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Income Tax Act 2007

Recharacterisation of certain transactions - Consolidated groups of companies - Accounting generally

FM 10: Expenditure: intra-group transactions

You could also call this:

“Rules for spending and losses between companies in the same group”

When you’re part of a company that belongs to a consolidated group, there are special rules about spending money or losing money within that group. If your company spends money, loses money, or has depreciation loss during a tax year when it’s part of this group, and this happens because of a deal with another company in the same group, you need to be careful.

You can’t claim a deduction for that spending or loss if it wouldn’t be allowed if all the companies in your group were just one big company. There’s a rule in section DV 16 that stops you from claiming this deduction. However, there are a couple of exceptions to this rule, which you can find in section DV 16(2)(a) or (b). If one of these exceptions applies to you, you might still be able to claim the deduction.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516646.

Topics:
Money and consumer rights > Taxes
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FM 9: Amounts that are company’s income, or

“Money that counts as income for companies in a consolidated group”

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FM 11: Expenditure: nexus with income derivation, or

“When a company in a group can claim tax deductions for expenses linked to other group members' income or business”

Part F Recharacterisation of certain transactions
Consolidated groups of companies: Accounting generally

FM 10Expenditure: intra-group transactions

  1. This section applies when—

  2. a company incurs expenditure or loss, or has an amount of depreciation loss, in a tax year or part of a tax year in which it is part of a consolidated group; and
    1. the company incurs the expenditure or loss through a payment or disposal to, or a transaction or arrangement with, another consolidated group company.

      1. If a deduction would not be allowed for the expenditure or loss if the consolidated group were 1 company, the company is denied a deduction under section DV 16 (Consolidated groups: intra-group transactions) unless the exceptions in section DV 16(2)(a) or (b) apply.

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