• “(g) any amount derived by a person from the sale or other disposition by a qualifying foreign equity investor of a share, or option to buy a share, in a company (called in this paragraph the resident company) that is resident in New Zealand, if—

  • “(i) the share or option, or an option or convertible note relating to the share, is purchased on a day that is 12 months or more before the day of the sale or other disposition; and

  • “(ii) the person who purchases the share or option, or the option or convertible note relating to the share, and sells or disposes of the share or option is a qualifying foreign equity investor from the time of the purchase to the time of the sale or other disposition; and

  • “(iii) the shares of the resident company are quoted on no official list of a recognised exchange—

    • “(A) at the time of the purchase referred to in subparagraph (i):

    • “(B) at some time in the 12-month period that begins from the time of the purchase referred to in subparagraph (i); and

  • “(iv) throughout the period referred to in subparagraph (ii), the resident company does not have a main activity that is one or more of—

    • “(A) land development:

    • “(B) land ownership:

    • “(C) mining:

    • “(D) provision of financial services:

    • “(E) insurance:

    • “(F) construction of public infrastructure assets:

    • “(G) acquisition of public infrastructure assets:

    • “(H) investing with a main aim of deriving, from the investment, gross income in the form of interest, dividends, or lease payments that are not royalties:

• “(h) any amount derived by a person from the sale or other disposition by a qualifying foreign equity investor of a share, or option to buy a share, in a company (called in this paragraph the resident company) that is resident in New Zealand, if—

  • “(i) the share or option, or an option or convertible note relating to the share, is purchased on a day that is 12 months or more before the day of the sale or other disposition; and

  • “(ii) the person who purchases the share or option, or the option or convertible note relating to the share, and sells or disposes of the share or option is a qualifying foreign equity investor throughout the period that—

    • “(A) begins at the time of the purchase referred to in subparagraph (i); and

    • “(B) ends on the day of the sale or other disposition; and

  • “(iii) the shares of the resident company are quoted on no official list of a recognised exchange at some time in the 12-month period that begins from the time of the purchase referred to in subparagraph (i); and

  • “(iv) throughout the period referred to in subparagraph (ii), the main activity of the resident company is providing capital in the form of debt or equity funding to other companies; and

  • “(v) each other company that is referred to in subparagraph (iv) and is resident in New Zealand—

    • “(A) does not have, as a main activity, an activity that is referred to in paragraph (g)(iv)(A) to (C) and (E) to (G); and

    • “(B) does not have, as a main activity, an activity that is referred to in paragraph (g)(iv)(D) or (H) and is not the provision of capital to other companies; and

    • “(C) does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in paragraph (g)(iv)(A) to (C) and (E) to (G); and

    • “(D) does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in paragraph (g)(iv)(D) or (H) and is not the provision of capital to other companies; and

  • “(vi) each other company that is referred to in subparagraph (iv) and is not resident in New Zealand does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in paragraph (g)(iv)(A) to (H); and

  • “(vii) for each other company that is referred to in subparagraph (iv), there is a time in the period referred to in subparagraph (ii) at which—

  • “(A) the shares of the other company are quoted on no official list of a recognised exchange; and

  • “(B) the shares of the resident company are quoted on no official list of a recognised exchange.”

“qualifying foreign equity investor means a person who is not resident in New Zealand and who is one or more of the following

• “(a) a person who—

  • “(i) is resident in a territory that is approved for the purpose of this definition by the Governor-General by an Order in Council; and

  • “(ii) is not part of an unincorporated body that satisfies paragraph (b)(i) to (v); and

  • “(iii) is not a legal entity that satisfies paragraph (c)(i) to (iii); and

  • “(iv) is treated by the taxation laws of the territory referred to in subparagraph (i), or by the taxation laws of a part of the territory, as the person who derives the proceeds from a sale or other disposition of shares or options that are held by the person; and

  • “(v) is not a person who—

    • “(A) would, under this Act and in the absence of section CB 2(1)(g) and (h), be subject to tax on an amount derived from a sale or other disposition of shares or options to which section CB 2(1)(g) or (h) would apply; and

    • “(B) would in any circumstances, under the taxation laws of the territory referred to in subparagraph (i) or under the taxation laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for a payment of the tax referred to in subsubparagraph (A):

• “(b) a person who is a non-resident and is part of an unincorporated body that—

  • “(i) is established under the laws of a territory that is approved for the purpose of this definition by the Governor-General by an Order in Council or under the laws of a part of such a territory; and

  • “(ii) consists of persons who include the person (called in this paragraph partners); and

  • “(iii) is treated by the taxation laws of the territory, or by the taxation laws of a part of the territory, as not being subject to a tax on income other than as a body that handles income of the partners; and

  • “(iv) has at least 1 partner (called in this paragraph a general partner) who is liable for all debts of the unincorporated body and who has significant involvement in, and control of, the business activities of the unincorporated body; and

  • “(v) has at least 1 partner (called in this paragraph a special partner) whose liability for debts of the unincorporated body is limited and who has limited involvement in, and control of, the business activities of the unincorporated body; and

  • “(vi) does not have a general partner who is not resident in a territory that is approved for the purpose of this definition by the Governor-General by an Order in Council; and

