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Income Tax Act 2007

Income - Employee or contractor income - Definitions

CE 7: Meaning of employee share scheme

You could also call this:

“What employee share schemes are and how they work”

An employee share scheme is a way for a company to give or sell shares to certain people. You might be part of this scheme if you work for the company now, used to work for it, or will work for it in the future. It can also include people who own part of the company and work there, or even family members of these employees or owners.

The scheme is linked to your job or the work you do for the company. It can also involve other companies that are part of the same group as your company.

However, some arrangements are not considered employee share schemes. These include:

  1. Schemes that are already exempt from being taxed as employee share schemes.
  2. When you have to pay the full market price for the shares on the day they are taxed.
  3. When you buy shares at full price and the company doesn’t protect you if the share value goes down, and you didn’t get any help to buy the shares.

Remember, this is just a simple explanation of what the law says an employee share scheme is. If you need to understand more about how it works for you, it’s a good idea to ask an adult or a professional who knows about these things.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512798.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Work and jobs > Worker rights
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“Trustees act on behalf of companies in employee share schemes”

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Part C Income
Employee or contractor income: Definitions

CE 7Meaning of employee share scheme

  1. Employee share scheme means—

  2. an arrangement with a purpose or effect of issuing or transferring shares in a company (company A) to a person—
    1. who will be, is, or has been an employee of company A or of another company that is a member of the same group of companies as company A, if the arrangement is connected to the person’s employment or service:
      1. who will be, is, or has been a shareholder-employee in relation to company A or in relation to another company that is a member of the same group of companies as company A, if the arrangement is connected to the person’s employment or service:
        1. who is an associate of a person described in subparagraph (i) or (ii) (person A), if the arrangement is connected to person A’s employment or service; but
        2. does not include an arrangement that—
          1. is an exempt ESS:
            1. requires market value consideration to be paid by a person described in paragraph (a) for the transfer of shares in the company on the share scheme taxing date:
              1. requires a person described in paragraph (a) to put shares, acquired by them for market value consideration, at risk, if the arrangement provides no protection against a fall in the value of the shares and none of the consideration for acquiring the shares is provided to the person under an agreement that it is used for acquiring the shares.

              Notes
              • Section CE 7: replaced, on , by section 22 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).