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Income Tax Act 2007

Recharacterisation of certain transactions - Amalgamation of companies

FO 3: Resident’s restricted amalgamations

You could also call this:

“Rules for New Zealand companies joining together in a special way”

When companies join together, it’s called an amalgamation. A special type of amalgamation is called a resident’s restricted amalgamation. For this to happen, all the companies involved must follow some rules at the time they join:

They must live in New Zealand. They can’t be seen as living in another country for tax reasons. They can’t be companies that only make money that doesn’t get taxed, except for some special kinds of money from owning parts of companies.

If the new company formed by joining is a special kind called a qualifying company, all the companies that joined must have been qualifying companies too.

A company that only makes money that doesn’t get taxed includes local councils, but not organisations controlled by councils.

Even if the companies follow all these rules, they can choose not to have their joining treated as a resident’s restricted amalgamation. To do this, they need to tell the tax office in a special way described in section 75 of the Tax Administration Act 1994.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516782.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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FO 2: Amalgamation rules, or

“Rules for when companies join together and how it affects their taxes”

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FO 4: Rights and obligations of amalgamated companies, or

“When companies merge, the new company takes on the old company's tax responsibilities and benefits”

Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 3Resident’s restricted amalgamations

  1. In the amalgamation rules, an amalgamation is a resident’s restricted amalgamation if, at the time of the amalgamation, each of the amalgamating companies and the amalgamated company—

  2. is resident in New Zealand; and
    1. is not treated under, and for the purposes of, a double tax agreement as resident in another country; and
      1. is not a company that derives only exempt income, except income exempt under sections CW 9 and CW 10 (which relate to income from equity); and
        1. if the amalgamated company is a qualifying company, it meets the condition in subsection (2); and

            1. If the amalgamated company is a qualifying company immediately after the amalgamation, each of the amalgamating companies must be a qualifying company at the time of the amalgamation.

            2. Repealed

            3. For the purposes of subsection (1)(c), a company that derives only exempt income includes a local authority that is not a council-controlled organisation.

            4. Even if they meet the requirements of subsection (1), the companies may choose that the amalgamation will not be treated as a resident’s restricted amalgamation by notifying the Commissioner in the way set out in section 75 of the Tax Administration Act 1994.

            Compare
            • 2004 No 35 s OB 1 qualifying amalgamation
            Notes
            • Section FO 3(1)(c): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 68(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
            • Section FO 3(1)(e): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section FO 3(3) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section FO 3(3): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section FO 3 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).