  • “(vii) does not have a partner who—

    • “(A) has, when treated as holding the interests of any person who is associated with the partner under section OD 8(1), an interest of 10% or more in the capital of the unincorporated body; and

    • “(B) is resident in a territory that is not approved for the purpose of this definition by the Governor-General by an Order in Council; and

  • “(viii) does not have a partner who, when treated as holding the interests of any person who is associated with the partner under section OD 8(1), has an interest of 10% or more in the capital of the unincorporated body and—

    • “(A) would, under this Act and in the absence of section CB 2(1)(g) and (h), be subject to tax on an amount derived from a sale or other disposition of shares to which section CB 2(1)(g) or (h) would apply; and

    • “(B) would in any circumstances, under the taxation laws of the territory in which the partner is resident or under the taxation laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for a payment of the tax referred to in subsubparagraph (A):

• “(c) a person who—

  • “(i) is established as a legal entity under the laws of a territory that is approved for the purpose of this definition by the Governor-General by an Order in Council or under the laws of a part of such a territory; and

  • “(ii) has persons (called in this paragraph members) who hold interests in the capital of the legal entity and who are entitled to shares of the income of the legal entity; and

  • “(iii) is treated by the taxation laws of the territory referred to in subparagraph (i), or by the taxation laws of the part of the territory, as not being subject to a tax on income other than as a body that handles income of the members; and

  • “(iv) is resident in no territory that has laws that treat the legal entity as being subject to a tax on income other than as a body that handles income of the members; and

  • “(v) does not have a member who—

    • “(A) has, when treated as holding the interests of any person who is associated with the member under section OD 8(1), an interest of 10% or more in the capital of the legal entity; and

    • “(B) is not resident in a territory that is approved for the purpose of this definition by the Governor-General by an Order in Council; and

  • “(vi) does not have a member who, when treated as holding the interests of any person who is associated with the member under section OD 8(1), has an interest of 10% or more in the capital of the legal entity and who—

    • “(A) would be entitled to receive an amount derived from a sale or other disposition, to which section CB 2(1)(g) or (h) would apply, of shares or options held by the legal entity; and

    • “(B) would receive an amount referred to in subsubparagraph (A) that, in the absence of section CB 2(1)(g) and (h), would have been reduced by a tax imposed by this Act on the amount or on the proceeds of the sale or other disposition in the hands of the legal entity; and

    • “(C) would in any circumstances, under the taxation laws of the territory in which the member is resident or under the taxation laws of part of the territory, be entitled to receive from the government of the territory or of the part of the territory a financial benefit in the form of a payment, credit, rebate, forgiveness or other compensation for the reduction referred to in subsubparagraph (B).”

• “(6) For the purpose of subsection (1)(g) and (h) and the definition of qualifying foreign equity investor in subsection (4), whether a person is resident in a territory other than New Zealand is determined—

  • “(a) in the presence of a double tax agreement between New Zealand and the territory that is in force under the terms of the double tax agreement, under the double tax agreement:

  • “(b) in the absence of a double tax agreement between New Zealand and the territory that is in force under the terms of the double tax agreement, under the laws of the territory.

• “(7) The Governor-General may, from time to time by Order in Council—

  • “(a) approve a territory for the purpose of the definition of qualifying foreign equity investor in subsection (4):

  • “(b) withdraw the approval of a territory for the purpose of the definition of qualifying foreign equity investor in subsection (4).

• “(8) An Order in Council under subsection (7) may—

  • “(a) come into force on a date that is not earlier than 1 April 2004:

  • “(b) apply for income years that do not precede the 2004-05 income year.”

• “(gb) any amount derived from providing a standard-cost household service if—

  • “(i) the amount does not exceed the total amount of the costs that, under a determination of the Commissioner under section 91AA of the Tax Administration Act 1994, may be treated as being incurred by the taxpayer in deriving the amount; and

  • “(ii) the taxpayer, in calculating the taxpayer's income tax liability for the income year, elects to include in the taxpayer's annual allowable deductions no amount that, in the absence of this paragraph, would be an allowable deduction incurred by the taxpayer in providing the standard-cost house-hold service:”.

• “(i) all distributions by a unit trust to a unit holder and all other payments to and transactions with a unit holder, in relation to the unit holder's interest in the unit trust, that—

  • “(i) would be dividends if made to or with a shareholder in relation to shares in a company; and

  • “(ii) are not the transfer to the unit holder of money or property referred to in paragraph (ib):

• “(ib) money or property, of a unit trust that is a foreign company, in which a beneficial interest vests absolutely in a unit holder:”.

• “(ab) a taxable bonus issue, within the meaning of paragraph (c) of the definition of that term, is the value of the money or property in which a beneficial interest would have vested in the unit holder if the taxable bonus issue had not been made; and”.

• “(ii) the available subscribed capital per share will be deemed to be equal to—

  • “(A) the value of the money or property in which a beneficial interest would have vested in the shareholder had the share not been issued, if the share is a taxable bonus issue within the meaning of paragraph (c) of the definition of that term; or

  • “(B) the amount paid to the trust in respect of the issue of the share, if subsubparagraph (A) does not apply.”

