income Tax Act 2007.

Clause 4 amends section CD 8, removing a cross-reference affected by the abolition of conduit tax relief.

Clause 5 amends section CD 36 so that an exclusion from the section applies to dividends from some Australian FIFs, instead of to dividends from grey list companies, if the recipient uses the fair dividend rate method for the attributing interest in the FIF.

Clause 6 amends section CD 53, changing a cross-reference affected by the abolition of conduit tax relief.

Clause 7 amends section CQ 2 so that PIEs do not derive attributed CFC income from an interest in a CFC, and replaces references to the branch equivalent method with references to the attributable FIF income method.

Clause 8 amends section CQ 5 so that interests in some Australian FIFs are excluded from being attributing interests. A reference to the accounting profits method and the branch equivalent method is replaced.

Clause 9 amends section CW 9 so that dividends from some Australian FIFs are exempt income for a resident company.

Clause 10 repeals section CW 11 because of the abolition of conduit tax relief.

Clause 11 amends section CW 14, changing a cross-reference affected by the abolition of conduit tax relief.

Clause 12 amends section DN 2 so that PIEs do not have attributed CFC loss from an interest in a CFC.

Clause 13 amends section DN 4 to replace a reference to the branch equivalent method.

Clause 14 amends section DN 5 to replace a reference to the branch equivalent method.

Clause 15 amends section DN 6 consequentially on the amendment to section EX 35 and to replace a reference to the accounting profits method and the branch equivalent method.

Clause 16 amends section DN 8 to replace references to the branch equivalent method.

Clause 17 repeals section DX 3 with effect from 1 October 2012, because of the abolition of supplementary dividend holding companies.

Clause 18 replaces section EX 14 so that PIEs do not derive attributed CFC income or loss from an interest in a CFC.

Clause 19 amends section EX 20B so that the calculation of attributable CFC amounts does not include dividends from some Australian FIFs, and does include income from a telecommunications service that uses equipment owned by some FIFs. The clause also inserts a subsection providing for CFCs that are not subject to income tax in a foreign jurisdiction but have a parent that is subject to income tax in the jurisdiction, with effect from 1 July 2009.

Clause 20 amends section EX 21B, to provide that a CFC may not be included in more than 1 test for non-attributing active CFCs.

Clause 21 amends section EX 21D by inserting a subsection providing for CFCs that are not subject to income tax in a foreign jurisdiction but have a parent that is subject to income tax in the jurisdiction, with effect from 1 July 2009.

Clause 22 amends section EX 21E by inserting a subsection providing for CFCs that are not subject to income tax in a foreign jurisdiction but have a parent that is subject to income tax in the jurisdiction, with effect from 1 July 2009.

Clause 23 amends section EX 34 so that a PIE derives FIF income or loss from an interest in a CFC.

Clause 24 replaces section EX 35 so that it does not apply to interests in a grey list company. Under the new provision, interests in some Australian FIFs will not be attributing interests and consequently not produce FIF income or loss.

Clause 25 amends section EX 44 by removing references to the accounting profits method and the branch equivalent method and inserting a reference to the attributable FIF income method.

Clause 26 amends section EX 46 by: repealing subsection (2), which provides for the use of the accounting profits method; replacing subsection (3), which provides for the use of the branch equivalent method, with a subsection providing for the use of the attributable FIF income method; repealing subsection (4) and replacing subsection (5) with a subsection limiting the availability of the deemed rate of return method; removing the limit in subsection (6) on the size of an interest for which the comparative value method may be used; and removing the same limit in subsections (7) and (9) for the use of the fair dividend rate method and the cost method.

Clause 27 replaces section EX 48(2) so that the fair dividend rate method and the cost method are the default methods for calculating FIF income or loss.

Clause 28 repeals section EX 49, which provides for the accounting profits method.

Clause 29 amends section EX 50, which provides for the branch equivalent method, so that it provides, instead, for the attributable FIF income method.

Clause 30 amends section EX 51, which provides for the comparative method, so the size of an interest for which the method gives a FIF loss does not affect the reduction to zero of the total FIF loss for the holder.

