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New Zealand law explained for everyone

Income Tax Act 2007

Income - Income from equity

CD 38: General calculation rule for transfers of company value

You could also call this:

“How to calculate the value of a company's transfer to you”

When a company gives something of value to you, it might be considered a dividend. To figure out how much this dividend is worth, you need to do a simple calculation. You take the value of what the company gives you and subtract the value of what you give the company in return.

The value of what the company gives you is based on how much it would be worth if you sold it. This could be money or something else that’s worth money.

The value of what you give the company is also based on how much it would be worth if you sold it. This could be money or something else of value. If you give the company a loan from overseas, the value is worked out using special rules about interest rates.

It’s important to know that if you’re just doing things that shareholders normally do, like owning shares or giving up your rights as a shareholder, this doesn’t count as giving value to the company.

There are some other rules in sections CD 39 to CD 42 that might change how this calculation works, so you need to check those too.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512661.

Topics:
Money and consumer rights > Taxes
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“Distributions made by Māori authorities to their members”

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CD 39: Calculation of amount of dividend when property made available, or

“How to calculate dividends when a company lets you use its property”

Part C Income
Income from equity

CD 38General calculation rule for transfers of company value

  1. The amount of a dividend that is a transfer of company value from a company to a person is calculated using the formula—

    value from company − value from person.

    Where:

    • In the formula,—

    • value from company is the market value of the money or money’s worth that the company provides to the person:
      1. value from person—
        1. is the market value of the money or money’s worth, if any, that the person provides to the company as consideration for the transfer. To the extent to which the person provides a loan that is cross-border related borrowing under section GC 6(3B) (Purpose and application of rules and nature of arrangements), the market value of the money or money’s worth that the person provides is determined using the interest rate for a loan made on the same terms, including credit rating, as used for the adjustment to the interest made in accordance with sections GC 6 to GC 18 (which relate to transfer pricing arrangements), if any; and
          1. excludes any amount that is attributable merely to the holding or giving up of rights as a shareholder in the company.

          2. This section is overridden by sections CD 39 to CD 42.

          Compare
          Notes
          • Section CD 38 heading: amended, on , by section 93(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section CD 38(1): amended, on , by section 93(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section CD 38(2)(b)(i): replaced, on , by section 52(1) (and see section 52(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
          • Section CD 38 list of defined terms transfer of company value: inserted, on , by section 93(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section CD 38 list of defined terms transfer of value: repealed, on , by section 93(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).