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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Anti-avoidance rule: stapled stock

EX 27: Anti-avoidance rule: stapled stock

You could also call this:

“Rule for treating foreign company rights linked to NZ company as owned by the NZ company”

You need to know about a rule that applies when someone who lives in New Zealand owns special rights in a foreign company. These rights are called “stapled rights” because they can only be sold together with rights in another company. The other company must be either in New Zealand or controlled from New Zealand.

When this happens, the law treats the stapled rights as if they belong to the other company, not to the person who actually owns them. This affects how the law calculates income and losses from foreign investments.

This rule is important because it changes how the law looks at who owns certain investments. It’s a way to make sure people don’t avoid paying the right amount of tax by using complicated investment structures.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515498.

Topics:
Money and consumer rights > Taxes
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“Measuring company interests every three months for tax purposes”

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EX 28: Meaning of FIF, or

“Explains what counts as a foreign investment fund”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Anti-avoidance rule: stapled stock

EX 27Anti-avoidance rule: stapled stock

  1. This section applies when—

  2. a New Zealand resident holds rights (the stapled rights) that give rise to an income interest or control interest in a foreign company; and
    1. the rights may, or may ordinarily, be disposed of only together with rights in another company; and
      1. the other company is a New Zealand resident or a CFC.

        1. When each of subparts CQ (Attributed income from foreign equity) and DN (Attributed losses from foreign equity) and this subpart is applied, the stapled rights are held by the other company and not by the person.

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