Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Income from equity

CD 27: Property made available intra-group

You could also call this:

“Rules for when property shared between related companies isn't a dividend”

When a company gives something of value to another company they’re connected with, it’s usually counted as a dividend. But there are some cases where it’s not counted as a dividend:

If the first company is letting the other company use something for less than it’s worth, it’s not lending money, and the total value of what they’ve given in a year is $10,000 or less, it’s not a dividend.

It’s also not a dividend if the first company has voting power in the other company (or is connected to a company that does), the other company doesn’t have voting power in the first company, and no one else has more than 10% voting power in both companies.

These rules don’t apply if the value transfer is covered by section FA 3.

When figuring out voting power for these rules, you don’t look through to the shareholders of the companies involved, except in some specific cases.

Remember, having no voting power doesn’t count as having voting power for these rules.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512632.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

CD 26: Capital distributions on liquidation or emigration, or

“How payments for shares are treated when a company closes or moves overseas”

Next

CD 28: Transfers of certain excepted financial arrangements within wholly-owned groups, or

“Transfers of certain financial deals between related companies are not taxed as dividends”

Part C Income
Income from equity

CD 27Property made available intra-group

  1. This section applies when—

  2. a transfer of company value is made by a company (the first company) to another company (the associated company); and
    1. in the absence of this section, the transfer would be a dividend under section CD 6(1)(a)(ii) because the associated company is associated with a shareholder in the first company.

      1. The transfer of company value is not a dividend if—

      2. the transfer consists of making property available for less than market value; and
        1. the transfer is not a loan; and
          1. in the income year of the first company in which the transfer occurs, the total amount of transfers of company value by the first company to the associated company that would be dividends for the year in the absence of this section, is $10,000 or less.

            1. The transfer of company value is also not a dividend if—

            2. either—
              1. the first company has a voting interest in the associated company; or
                1. the first company is associated with a company (the parent company) that has a voting interest in the associated company and that could have received the transfer of company value without the transfer being assessable income or non-resident passive income; and
                2. the associated company does not have a voting interest in the first company; and
                  1. no person, other than the parent company, has both—
                    1. a voting interest or, if there is a market value circumstance in relation to either the first company or the associated company, a market value interest in the first company; and
                      1. a voting interest or, if there is a market value circumstance in relation to either the first company or the associated company, a market value interest in the associated company, of more than 10%.

                      2. Subsection (3) does not apply to a transfer of company value that is subject to section FA 3 (Recharacterisation of certain dividends: recovery of cost of shares held on revenue account).

                      3. For the purposes of subsection (3)(a) and (b),—

                      4. for the purposes of determining if a company has a voting interest in another company, the look-through rule in section YC 4 (Look-through rule for corporate shareholders) does not apply to treat the initial company’s voting interest as held by its shareholders or anyone else; and
                        1. a zero voting interest is not a voting interest.

                          1. For the purposes of subsection (3)(c),—

                          2. for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest in the first company or the associated company, the look-through rule in section YC 4 does not apply to treat the person’s voting interest or market value interest as held by the person’s shareholders or anyone else unless the person treated as holder is the parent company; and
                            1. for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest of more than 10% in the associated company, the look-through rule in section YC 4 does not apply to treat a voting interest or market value interest of the first company or the parent company in the associated company as held by their respective shareholders or anyone else; and
                              1. a zero voting interest is not a voting interest and a zero market value interest is not a market value interest.

                                Compare
                                Notes
                                • Section CD 27(1)(a): amended, on , by section 91(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(1)(b): substituted, on (applying for the 2010–11 and later income years), by section 17(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                • Section CD 27(2): amended, on , by section 91(2)(a) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(2)(c): amended, on , by section 91(2)(b) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(3) heading: amended, on , by section 91(3)(a) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(3): amended, on , by section 91(3)(b) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(3)(a)(ii): substituted (with effect on 30 June 2009), on , by section 17(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                • Section CD 27(3)(a)(ii): amended, on , by section 91(3)(c) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27(4): amended, on , by section 91(4) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27 list of defined terms FDP: repealed (with effect on 30 June 2009), on , by section 17(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                • Section CD 27 list of defined terms transfer of company value: inserted, on , by section 91(5) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section CD 27 list of defined terms transfer of value: repealed, on , by section 91(5) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).