• “(2) Subsection (3) applies for a withdrawal if, when the member ceases employment with the employer—

  • “(a) the member has been in employment throughout the period (called in this subsection and subsection (2B) the minimum employment period) that—

    • “(i) begins on the 1st day of the 2nd-to-last of the income years that end on or before the day on which the member ceases employment; and

    • “(ii) ends on the day on which the member ceases employment; and

  • “(b) the employer or another employer has made, on behalf of the member, specified superannuation contributions that—

    • “(i) have been made to the superannuation fund or to another superannuation fund that has transferred to the superannuation fund, whether directly or indirectly, the funds relating to the member; and

    • “(ii) have not been part of a withdrawal, other than as a result of a transfer between superannuation funds that is referred to in subparagraph (i); and

  • “(c) the specified superannuation contributions that are part of the withdrawal—

    • “(i) satisfy subsection (2B):

    • “(ii) do not include employer contributions to superannuation savings that exceed the amount found by multiplying $5,000 by the number of income years for which the specified superannuation contributions were made on behalf of the member.

• “(2B) Specified superannuation contributions that are made on behalf of a member satisfy this subsection if—

  • “(a) the contributions have been made for all or part of the minimum employment period and—

    • “(i) have not, for each of the complete income years in the minimum employment period, been 150% or more of the specified superannuation contributions made on behalf of the member in the previous income year; and

    • “(ii) do not, for the income year in which the member ceases employment, have an annualised value that is 150% or more of the specified superannuation contributions made on behalf of the member in the previous income year:

  • “(b) the contributions have been made for all or part of the minimum employment period and the Commissioner considers that the contributions made by each employer are—

    • “(i) consistent in size and frequency with the specified superannuation contributions made by the employer on behalf of other employees in comparable positions; and

    • “(ii) consistent in size and frequency during the period or periods to which the specified superannuation contributions relate.”

• “(1A) A taxpayer who applies for the grant of a patent and is refused the grant or withdraws the application is allowed, in the income year of the refusal or withdrawal, a deduction for expenditure—

  • “(a) that the taxpayer incurs in relation to the application; and

  • “(b) that would have been part of the cost of fixed life intangible property if the application had been granted; and

  • “(c) for which the taxpayer is not allowed a deduction under another provision.”

“DJ 11B Expenditure incurred by company in respect of dividend from foreign company

• Despite section BD 2(2)(b), a company that incurs expenditure in deriving a dividend that is exempt income of the company under section CB 10(1) is allowed a deduction of—

  • “(a) the amount of expenditure, if the company is not a conduit tax relief company:

  • “(b) the amount calculated using the following formula if the company is a conduit tax relief company:

    a x (1 -- b)

    where—

    • a is the amount of the expenditure incurred by the company in deriving the dividend

    • b is the fraction of the company's shareholders that are not resident in New Zealand, as calculated under section NH 7(2) and (4).

“DJ 14B Expenditure on unsuccessful application for resource consent

• A taxpayer who applies for the grant of a resource consent under the Resource Management Act 1991 and is refused the grant or withdraws the application is allowed, in the income year of the refusal or withdrawal, a deduction for expenditure—

  • “(a) that the taxpayer incurs in relation to the application; and

  • “(b) that would have been part of the cost of a resource consent that is depreciable property if the application had been granted; and

  • “(c) for which the taxpayer is not allowed a deduction under another provision.”

“DO 4B Accounting for expenditure on listed horticultural plants under sections DO 4C and DO 4D

• “(1) In this section and sections DO 4C and DO 4D

  “planting for a taxpayer and an income year means 1 or more listed horticultural plants that are involved in the business of the taxpayer during the income year and for which the taxpayer must account under sections DO 4C and DO 4D, for the income year, separately from other listed horticultural plants, if any, that are involved in the business of the taxpayer

  “plot means the land occupied by the listed horticultural plants in a planting

  “replaced area fraction for a planting and an income year means the amount calculated using the formula—

  

  where—

  • a is the area, at the end of the income year, of the part of the plot on which listed horticultural plants in the planting are planted or regrafted during the income year as replacement plants

  • b is the total area, at the end of the income year, of the plot.

  “(2) Subject to subsection (3), a taxpayer to whom section DO 4C applies and who has had an allowable deduction under section DO 4D for either or both of the 2 income years that immediately precede an income year must, for the income year and subsequent income years, account separately under sections DO 4C and DO 4D for the listed horticultural plants that—

  • “(a) the taxpayer acquires in the income year; and

  • “(b) benefit the business of the taxpayer in the income year; and

  • “(c) are not replacement plants.

  “(3) A taxpayer to whom section DO 4C applies and who has had no allowable deduction under section DO 4D for listed horticultural plants for both of the 2 income years that immediately precede an income year may account under sections DO 4C and DO 4D for the listed horticultural plants as 1 planting for the income year and subsequent income years.

“DO 4C Expenditure on land-planting of listed horticultural plants

• “(1) This section applies to a taxpayer if—

  • “(a) the taxpayer carries on a farming or agricultural business (including a horticultural business) on land in New Zealand; and

  • “(b) the land is developed by the planting on the land of listed horticultural plants.

  “(2) Subject to subsection (3), in an income year in which the development of the land benefits the business, the taxpayer has an allowable deduction relating to expenditure incurred by the taxpayer, or by another person, in the development of the land.

