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Income Tax Act 2007

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

FE 40: Tiered ownership interests

You could also call this:

“How to calculate your ownership in companies owned by other companies”

When you own part of a company that owns part of another company, this is called tiered ownership. Here’s how it works:

If you own less than half of the first company (Company A), and Company A owns part of another company (Company B), you’re treated as owning a small part of Company B too. To figure out how much of Company B you own, you multiply the percentage you own of Company A by the percentage Company A owns of Company B.

For example, if you own 30% of Company A, and Company A owns 40% of Company B, you’re treated as owning 12% of Company B (30% × 40% = 12%).

But if you own half or more of Company A, it’s simpler. In this case, you’re treated as owning the same percentage of Company B that Company A owns. So if you own 60% of Company A, and Company A owns 40% of Company B, you’re treated as owning 40% of Company B.

This rule helps figure out how much of a company you really own when there are multiple companies involved.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516548.

Topics:
Money and consumer rights > Taxes
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FE 39: Direct ownership interests, or

“How to calculate your share of company ownership”

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FE 41: Treatment of associated persons’ interests, or

“How to count ownership interests for New Zealand banking groups”

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

FE 40Tiered ownership interests

  1. This section applies when a person has a direct ownership interest in a company (company A), and that company has an ownership interest in another company (company B).

  2. If the person’s direct ownership interest in company A is less than 50%, they are treated as holding an indirect ownership interest in company B. The interest is calculated by multiplying the percentage that is the person’s direct ownership interest in company A by the percentage that is company A’s ownership in company B.

  3. If the person’s direct ownership interest in company A is equal to or more than 50%, they are treated as holding an indirect ownership interest in company B that is equal to company A’s ownership interest in company B.

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Notes
  • Section FE 40 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).