The general value shifting regime (GVSR) has three components:
- Direct value shifting rules for entity interests.
- Direct value shifting rules for created rights.
- Indirect value shifting rules.
The direct value shifting rules apply to assets that are directly affected by a value shift. Broadly, a direct value shift happens where something is done that results in the market value of an asset decreasing, usually with a resulting increase in the market value of another asset.
Examples of direct value shifts are where share rights are varied for one class of shares but not another, or where an owner of an asset grants a right of use to another entity for no payment.
Such value shifts distort the relationship between the asset's market value and the asset's value for tax purposes. The direct value shifting rules seek to address this distortion.
The indirect value shifting rules apply to interests in entities that have value shifted to or from them resulting in an indirect effect on the value of the interests.