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Income Tax Act 2007

Recharacterisation of certain transactions - Emigration of resident companies

FL 1: What this subpart does

You could also call this:

“This subpart explains tax implications when a New Zealand company moves overseas or changes status”

This part of the law talks about what happens when a company that usually lives in New Zealand decides to move away or stop being a New Zealand company. It explains how the company and the people who own parts of it (called shareholders) are affected for tax reasons.

When a company moves away from New Zealand, the law pretends that a few things happen. It’s like the company is selling all its stuff at fair prices, then closing down completely. Any extra money left over after this pretend sale and shutdown is treated as if it were given to the shareholders.

After this pretend shutdown, the law then imagines that the company starts up again as a foreign company. This new foreign company is imagined to have the same owners and do the same business as before. It’s also imagined to buy all the stuff the old company had, at the fair prices from the pretend sale.

This law applies when a New Zealand company either stops being a New Zealand company or starts being treated as a non-New Zealand company under an agreement with another country about taxes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516618.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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FH 15: Definitions, or

“Explains important terms used in the Income Tax Act 2007 for 'Recharacterisation of certain transactions'”

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FL 2: Treatment of companies that become non-resident and their shareholders, or

“Rules for taxing companies and their owners when companies move overseas”

Part F Recharacterisation of certain transactions
Emigration of resident companies

FL 1What this subpart does

  1. This subpart applies when a company that is a New Zealand resident (the emigrating company)—

  2. stops being a New Zealand resident; or
    1. starts being treated under a double tax agreement as not being a New Zealand resident.

      1. For tax purposes, the effects on an emigrating company and its shareholders, when an emigrating company becomes non-resident, or if a specified event occurs after an emigrating company starts being treated under a double tax agreement as not being a New Zealand resident, reflect the effects that would have resulted if,—

      2. immediately before the time of emigration,—
        1. the emigrating company disposed of its property at market value; and
          1. the emigrating company went into liquidation; and
            1. the amount available for distribution on liquidation were distributed as dividends to shareholders of the emigrating company to the extent to which the amount is more than the available subscribed capital and any capital gain of the company; and
            2. at the time of emigration, the emigrating company were reformed as a foreign company with—
              1. the same ownership and business activities as those of the emigrating company immediately before the time of emigration; and
                1. the property of the emigrating company immediately before the time of emigration, acquired at its market value at that time.

                Compare
                Notes
                • Section FL 1(1): replaced (with effect on 30 August 2022), on , by section 67(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section FL 1(2): amended (with effect on 30 August 2022), on , by section 67(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section FL 1 list of defined terms double tax agreement: inserted (with effect on 30 August 2022), on , by section 67(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).