  “(3) The taxpayer does not have an allowable deduction under subsection (2) in an income year in which—

  • “(a) if the taxpayer owns the land, the taxpayer disposes of the land; or

  • “(b) if the taxpayer does not own the land, the taxpayer ceases carrying on the business on the land.

  “(4) Subject to subsections (5) and (6), the amount of the allowable deduction is calculated using the formula

  1.2 x a × b

  where—

  • a is the percentage rate determined for the type of listed horticultural plant by the Commissioner under section 91AAB of the Tax Administration Act 1994

  • b is the diminished value of the expenditure.

  “(5) If a listed horticultural plant of the taxpayer ceases in an income year to exist or to be used in deriving gross income and the taxpayer has no allowable deduction under section DO 4D for the income year for expenditure incurred in replacing the listed horticultural plant, the taxpayer has an allowable deduction—

  • “(a) of the amount of the diminished value of the expenditure on the listed horticultural plant at the time that the listed horticultural plant ceases to exist or to be used in deriving income:

  • “(b) for the income year.

  “(6) A taxpayer who has an allowable deduction under section DO 4D for an income year for expenditure incurred on a replacement plant in a planting may, by taking a tax position in a tax return for the income year—

  • “(a) elect to increase the diminished value, at the end of the income year, of the expenditure on listed horticultural plants that are in the planting at the end of the income year by the diminished value, immediately before the replacement, of the expenditure on a listed horticultural plant that is replaced; and

  • “(b) choose a method of making the increase referred to in paragraph (a).

“DO 4D Expenditure on land—horticultural replacement planting

• “(1) This section applies to a taxpayer who carries on a horticultural business on land in New Zealand and who, in an income year (called the current income year)—

  • “(a) plants, or causes to be planted, on the land a listed horticultural plant as a replacement plant:

  • “(b) regrafts, or causes to be regrafted, a listed horticultural plant on the land as a replacement plant.

  “(2) The taxpayer has an allowable deduction for the current income year, of the amount given by one of subsections (3) and (4) for the expenditure incurred in the current income year by the taxpayer in replacing a listed horticultural plant if, in the current income year—

  • “(a) the replacement plant benefits the business; and

  • “(b) the taxpayer does not dispose of the land on which the listed horticultural plant is cultivated; and

  • “(c) the taxpayer elects, by taking a tax position in a tax return for the current year, that this section apply to the expenditure.

  “(3) For a taxpayer who has had no allowable deduction under this section for either or both of the 2 income years that immediately precede the current income year, the amount of the allowable deduction under subsection (2) for expenditure incurred in replacing a listed horticultural plant in a planting is calculated using the formula—

  

  where—

  • c is the amount of the expenditure incurred by the taxpayer

  • d is the greater of 7.5% and the replaced area fraction for the planting for the current year.

  “(4) For a taxpayer who has had an allowable deduction under this section for a planting for both of the 2 income years that immediately precede the current income year, the amount of the allowable deduction under subsection (2) for expenditure incurred in replacing a listed horticultural plant in the planting is the smaller of—

  • “(a) the amount that is calculated using the formula

    

    where—

    • c is the amount of the expenditure incurred by the taxpayer

    • d is the greater of 7.5% and the replaced area fraction for the planting for the current year:

  • “(b) the amount that is calculated using the formula:

    

    where—

    • c is the amount of the expenditure incurred by the taxpayer

    • e is the replaced area fraction for the planting for the current year

    • f is the smaller of 7.5% and the replaced area fraction for the planting for the earlier of the 2 income years that immediately precede the current year

    • g is the smaller of 7.5% and the replaced area fraction for the planting for the later of the 2 income years that immediately precede the current year.

• “(a) where the expenditure relates to the purchase of goods, the amount of expenditure incurred on goods that—

  • “(i) are not used in deriving gross income; and

  • “(ii) are not destroyed or rendered useless for the purpose of deriving gross income:”.

• “(3) Subject to subsection (4), a taxpayer who in an income year disposes of depreciable property for a consideration that is less than the adjusted tax value of the property at the time of disposition is allowed for the income year a deduction that is equal to the amount by which the adjusted tax value of the property on the date of disposition exceeds the consideration derived by the taxpayer if the depreciable property—

  • “(a) is not a building; or

  • “(b) is a building that is destroyed or rendered useless for the purpose of deriving gross income as a result of an event that is a qualifying event under paragraph (a) or (b) of the definition of that term.”

• “(G) shares in a foreign company, if the proceeds of a disposition of the shares would not be gross income of the holder other than under the FIF rules.”

• “(d) involves money that is provided by—

  • “(i) a lender who is not an associated person of the borrower under a provision of section OD 7 or OD 8(3) and who does not provide the money on arm's-length terms and who—

    • “(A) is not a person who regularly provides money to persons on arm's-length terms under arrangements that do not satisfy paragraphs (a) to (c):

    • “(B) is not resident in New Zealand under section OE 1 or OE 2 and does not carry on business in New Zealand through a fixed establishment in New Zealand; or

  • “(ii) a lender who is an associated person of the borrower under a provision of section OD 7 or OD 8(3) and who obtains the money under an arrangement that satisfies paragraphs (a) to (c).”

