Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Interest apportionment on thin capitalisation - New Zealand group

FE 30: Ownership interests in companies outside New Zealand group

You could also call this:

“Rules for including foreign companies in a New Zealand group for tax purposes”

This section talks about when a company that’s not part of a New Zealand group can be included in one. It applies when there’s already a New Zealand group, and there’s a company (called company A) that’s not in it.

For this to work, company A needs to be doing business in New Zealand or getting income from New Zealand. Also, a single non-resident person must own at least 50% of both the New Zealand group and company A.

If these conditions are met, the New Zealand parent of company A can choose to add it to the group. But this only works if all the other New Zealand parents in the group agree to do the same for any other companies in a similar situation.

However, there’s a catch. Company A can’t join the group if there’s another company (company B) that directly owns part of company A and is also doing business in New Zealand. This rule applies if either a New Zealand parent in the group controls company B, or if the same non-resident person who owns 50% of the group and company A also owns 50% or more of company B.

The section that talks about how a New Zealand parent can control company B is section FE 27(3).

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516522.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

FE 29: Combining New Zealand groups owned by natural persons and trustees, or

“Rules for joining New Zealand groups with shared ownership by people or trustees”

Next

FE 31: Worldwide group for corporate excess debt entity if not excess debt outbound company, or

“How to determine your worldwide group if you're a company with high debt but not overseas”

Part F Recharacterisation of certain transactions
Interest apportionment on thin capitalisation: New Zealand group

FE 30Ownership interests in companies outside New Zealand group

  1. This section applies when—

  2. a New Zealand group is in existence; and
    1. a particular excess debt entity (company A) that is not an excess debt outbound company is outside the group; and
      1. company A is—
        1. resident in New Zealand:
          1. carrying on business in New Zealand through a fixed establishment in New Zealand:
            1. deriving income, other than non-resident passive income, that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and
            2. a single non-resident has ownership interests of 50% or more in both—
              1. the New Zealand group; and
                1. company A.

                2. The New Zealand parent of company A may choose to include the company in the New Zealand group if every company to be included in the enlarged group that is a New Zealand parent in the group makes the same election in relation to all other companies that are not in a New Zealand group with that parent before this section applies.

                3. Despite subsection (2), company A cannot be part of the New Zealand group if—

                4. another company (company B) that is outside the group has a direct ownership in company A; and
                  1. company B is—
                    1. resident in New Zealand:
                      1. carrying on business in New Zealand through a fixed establishment in New Zealand:
                        1. deriving income, other than non-resident passive income, that has a source in New Zealand and for which relief from New Zealand tax under a double tax agreement is unavailable; and
                        2. either—
                          1. a New Zealand parent in the group, after the application of subsection (2), has control of company B under section FE 27(3); or
                            1. the single non-resident has ownership interests of 50% or more in company B.

                            Compare
                            Notes
                            • Section FE 30(1)(b): substituted (with effect on 30 June 2009), on , by section 223(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30(1)(c): substituted (with effect on 30 June 2009), on , by section 223(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30(1)(c)(iii): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 62(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                            • Section FE 30(3)(b): substituted (with effect on 30 June 2009), on , by section 223(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30(3)(b)(iii): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 62(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                            • Section FE 30 list of defined terms control: repealed, on , by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30 list of defined terms double tax agreement: inserted (with effect on 30 June 2009), on , by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30 list of defined terms excess debt outbound company: inserted (with effect on 30 June 2009), on , by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30 list of defined terms non-resident passive income: inserted (with effect on 1 July 2011), on , by section 62(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                            • Section FE 30 list of defined terms ownership interest: inserted, on , by section 116(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                            • Section FE 30 list of defined terms source in New Zealand: inserted (with effect on 30 June 2009), on , by section 223(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                            • Section FE 30 list of defined terms tax: inserted (with effect on 1 July 2011), on , by section 62(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).