Clause 31 amends section EX 52, which provides for the usual fair dividend rate method, so that the exclusion from the method does not apply to interests in grey list companies but to interests in some Australian FIFs.

Clause 32 amends section EX 53, which provides for an alternative form of the fair dividend rate method, so that the exclusion from the method does not apply to interests in grey list companies but to interests in some Australian FIFs.

Clause 33 amends section EX 58 to replace: a reference to branch equivalent income or loss with a reference to net attributable CFC income; and a reference to the branch equivalent method with a reference to the attributable FIF income method. The first replacement corrects an error and is treated as coming into force on 1 July 2009.

Clause 34 amends section EX 59 so that the exemption from the section does not apply to interests in grey list companies but to interests in some Australian FIFs.

Clause 35 amends section EX 62, which limits changes of method for calculating FIF income. The amendments are consequential on the repeal of the accounting profits method and the branch equivalent method, on the introduction of the attributable FIF income method, and on the limitation of the use of the comparative value method.

Clause 36 amends section EX 63, which provides for the consequences of a change of method, consequential on the repeal of the accounting profits method and the branch equivalent method and on the introduction of the attributable FIF income method.

Clause 37 amends section EX 64 to replace a reference to the accounting profits method and the branch equivalent method.

Clause 38 amends section EX 65 to replace references to the accounting profits method and the branch equivalent method.

Clause 39 amends section EX 66 to replace a reference to the accounting profits method and the branch equivalent method.

Clause 40 amends section EX 66B to replace a reference to the accounting profits method and the branch equivalent method.

Clause 41 inserts new section EX 67B which provides that an interest in a FIF that is inherited before 1 April 2007 when the FIF is a grey list company, and that has a cost equal to zero or the cost of the interest for the person from whom it is inherited, is treated as being disposed of and reacquired at market value.

Clause 42 amends section EX 69 to replace a reference to the accounting profits method and the branch equivalent method.

Clause 43 amends section EX 72 to remove a reference to attributed repatriation and replace a reference to the branch equivalent income.

Clause 44 amends section FE 1 so that interests in certain FIFs are included in the description of the application of the thin capitalisation rules.

Clause 45 amends section FE 2 so that interests in certain FIFs are included in the criteria for the application of the thin capitalisation rules. Also, new subsection (5) is added, as part of the rules relating to the New Zealand banking group of a Crown-owned registered bank, with effect from 1 July 2009.

Clause 46 amends section FE 3 to modify the definition of the New Zealand group and worldwide group of individuals for the purposes of the thin capitalisation rules. Subclauses (1) and (2) exclude from the New Zealand group people who receive no income from New Zealand other than non-resident passive income. Subclause (3) includes, in some worldwide groups, FIFs in which the individual has certain sorts of interest.

Clause 47 amends section FE 5 by: inserting the criteria for a new optional test based on the ratio of deductible interest expenditure to adjusted net income for a person's group; removing part of the threshold for the requirement to apportion interest expenditure under the thin capitalisation rules; and including the effects of interests in certain FIFs in the criteria for the rules. The criteria for the new optional test are treated as having come into force on 1 July 2009.

Clause 48 inserts new section FE 6B, which provides for the optional thin capitalisation test and is treated as coming into force on 1 July 2009.

Clause 49 inserts new section FE 12B, which provides rules for calculating amounts for groups in applying the optional thin capitalisation test. It is treated as coming into force on 1 July 2009.

Clause 50 amends section FE 14 so that debts and assets producing non-resident passive income for a non-resident member of a New Zealand group are not included in the calculation of the debt percentage of the New Zealand group under the thin capitalisation rules.

Clause 51 amends section FE 16 so that assets to the extent that they produce non-resident passive income are not included in the total group assets of a New Zealand group under the thin capitalisation rules.

Clause 52 amends section FE 21 to remove a reference to conduit tax relief.

Clause 53 amends section FE 26 so that non-resident passive income is disregarded in identifying the New Zealand parent of an entity under the thin capitalisation rules.

Clause 54 amends section FE 28 so that non-resident passive income is disregarded in identifying the members of an entity's New Zealand group under the thin capitalisation rules.