“EZ 9 New start grants for farmers

• “(1) This section applies to a taxpayer if—

  • “(a) the taxpayer carries on a business of—

    • “(i) animal husbandry:

    • “(ii) poultry-keeping:

    • “(iii) beekeeping:

    • “(iv) breeding horses other than bloodstock:

    • “(v) horticulture:

    • “(vi) cropping; and

  • “(b) the taxpayer is paid a new start grant in respect of the business for an event that is a qualifying event; and

  • “(c) the taxpayer in carrying on the business incurs, before the declaration of the state of emergency that relates to the qualifying event, a liability—

    • “(i) to make a payment under a financial arrangement:

    • “(ii) for expenditure or loss that is, before the date that is 3 months after the expiration of the state of emergency, taken into account in calculating the taxpayer's taxable income for an income year:

  • “(d) as a prerequisite for the payment of the new start grant and on or before 30 September 2005, the liability referred to in paragraph (c) is forgiven or otherwise remitted; and

  • “(e) but for this section, the amount of the remitted liability would be gross income of the taxpayer under the accrual rules or under section CE 4.

  “(2) The amount of a remitted liability referred to in subsection (1) is not gross income of the taxpayer to the extent that the amount cannot be set off—

  • “(a) against a loss that is incurred by the taxpayer in carrying on the business in the income year in which the liability is remitted:

  • “(b) under section IE 1, IE 2 or IF 1, against a loss that is incurred by the taxpayer in carrying on the business and is available to be set off against the taxpayer's net income in the income year in which the liability is remitted:

  • “(c) under subsection (3).

  “(3) The Commissioner may, despite sections IE 1, IE 2 and IF 1, require that an amount of a remitted liability referred to in subsection (1) be set off against a loss of another person if—

  • “(a) the other person and the taxpayer are associated persons; and

  • “(b) the other person—

    • “(i) also carries on or has carried on the business in respect of which the new start grant is paid; or

    • “(ii) is or was the owner of an estate in fee simple or leasehold estate in land used in the business in respect of which the new start grant is paid; and

  • “(c) the Commissioner is satisfied that the taxpayer has—

    • “(i) a substantial degree of control over the other person:

    • “(ii) a substantial identity of interests with the other person; and

  • “(d) the loss of the other person is—

    • “(i) incurred in respect of the business or the land that is used in the business; and

    • “(ii) of a kind referred to in subsection (2)(a) and (b).

  “(4) In determining the amount that is set off under subsection (3), the Commissioner must have regard to the interests of the associated person that are separate from those of the taxpayer.

  “(5) The Commissioner must give to the associated person notice in writing of a determination under subsection (3).”

“EZ 9B Deduction for diminished value of expenditure on improvements destroyed or rendered useless by qualifying event

• Subject to section DJ 1, a taxpayer is allowed for an income year a deduction that is equal to the diminished value for the income year of expenditure of a kind that is referred to in Schedule 7 if—

  • “(a) the taxpayer or another person incurred the expenditure on improvements in preparing or developing a business or land that is used in a business; and

  • “(b) the improvements were destroyed or rendered useless for the purpose of deriving gross income as a result of an event that is a qualifying event under paragraph (a) or (b) of the definition of that term; and

  • “(c) the taxpayer would have been entitled for the income year to a deduction under section DL 2, DO 4 or DO 5 for the expenditure if the improvement had not been destroyed or rendered useless.”

• “(ab) all members of the consolidated group are or would be members of the imputation group; and”.

• “(4) This section does not apply in respect of any trading stock that—

  • “(a) is transferred to a person under a relationship agreement; or

  • “(b) is donated, or supplied for consideration worth less than the market value of the trading stock, to a person as a result of an event that is a qualifying event under paragraph (a) or (b) of the definition of that term.”

• “(3) A person who elects to become a Maori authority becomes a Maori authority—

  • “(a) on the first day of the income year in which the person gives notice of the election to the Commissioner, if paragraph (b) does not apply:

  • “(b) on the first day of the income year immediately succeeding the income year in which the person gives notice of the election to the Commissioner, if the person nominates that date in the notice of the election.”

• “(f) a taxable bonus issue.”

• “(4) A taxable bonus issue that is made by a Maori authority to a member is a taxable Maori authority distribution.”

4

a Maori authority

a trust that is not a Maori authority

taxable income derived by the Maori authority is treated as trustee income

• “(2B) A taxpayer who is a partner in a special partnership may not under this section carry forward a net loss if—

  • “(a) the taxpayer has a deduction in an income year that arises from the activities of the special partnership; and

  • “(b) the net loss arises from the deduction; and

  • “(c) during the income year, the taxpayer derives no gross income, whether from the activities of the special partnership or otherwise.

• “(2C) A taxpayer may not carry forward under this section a net loss to the extent that the net loss is offset against a remitted amount of an associated person as determined by the Commissioner under section EZ 9.”

• “(i) a net loss for the year of offset that does not consist of a mining outgoing excess and is not prevented by section IE 1(2B) or (2C) from being carried forward under sections IE 1 and IF 1:”.

• “(cm) Medicine Mondiale:

• “(cn) New Zealand Jesuits in India Trust:

• “(co) Operation Vanuatu Charitable Trust.”

