INCOME TAX

Southland Times, Issue 22203, 21 December 1933, Page 6

INCOME TAX

IMPORTANT CHANGE CAPITAL BORROWED OUT OF DOMINION METHOD OF ASSESSMENT (From Our Parliamentary Reporter.) Wellington, December 20. An important change in the method of assessing the income tax of companies using capital borrowed out of New Zealand, is made in the Land and Income Tax Amendment Bill. The Bill provides that where in calculating the assessment of income for any year any company carrying on business in New Zealand deducts from its total income derived for that year the whole or any portion of interest paid to any person or companies not resident in New Zealand, the company making the deduction shall be separately assessed for income tax on the total amount deducted as if that amount were taxable income derived by the company. Assessments previously made on this basis are validated as are also any refunds made in this connection by the Commissioner of Taxes.

The clause is not to apply to any action which has been taken in the court before the passing of the Bill. At the present time companies operating in New Zealand may deduct any interest they pay to foreign lenders in respect of capital used in New Zealand. These lenders are assessable for New Zealand income tax on interest derived from New Zealand. This provision does not apply, however, where money used in New Zealand has been borrowed from debenture holders through the head office out of New Zealand. The recent court decision was against the assessment for New Zealand income tax of English debenture holders on capital borrowed in England by an English company and employed in New Zealand by the New Zealand branch of the company. The section makes it clear that these debenture holders should be assessed upon interest derived from the use of their capital in New Zealand. FURTHER EXEMPTIONS. (From Our Parliamentary Reporter). Wellington, December 20. Tlie Land and Income Tax Amendment Bill which was introduced in the House to-day makes provision for the exemption up to £5O of married women who support their husbands. Exemption is not to be made, however, where the husband has an income in his own right amounting to or exceeding £5O or where the husband has not been supported by his wife during the income year. Provision is made where a housekeeper is employed by a widow or widower for the exemption of £5O with the stipulation that in no case shall the special exemption exceed the amount paid by salary or wages to the housekeeper.

EXEMPTION CLAIMS

PURE ENDOWMENT POLICIES.

(From Our Parliamentary Reporter.) Wellington, December 20.

In future the premiums paid on pure endowment policies may not be included in claims for exemptions from income tax. A clause in the Land and Income Tax Amendment Bill introduced in the House to-day provided that nc special exemption shall be allowed in respect of premiums paid on any pure endowment policy effected after the passing of the Bill. A pure endowment policy is defined as a policy of life insurance which does not provide for. the payment of a psecified capital sum on the death of the assured person.