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

You could also call this:

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

If you have certain rights in a foreign investment fund (FIF), they might not be considered an attributing interest for a 10-year period. This applies if:

You directly own shares in a company from a country with similar tax rules to New Zealand. This company isn’t listed in schedule 25, part B of the Income Tax Act.

You’ve owned these shares since before they were listed on a stock exchange.

The company owns more than half of a New Zealand company. This New Zealand company must have been operating in New Zealand for at least a year, with most of its assets and employees here.

It’s been less than 10 years since the foreign company first owned more than half of the New Zealand company.

The New Zealand company spends at least $1 million in New Zealand each year (not including interest), or 25% of its total spending if that’s less. It also needs to employ at least 10 full-time workers in New Zealand, or 25% of its total workforce if that’s less.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515534.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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EX 36: Venture capital company emigrating to grey list country: 10-year exemption, or

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

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EX 37B: Share in grey list company acquired under venture investment agreement, or

“ Special rules for certain shares in overseas companies acquired through venture investments ”

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

EX 37Grey list company owning New Zealand venture capital company: 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 grey list company at all times after a time when the shares were not listed on a recognised exchange; and
          1. at all times in the year, the grey list company holds more than 50% of the voting interests in a company resident in New Zealand (the resident company) that, for 12 months or more, has—
            1. carried on a business in New Zealand; and
              1. had in New Zealand more than 50% of the resident company's assets; and
                1. had in New Zealand more than 50% of the resident company's employees; and
                2. the year begins less than 10 years after the grey list company first held more than 50% of the voting interests in the resident company; and
                  1. the resident company through a fixed establishment in New Zealand—
                    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:
                      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 37(d): substituted, on , by section 388(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section EX 37(e): substituted, on , by section 388(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section EX 37(e): amended (with effect on 1 April 2008), on , by section 171(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section EX 37(f): substituted (with effect on 1 April 2008), on , by section 171(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section EX 37(g)(i): substituted, on , by section 388(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section EX 37(g)(ii): substituted, on , by section 388(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section EX 37 list of defined terms voting interest: inserted (with effect on 1 April 2008), on , by section 171(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).