• “(db) if the company, as a result of the payment of the dividend, is liable to pay no income tax in relation to an amount, or part of an amount, from which the dividend is sourced; or”.

“Subpart BC—Early-payment discount of income tax

“MBC 1 Purpose

• “(1) The purpose of this subpart is to encourage, by means of a discount of income tax, payments of amounts as income tax by small-business taxpayers in the income year that precedes the income year in which the taxpayers are first required to pay provisional tax.

  “(2) In this subpart—

  “early-payment discount means a discount of income tax under this subpart

  “small-business taxpayer means a taxpayer who—

  • “(a) conducts a business on the taxpayer's own account, acting alone or as a partner in a partnership; and

  • “(b) does not use a company or a trust in the conduct of the business; and

  • “(c) derives gross income that is predominantly—

    • “(i) from the business; and

    • “(ii) not interest, dividends, royalties, rents or beneficiary income.

“MBC 2 Availability of early-payment discount

• “(1) This section applies to a small-business taxpayer for an income year if the small-business taxpayer—

  • “(a) is not required to make payments of provisional tax in the income year; and

  • “(b) on or before the taxpayer's balance date for the income year, makes payments as income tax for the income year; and

  • “(c) throughout the period from the taxpayer's balance date for the income year to the taxpayer's terminal tax date for the income year, has a credit in an account with the Commissioner that is greater than or equal to the lesser of the following:

    • “(i) the amount that, on or before the small-business taxpayer's balance date for the income year, the small-business taxpayer pays as income tax for the income year:

    • “(ii) the amount of terminal tax for the income year for which the taxpayer would be liable in the absence of this section; and

  • “(d) has, for earlier income years—

    • “(i) never been required to make payments of provisional tax and—

      • “(A) never received an early-payment discount; or

      • “(B) derived gross income from a business at no time in a period of 4 income years that began after the latest income year for which the small-business taxpayer received an early-payment discount; or

    • “(ii) derived gross income from a business at no time in a period of 4 income years that began after the latest income year for which the small-business taxpayer was required to make payments of provisional tax.

  “(2) If a small-business taxpayer to whom this section applies makes a return of income for the income year and applies for an early-payment discount, the Commissioner must credit the income tax account of the small-business taxpayer with an early-payment discount found by multiplying the discount rate referred to in subsection (4) by the lesser of the following:

  • “(a) the amount that, on or before the small-business taxpayer's balance date for the income year, the small-business taxpayer paid as income tax for the income year:

  • “(b) 105% of the small-business taxpayer's residual income tax for the income year.

  “(3) The small-business taxpayer must make the application required by subsection (2) on or before the date given by section 37(5) of the Tax Administration Act 1994 as the last date for filing a return of income for the income year to which the application relates.

  “(4) The discount rate is—

  • “(a) 6.7% if no rate is prescribed under paragraph (b):

  • “(b) the rate prescribed by the Governor-General by Order in Council.

“MBC 3 Credit treated as being payment as income tax

• A credit of an early-payment discount for a small-business taxpayer for an income year is treated as being a payment made on the day after the last day of the income year by the small-business taxpayer as income tax for the income year.”

• “(1) Subject to sections MD 2, MD 2A, MD 2B, MD 3 and NH 4, and subsection (2), the Commissioner must refund an amount that a taxpayer has paid as tax if—

  • “(a) the Commissioner is satisfied that the amount represents an excess over the tax properly payable by the taxpayer; and

  • “(b) the 4-year period referred to in section 108 of the Tax Administration Act 1994 has not expired.”

• “(2) Subject to sections MD 2, MD 2A, MD 2B, MD 3, and NH 4, the Commissioner must refund an amount that a taxpayer has paid as tax if—

  • “(a) the taxpayer paid the amount as a result of an amendment to an assessment that increased the amount of tax payable by the taxpayer; and

  • “(b) the Commissioner is satisfied that the amount represents an excess over the tax properly payable by the taxpayer; and

  • “(c) the 4-year period beginning at the end of the income year in which the assessment was amended has not expired.

• “(2B) The Commissioner may refund an amount of an overpayment of tax that is referred to in subsection (1) or (2) after the end of the 4-year period referred to in the subsection if—

  • “(a) the overpayment arises from—

    • “(i) a clear mistake or simple oversight of the taxpayer:

    • “(ii) an entitlement of the taxpayer to a rebate of income tax under Part KD; and

  • “(b) the refund is made—

    • “(i) within the period of 4 years beginning from the end of the 4-year period referred to in the subsection:

    • “(ii) as a result of an application by or on behalf of the taxpayer that the Commissioner receives before or within the period of 4 years beginning from the end of the 4-year period referred to in the subsection.”

• “(1B) Despite subsection (1)(a), a Maori authority that furnishes its Maori authority credit account return for an imputation year before the end of the next imputation year may be refunded income tax in accordance with section MD 1 if—

  • “(a) the Maori authority has furnished the Maori authority credit account return within an extension of time given by the Commissioner; and

  • “(b) the amount of the refund does not exceed the credit balance in the Maori authority's Maori authority credit account on the last day of the imputation year for which the Maori authority credit account return was furnished.”