Clause 55 amends section FE 30 so that non-resident passive income is disregarded in identifying companies otherwise outside an entity's New Zealand group that may be included with the group under the thin capitalisation rules.

Clause 56 amends section FE 31C by including interests in certain FIFs in the test for members of an entity's worldwide group under the thin capitalisation rules

Clause 57 amends section FE 36 by inserting a reference to the new definition of the New Zealand banking group of a registered bank owned by the Crown, with effect from 1 July 2009.

Clause 58 inserts new section FE 36B, giving a new definition of the New Zealand banking group of a registered bank owned by the Crown, with effect from 1 July 2009.

Clause 59 amends section FM 6 by removing a reference to conduit tax relief.

Clause 60 amends section FM 31 by changing a cross-reference affected by the abolition of conduit tax relief.

Clause 61 amends section FO 3 by changing a cross-reference affected by the abolition of conduit tax relief.

Clause 62 amends section GB 16 by removing a reference to an election under the accounting profits method of calculating FIF income.

Clause 63 repeals section GB 40 because of the abolition of BETA accounts for companies.

Clause 64 amends section GZ 2 to restrict the extent to which the anti-avoidance provision applies to members of a conduit tax relief group of companies. The changes are treated as coming into force on 1 July 2009.

Clause 65 repeals section GZ 2 because of the abolition of conduit tax relief. The repeal comes into force on 1 July 2011.

Clause 66 amends section HA 8B to extend the prohibition on a qualifying company of holding attributing interests of more than 10% in a FIF to the holding by the qualifying company of any income interest of more than 10% in a FIF. The change is treated as coming into force on 1 July 2009.

Clause 67 amends section HA 17 by changing a cross-reference affected by the abolition of conduit tax relief.

Clause 68 amends section HG 2 by removing a reference to conduit tax relief.

Clause 69 amends section IQ 2 to replace a reference to the branch equivalent method.

Clause 70 amends section IQ 2B, which provides for the treatment of losses incurred from a FIF or CFC in a foreign jurisdiction before the method of calculating attributed CFC net loss was changed, with effect from 1 July 2009. Subsections (1) and (2) are amended to clarify that available BE losses are associated with the jurisdiction. The section is also amended, with effect from 1 July 2011, to replace references to the branch equivalent method that should now be references to the attributable FIF income method and, with effect from 1 July 2009, to insert a method for converting, into New Zealand currency, amounts expressed in foreign currency in company accounts.

Clause 71 amends section IQ 3 to correct the references to the jurisdiction in which the FIF loss arose and to correct the reference to the source of the FIF income, with effect from 1 April 2008.

Clause 72 amends section IQ 4 to replace a reference to the branch equivalent method.

Clause 73 amends section IQ 9 to replace references to the branch equivalent method.

Clause 74 amends section LK 5B, which provides for the treatment of tax credits received by a FIF or CFC from a foreign jurisdiction before the method of calculating attributed CFC income was changed, with effect from 1 July 2009. Subsections (1) and (2) are amended to clarify that available BE credits are associated with the jurisdiction.

Clause 75 repeals section LQ 5 because of the abolition of conduit tax relief.

Clause 76 amends section OA 2 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 77 amends section OA 5 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 78 amends section OA 6 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 79 amends section OA 7 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 80 amends section OA 8 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 81 amends section OA 9 because of the abolition of branch equivalent tax accounts for companies.

Clause 82 amends section OA 10 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 83 amends section OA 14 because of the abolition of branch equivalent tax accounts for companies.

Clause 84 amends section OA 15 because of the abolition of conduit tax relief and branch equivalent tax accounts for companies.

Clause 85 amends section OA 18 because of the abolition of conduit tax relief.

Clause 86 amends section OB 1 because of the abolition of conduit tax relief.

Clause 87 amends section OB 4 because of the abolition of branch equivalent tax accounts for companies.

Clause 88 amends section OB 24 because of the abolition of conduit tax relief.

Clause 89 amends section OB 53 because of the abolition of conduit tax relief.

Clause 90 amends section OC 14 because of the abolition of conduit tax relief.

Clause 91 amends section OC 18 because of the abolition of conduit tax relief.

