(Clauses 26 and 30) Summary of proposed amendment The amendment clarifies that the trading gains of non-resident investment funds (foreign PIE equivalents) from the disposal of shares and financial arrangements are to be treated as excluded (non-taxable) income. It is also provided that foreign PIE equivalents are not entitled to a deduction for expenditure incurred in deriving that excluded income. This amendment ensures consistency of tax treatment for foreign PIE equivalents and other methods of inbound foreign portfolio investment in New Zealand, such as the foreign investor variable rate PIE regime. Application date The amendment will have retrospective effect from 1 April 2012, the date on which the foreign investor variable rate PIE provisions came into effect. (Clause 29) Summary of proposed amendment The proposed amendment addresses an anomaly whereby a member of a consolidated group is currently entitled to a deduction for the cost of purchasing shares (or other excepted financial arrangements) as revenue account property in a company outside the group which subsequently joins the group. The deduction the amendment seeks to remove arises when the shares are cancelled (whether by redemption, amalgamation, liquidation or otherwise) and where at the time of cancellation the issuer of the shares and the holder are members of the same consolidated group. Because the cancellation does not give rise to any income to the holder, removing the deduction results in a net nil position for income tax. This matches the economic reality. Application date The amendment will apply for the 2016–17 and later income years. Key features The anomaly sought to be addressed by the proposed amendment arises when a company subscribes for shares in an entity that is not in the same consolidated group, then the two entities subsequently become members of the same consolidated group
(Clauses 26 and 30) Summary of proposed amendment The amendment clarifies that the trading gains of non-resident investment funds (foreign PIE equivalents) from the disposal of shares and financial arrangements are to be treated as excluded (non-taxable) income. It is also provided that foreign PIE equivalents are not entitled to a deduction for expenditure incurred in deriving that excluded income. This amendment ensures consistency of tax treatment for foreign PIE equivalents and other methods of inbound foreign portfolio investment in New Zealand, such as the foreign investor variable rate PIE regime. Application date The amendment will have retrospective effect from 1 April 2012, the date on which the foreign investor variable rate PIE provisions came into effect. (Clause 29) Summary of proposed amendment The proposed amendment addresses an anomaly whereby a member of a consolidated group is currently entitled to a deduction for the cost of purchasing shares (or other excepted financial arrangements) as revenue account property in a company outside the group which subsequently joins the group. The deduction the amendment seeks to remove arises when the shares are cancelled (whether by redemption, amalgamation, liquidation or otherwise) and where at the time of cancellation the issuer of the shares and the holder are members of the same consolidated group. Because the cancellation does not give rise to any income to the holder, removing the deduction results in a net nil position for income tax. This matches the economic reality. Application date The amendment will apply for the 2016–17 and later income years. Key features The anomaly sought to be addressed by the proposed amendment arises when a company subscribes for shares in an entity that is not in the same consolidated group, then the two entities subsequently become members of the same consolidated group