• “(4B) Despite subsection (4), the income tax not refunded may be credited on a provisional tax instalment date if residual income tax is treated as being payable on the date specified in Part 7 of the Tax Administration Act 1994.”

• “(2) Subsection (1) does not prevent a credit (called a permitted credit), of an amount given by subsection (3), arising in an imputation credit account or dividend withholding payment account if—

  • “(a) a company or consolidated group is entitled to a refund of overpaid income tax or overpaid dividend withholding payment; and

  • “(b) the Commissioner transfers the refundable amount to another period or another tax type; and

  • “(c) after the overpayment that gives rise to the entitlement to a refund and before the transfer, a debit in the imputation credit account or dividend withholding payment account arises under section ME 5(1)(i), ME 12(1)(h), MG 5(1)(i) or MG 15(1)(i); and

  • “(d) a credit would have arisen to the account of the company or consolidated group in the event that—

    • “(i) the refundable amount had been refunded by the Commissioner at the time of the transfer; and

    • “(ii) the company or consolidated group had immediately paid the amount of the refund to the Commissioner in payment of a tax liability for the other period or tax type; and

  • “(e) the company or consolidated group requests at any time that this subsection apply to the transfer of the refundable amount.

• “(3) The amount of the permitted credit to which subsection (2) refers is the amount of the credit to which subsection (2)(d) refers, reduced by the amount of the debit that would have arisen under section ME 5(1)(e), ME 12(1)(d), MG 5(1)(d) or MG 15(1)(d) at the time of the refund to which subsection (2)(d)(i) refers.”

• “(a) resident in a country other than New Zealand; or”.

• “(a) for the purpose of section ME 6, from—

  • “(i) the date that is 30 days after the date on which the Commissioner receives the notice, if none of subparagraphs (ii) to (iv) apply; or

  • “(ii) 1 October 2003, if the Commissioner receives the notice before 1 April 2004 and notifies the company that the notice is effective from 1 October 2003; or

  • “(iii) 1 April 2004, if the Commissioner receives the notice before 1 April 2005 and notifies the company that the notice is effective from 1 April 2004; or

  • “(iv) the beginning of the imputation year in which the Commissioner receives the notice, if the company is formed in the imputation year or becomes eligible under this section in the imputation year and the Commissioner notifies the company that the notice is effective from the beginning of the imputation year:”.

• “(b) arise in relation to a company that, at the time the debit or credit arises—

  • “(i) will be a member of the resident imputation sub-group, if the debit or credit arises before the formation of the resident imputation subgroup:

  • “(ii) is a member of the resident imputation subgroup, if the debit or credit arises at or after the formation of the resident imputation subgroup.”

• “(fb) an amount forming all or part of a credit balance in the dividend withholding payment account of a company that is a member of the consolidated imputation group, if the company elects under section MG 11 that the amount be a credit to the imputation credit account of the consolidated imputation group:”.

• “(jb) an amount forming all or part of a credit balance in the policyholder credit account of a company, if the company elects under section ME 19(3)(a) during the imputation year that the amount be a credit to the imputation credit account of the consolidated imputation group:”.

• “(eb) in the case of the credit referred to in paragraph (jb) of that subsection, on the date the relevant debit arose under section ME 18(4)(b):”.

• “(b) an amount forming all or part of a credit balance in the imputation credit account of the consolidated imputation group, if the nominated company of the consolidated imputation group elects under section ME 14(1) during the imputation year that the amount be a credit to the policyholder credit account of the consolidated imputation group or of a member of the consolidated imputation group:”.

• “(bb) an amount equal to any allocation deficit debit that arises in the company's dividend withholding payment account under section MG 8B, if the amount of the allocation deficit debit is given by section MG 8B(3)(a):

• “(bc) an amount equal to the credit balance in the company's dividend withholding payment account immediately before an allocation deficit debit arises in the company's dividend withholding payment account under section MG 8B, if the amount of the allocation deficit debit is given by section MG 8B(3)(b):”.

• “(bb) in the case of a credit referred to in paragraph (bb) or (bc) of that subsection, at the end of the imputation year in respect of which the credit arises:”.

• “(d) an amount equal to any allocation deficit debit that arises in the consolidated group's dividend withholding payment account under section MG 8B, if the amount of the allocation deficit debit is given by section MG 8B(3)(a):

• “(e) an amount equal to the credit balance in the consolidated group's dividend withholding payment account immediately before an allocation deficit debit arises in the consolidated group's dividend withholding payment account under section MG 8B, if the amount of the allocation deficit debit is given by section MG 8B(3)(b):”.

• “(d) in the case of a credit referred to in paragraph (d) or (e) of that subsection, at the end of the imputation year in respect of which the credit arises:”.

• “(6B) If an election under subsection (4) relates to an amount that exceeds the income tax liability, for the income year, of the company that receives the offset under subsection (6), the excess amount is treated as giving rise to a net loss of the company for the purpose of Parts IF and IG of an amount given by the following formula:

  

  where—

  • a is the amount of the excess

  • b is the basic rate of income tax, expressed as a percentage, stated in—

    • (a) Schedule 1, Part A, clause 5, if the company is not a Maori authority; or

    • (b) Schedule 1, Part A, clause 2, if the company is a Maori authority.