Clause 92 amends section OC 19 because of the abolition of conduit tax relief.

Clause 93 amends section OC 27 because of the abolition of conduit tax relief.

Clause 94 repeals subpart OD because of the abolition of conduit tax relief.

Clause 95 amends section OE 1 because of the abolition of branch equivalent tax accounts for companies.

Clause 96 amends section OE 2 to OE 4 because of the abolition of branch equivalent tax accounts for companies.

Clause 97 amends section OE 5 to replace a reference to the accounting profits method and the branch equivalent method. The change comes into force on 1 July 2011.

Clause 98 replaces section OE 5 because of the abolition of branch equivalent tax accounts for companies. The replacement is from 1 July 2012.

Clause 99 amends section OE 6 to restrict the amount of a branch equivalent tax credit as a result of the abolition of branch equivalent tax debits from 1 July 2009.

Clause 100 repeals section OE 6 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 101 amends section OE 7 to restrict the making of an election to use a debit balance in a BETA account after the abolition of branch equivalent tax debits from 1 July 2009.

Clause 102 repeals sections OE 7 and OE 8 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 103 amends section OE 9 to restrict the amount of a branch equivalent tax credit as a result of the abolition of branch equivalent tax debits from 1 July 2009.

Clause 104 repeals section OE 9 to OE 16B because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 105 repeals table O7 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 106 repeals section OP 70 because of the abolition of conduit tax relief.

Clause 107 repeals sections OP 78 to OP 80 because of the abolition of conduit tax relief.

Clause 108 repeals sections OP 83 to OP 87 because of the abolition of conduit tax relief.

Clause 109 repeals sections OP 89 to OP 94 because of the abolition of conduit tax relief.

Clause 110 repeals sections OP 96 and tables O23 and O24 because of the abolition of conduit tax relief.

Clause 111 repeals sections OP 97 and OP 98 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 112 amends section OP 100 to restrict the amount of a branch equivalent tax credit as a result of the abolition of branch equivalent tax debits from 1 July 2009.

Clause 113 repeals section OP 100 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 114 amends section OP 101 to restrict the election to use a branch equivalent tax debit as a result of the abolition of branch equivalent tax debits from 1 July 2009.

Clause 115 repeals sections OP 101 and OP 102 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 116 amends section OP 103 to restrict the amount of a branch equivalent tax credit as a result of the abolition of branch equivalent tax debits from 1 July 2009.

Clause 117 repeals sections OP 103 to OP 104B because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 118 repeals section OP 108B because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 119 repeals table O25 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 120 repeals section OZ 16 because of the abolition of branch equivalent tax accounts for companies, with effect from 1 July 2012.

Clause 121 repeals section OZ 17 because of the abolition of conduit tax relief.

Clause 122 amends section RE 2 to change a cross reference because of the abolition of conduit tax relief.

Clause 123 amends section RF 8 because of the abolition of conduit tax relief.

Clause 124 amends section RF 9 because of the abolition of conduit tax relief.

Clause 125 amends section RF 10 because of the abolition of conduit tax relief.

