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Income Tax Act 2007

Recharacterisation of certain transactions - Consolidated groups of companies

FM 4: Limiting joint and several liability of group companies

You could also call this:

“Choosing which companies in a group are responsible for paying group tax”

Before the nominated company of a consolidated group assesses the group’s tax for a year, they can ask the Commissioner to let specific companies in the group be responsible for the group’s income tax. The Commissioner will usually say yes, unless it makes it much harder to collect the tax.

If the Commissioner agrees, only the named companies will have to pay the group’s income tax. If there’s more than one named company, they’ll share this responsibility. Other companies in the group won’t have to pay the provisional tax for the group.

However, if a named company doesn’t pay all the tax they’re supposed to, the Commissioner can still make other companies in the group pay the tax that comes from their income.

The rules about provisional tax and consolidated groups in section RC 28 don’t apply to companies that aren’t named in this agreement.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516632.

Topics:
Money and consumer rights > Taxes
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FM 3: Liability of consolidated groups and group companies, or

“Group companies share tax responsibilities and reporting”

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FM 5: Liability when company leaves consolidated group, or

“Tax responsibilities when a company exits a consolidated group”

Part F Recharacterisation of certain transactions
Consolidated groups of companies

FM 4Limiting joint and several liability of group companies

  1. This section applies before the nominated company of a consolidated group makes an assessment for the consolidated group for a tax year.

  2. Despite section FM 3(5), the nominated company may apply to the Commissioner for approval for 1 or more named companies in the consolidated group to bear the consolidated group’s income tax liability for the tax year.

  3. The Commissioner must approve an application under subsection (2) unless limiting the liability to the named companies will significantly prejudice the recovery, or likely recovery, of the income tax liability of the consolidated group for the tax year.

  4. For a tax year to which an approval referred to in subsection (3) relates,—

  5. only a named company is liable for the income tax liability of the consolidated group, and if more than 1 company is named, the liability is joint and several:
    1. section RC 28 (Provisional tax rules and consolidated groups) does not apply to impose on a company other than a named company joint and several liability for provisional tax payable by the consolidated group.

      1. Despite subsection (4), the joint and several liability of a group company other than a named company is not extinguished to the extent to which—

      2. a named company does not meet their income tax liability under this section; and
        1. the Commissioner determines that the income tax liability of the consolidated group that is attributable to the taxable income of a company other than a named company is to be recovered from the other company.

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          Notes
          • Section FM 4(2): amended, on , by section 46(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
          • Section FM 4(3): amended, on , by section 46(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
          • Section FM 4 list of defined terms apply: inserted, on , by section 46(3) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).