• “(5B) If an election under subsection (3) or (4) relates to an amount that exceeds the income tax liability, for the income year, of the company or group that receives the offset under subsection (5), the excess amount is treated as giving rise to a net loss of the company or group for the purpose of Parts IF and IG of an amount given by the following formula:

  

  where—

  • a is the amount of the excess

  • b is the basic rate of income tax, expressed as a percentage, stated in—

    • (a) Schedule 1, Part A, clause 5, if the company is not a Maori authority or the group does not consist of Maori authorities; or

    • (b) Schedule 1, Part A, clause 2, if the company is a Maori authority or the group consists of Maori authorities.

“MG 8B Policyholder credit account companies and dividend withholding payment credits

• “(1) This section applies to a policyholder credit account company (called the company) that is not a conduit tax relief company and an imputation year (called the dividend year) in which the company pays a dividend with a dividend withholding payment credit attached.

  “(2) An allocation deficit debit of an amount given by subsection (3) arises at the end of the dividend year in the company's dividend withholding payment account if—

  • “(a) the total of the amounts of the company's policyholder income and policyholder net loss for the DWP reference period, found using the policyholder base calculation for each imputation year, is greater than nil; and

  • “(b) the shareholder DWP ratio for the DWP reference period exceeds the policyholder DWP ratio for the DWP reference period.

  “(3) The amount of the allocation deficit debit that arises under subsection (2) is—

  • “(a) equal to the maximum deficit debit, if the maximum deficit debit is less than or equal to the credit balance that is in the company's dividend withholding payment account immediately before any allocation deficit debit arises under this section:

  • “(b) equal to the reduced deficit debit, if paragraph (a) does not apply.

  “(4) In this section—

  “DWP reference period means the period that consists of—

  • “(a) the dividend year:

  • “(b) the longest period of consecutive imputation years—

    • “(i) that begins on or after the date on which this section applies for the company; and

    • “(ii) that ends immediately before the dividend year; and

    • “(iii) in which the company paid no dividend that had a dividend withholding payment credit attached

  “maximum deficit debit means the quantity that is given by the following formula

  (a - b) x d x (1 - r)

  where—

  • a is the company's shareholder DWP ratio for the DWP reference period:

  • b is the company's policyholder DWP ratio for the DWP reference period:

  • d is the total of the amounts of the company's policy-holder income and policyholder net loss found for the DWP reference period using the policyholder base calculation:

  • r is the basic rate of income tax, expressed as a percentage, stated in—

    • (a) Schedule 1, Part A, clause 5, if the company is not a Maori authority:

    • (b) Schedule 1, Part A, clause 2, if the company is a Maori authority

  “policyholder DWP ratio means the quantity that is given by the following formula

  

  where—

  • c is the total for the DWP reference period of all the credits that have arisen in the company's policyholder credit account as a result of an election by the company under section MG 7 in relation to a credit balance in the company's dividend withholding payment account

  • d is the total of the amounts of the company's policy-holder income and policyholder net loss found for the DWP reference period using the policyholder base calculation

  • r is the basic rate of income tax, expressed as a percentage, stated in—

    • (a) Schedule 1, Part A, clause 5, if the company is not a Maori authority:

    • (b) Schedule 1, Part A, clause 2, if the company is a Maori authority

  “reduced deficit debit means the quantity that is given by the following formula

  

  where—

  • c is the total for the DWP reference period of all the credits that have arisen in the company's policyholder credit account as a result of an election by the company under section MG 7 in relation to a credit balance in the company's dividend withholding payment account

  • d is the total of the amounts of the company's policy-holder income and policyholder net loss found for the DWP reference period using the policyholder base calculation

  • e is the credit balance in the company's dividend withholding payment account at the end of the dividend year immediately before any allocation deficit debit arises under this section

  • f is the total amount of DWP credits that the company has attached to dividends paid by the company in the DWP reference period

  • g is the total amount of dividends paid by the company in the DWP reference period

  • r is the basic rate of income tax, expressed as a percentage, stated in—

    • (a) Schedule 1, Part A, clause 5, if the company is not a Maori authority:

    • (b) Schedule 1, Part A, clause 2, if the company is a Maori authority

  “shareholder DWP ratio means the quantity given by the following formula

  

  where—

  • f is the total amount of DWP credits that the company has attached to dividends paid by the company in the DWP reference period

  • g is the total amount of dividends paid by the company in the DWP reference period.

  “(5) This section does not apply to a dividend that is the subject of a determination made by a statutory producer board or a co-operative company under section ME 30 or section ME 35.

  “(6) This section applies for the 2004-05 and subsequent imputation years.

  “(7) If a company makes an election in writing for an imputation year that begins after 31 March 1995 and before 1 April 2004, this section applies for the company for the imputation year and for subsequent imputation years.

  “(8) If an amalgamated company makes an election in writing for an imputation year that begins after 31 March 1995 and before 1 April 2004 and for a company that was an amalgamating company in relation to the amalgamated company, this section applies for the amalgamating company for the imputation year and for subsequent imputation years.

  “(9) If a nominated company for a consolidated group makes an election in writing for an imputation year that begins after 31 March 1995 and before 1 April 2004, this section applies for the consolidated group for the imputation year and for subsequent imputation years.”