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EC 3: Livestock valuation methods
or “How to calculate the value of your animals for tax purposes”
You could also call this:

“Rules for transferring livestock between companies owned by the same entity”

When a group of companies is fully owned by the same entity, they can transfer livestock between them in certain ways. This rule applies when one company in the group first buys the livestock and it stays within the group, held by companies in New Zealand. At the end of the financial year, a different company in the group has the livestock. Both companies need to still be part of the group at this time.

For this rule to work, the companies involved must end their financial years on the same date. If they don’t, they need special permission from the Commissioner to use different dates. The Commissioner will only allow this if it matches the end of a business cycle and prevents problems with calculating income.

The company that ends up with the livestock can choose to value it at the same price the first company paid for it. This can be helpful for the group’s finances.

If the companies stop being part of the same group, the company holding the livestock must treat it as if they sold it and bought it again at its current market value. If they can’t work out its value on its own, they should use the value from when they first got it.

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Next up: EC 4B: Compulsory use of herd scheme method for associated persons

or “Rules for selling livestock to connected persons using the herd scheme”
Next

Part E Timing and quantifying rules
Valuation of livestock

EC 4Transfers of livestock within wholly-owned groups

  1. This section applies in an income year to livestock held by a company that is part of a wholly-owned group of companies, when—

  2. a group company (company A) originally acquires and holds the livestock; and
    1. from the time it is acquired to the end of the income year, the livestock is held within the group by a company or companies that are resident in New Zealand; and
      1. through transfers within the group, another group company (company B) holds the livestock at the end of the income year; and
        1. company A and company B remain part of the group at the end of the income year; and
          1. either—
            1. the income years of company A and company B end on the same date; or
              1. they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date.

              2. Company B may choose to value the livestock at the cost of the livestock to company A.

              3. If the companies stop being part of the same wholly-owned group, company B is treated as disposing of and reacquiring the livestock for its market value at the time. If the market value of the livestock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value.

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