Clause 126 amends section YA 1. Subclause (2) repeals the definition of accounting profits method. Subclause (3) replaces the definition of associated non-attributing active CFC, providing for CFCs that are not liable for tax in a foreign jurisdiction but have a parent that is liable for tax there, with effect from 1 July 2009. Subclause (4) inserts a definition of attributable FIF income method. Subclause (5) repeals the definition of BETA company. Subclause (6) repeals the definition of branch equivalent company, because of the abolition of underlying foreign tax credits. Subclause (7) amends the definition of branch equivalent method, relating it to the provision that applied before being amended. Subclause (8) replaces the definition of branch equivalent tax account to remove the references to companies having such accounts. Subclause (9) amends the definition of calculation method, replacing a reference to the accounting profits method and the branch equivalent method. Subclause (10) repeals the definition of combined imputation and CTR ratio, because of the abolition of conduit tax relief. Subclause (11) amends the definition of consideration, changing the heading in a cross-reference. Subclause (12) repeals the definition of consolidated BETA group, because of the abolition of BETA accounts for companies. Subclause (13) amends the definition of continuity provisions, because of the abolition of BETA accounts for companies. Subclause (14) amends the definition of credit account continuity provisions, because of the abolition of BETA accounts for companies. Subclause (15) repeals 10 definitions of terms beginning with CTR, because of the abolition of conduit tax relief. Subclauses (16) and (17) amend the definition of deductible foreign equity distribution so that deductions allowed to certain entities overseas are recognised. Subclause (18) replaces the definition of excess credit amount, because of the abolition of conduit tax relief. Subclause (19) amends the definition of FIF net loss, changing the heading in a cross-reference. Subclause (20) amends the definition of fixed-rate share to include a cross-reference, with effect from 30 June 2009. Subclause (21) amends the definition of foreign attributed income, replacing a reference to the accounting profits method and the branch equivalent method. Subclause (22) repeals the definition of foreign attributed loss offsets, because of the abolition of conduit tax relief. Subclause (23) repeals the definition of fully credited for conduit tax relief because of the abolition of conduit tax relief. Subclause (24) amends the definition of international tax rules, because of the abolition of BETA accounts for companies. Subclause (25) amends the definition of lease, changing the heading in a cross-reference. Subclause (26) amends the definition of loss to replace a reference to branch equivalent income or loss with a reference to attributable FIF income or loss. Subclause (27) amends the definition of maximum permitted ratio, because of the abolition of conduit tax relief. Subclause (28) inserts definitions of net attributable FIF income and net attributable FIF loss because of the introduction of the attributable FIF income method. Subclause (29) amends the definition of non-refundable tax credit because of the abolition of conduit tax relief. Subclause (30) amends the definition of New Zealand banking group to insert a cross-reference with effect from 1 July 2009. Subclause (31) inserts definitions of NZIAS 28 and NZIAS 31 with effect from 1 July 2009. Subclause (32) amends the definition of residual income tax, because of the abolition of BETA accounts for companies. Subclause (33) amends the definition of supplementary dividend holding company, because of the abolition of conduit tax relief. Subclause (34) amends the definition of taxation law, because of the abolition of conduit tax relief. Subclause (35) provides for the application of some remedial amendments to income years beginning on or after 1 July 2009. Subclause (36) provides for the application of amendments arising from the abolition of conduit tax relief to income years beginning on or after 1 July 2011. Subclause (37) provides for the application of amendments arising from the abolition of BETA accounts for companies to income years beginning on or after 1 July 2012.

Clause 127 amends section YC 17 because of the abolition of branch equivalent tax accounts for companies.

Clause 128 amends section YC 18B because of the abolition of branch equivalent tax accounts for companies.

Clause 129 amends section YD 9 by inserting another cross-reference in the list of provisions to which the section applies, with effect from 1 July 2009.

Clause 130 repeals sections YD 9 to YD 11 because of the abolition of conduit tax relief.

Clause 131 repeals schedule 25, part C because of the abolition of the accounting profits method.

Clause 132 specifies the clauses that amend the Tax Administration Act 1994.

Clause 133 amends section 22 because of the abolition of conduit tax relief and of branch equivalent tax accounts for companies.

Clause 134 amends section 29 because of the abolition of conduit tax relief.

Clause 135 repeals section 30A because of the abolition of conduit tax relief.

Clause 136 inserts new section 65B to set requirements for the provision of information to the Commissioner by a person using the new thin capitalisation test, with effect from 1 July 2009.

Clause 137 repeals section 68A because of the abolition of conduit tax relief.

Clause 138 amends section 69 because of the abolition of conduit tax relief and of branch equivalent tax accounts for companies.

Clause 139 repeals section 77 because of the abolition of branch equivalent tax accounts for companies.

Clause 140 amends section 91AAQ to give to the Commissioner a power to specify, in a determination, conditions that an insurer must satisfy before being a non-attributing active CFC.

Clause 141 inserts new section 183AA(4)(c) to extend the definition of GST transitional taxable period for the purposes of remissions of penalties and interest under the section.

Clause 142 replaces section 86I of the Stamp and Cheque Duties Act 1971 with new sections 86I and 86IB, which provide for a zero rate of approved issuer levy for payments made under some registered securities.