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New Zealand law explained for everyone

Income Tax Act 2007

Income - Exempt income

CW 58: Disposal of companies’ own shares

You could also call this:

“Companies don't pay tax when selling their own shares”

When a company sells its own shares, the money it gets from this sale is usually not taxed. This rule applies even if the company sells the shares because of a special rule called section CE 6. For this tax-free benefit to apply, two things need to happen:

First, the company must have bought these shares itself. This includes situations where the company got the shares because of section CE 6.

Second, when the company bought these shares, it must have been treated in a special way under the Companies Act 1993. This special treatment means that even though the company bought its own shares, these shares weren’t cancelled or removed from existence.

If both these things happen, then the money the company makes from selling its own shares doesn’t count as income that can be taxed.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513312.

Topics:
Money and consumer rights > Taxes
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Part C Income
Exempt income

CW 58Disposal of companies’ own shares

  1. An amount of income derived by a company from disposing of shares in the company, including if the company disposes of the shares as the result of the application of section CE 6 (Trusts are nominees), is exempt income if—

  2. the company acquired the shares, including if the company acquired the shares as the result of the application of section CE 6; and
    1. the acquisition was treated under section 67A(1) of the Companies Act 1993 as not resulting in the cancellation of the shares.

      Compare
      Notes
      • Section CW 58: amended, on , by section 21(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section CW 58(a): amended, on , by section 21(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).