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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Attributing interests in FIFs

EX 36: Venture capital company emigrating to grey list country: 10-year exemption

You could also call this:

“10-year tax exemption for investments in NZ companies moving to certain countries”

You don’t have to worry about your rights in a foreign investment fund (FIF) being an attributing interest for 10 years if certain conditions are met. This applies when you directly own shares in a company that moved from New Zealand to a grey list country.

For this rule to apply, you need to have owned shares in the company when it was in New Zealand and the shares weren’t listed on a stock exchange. The company must have been doing business in New Zealand for at least a year, with more than half of its assets and employees here before it moved.

After moving, the company needs to keep a fixed place of business in New Zealand. It must spend at least $1 million or 25% of its total spending (not including interest) through this New Zealand office. The company also needs to employ at least 10 full-time workers or 25% of its total workforce in New Zealand.

This special rule only works for 10 years after the company moves to the grey list country. The company can’t be one of the types listed in schedule 25, part B of the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515532.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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EX 35: Exemption for interest in FIF resident in Australia, or

“No tax on certain shares in Australian companies”

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EX 37: Grey list company owning New Zealand venture capital company: 10-year exemption, or

“10-year tax exemption for overseas companies investing in New Zealand venture capital”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Attributing interests in FIFs

EX 36Venture capital company emigrating to grey list country: 10-year exemption

  1. A person’s rights in a FIF in an income year are not an attributing interest if—

  2. the rights are a direct income interest; and
    1. the FIF is a grey list company; and
      1. the FIF is not an entity described in schedule 25, part B (Foreign investment funds); and
        1. the person has held shares in the company at all times after a time when—
          1. the company was resident in New Zealand; and
            1. the shares were not listed on a recognised exchange; and
            2. the company became a grey list company immediately after having, for 12 months or more,—
              1. carried on business in New Zealand; and
                1. had in New Zealand more than 50% of its assets; and
                  1. had in New Zealand more than 50% of its employees; and
                  2. the year begins less than 10 years after the company became a grey list company; and
                    1. at all times in the year, the company has a fixed establishment in New Zealand; and
                      1. the company through the fixed establishment—
                        1. incurs in the year, expenditure other than interest of at least $1,000,000 or, if less than $1,000,000, at least 25% of the total expenditure, other than interest, incurred by the company in the year; and
                          1. at all times in the year, engages at least 10 fulltime employees or contractors or, if less than 10, at least 25% of the total number engaged by the company.

                          Compare
                          Notes
                          • Section EX 36(d): amended, on , by section 387(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EX 36(e)(i): substituted, on , by section 387(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EX 36(h)(i): substituted, on , by section 387(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EX 36(h)(ii): substituted, on , by section 387(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).