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New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Amalgamation of companies

FO 9: Unexpired portion of prepaid expenditure

You could also call this:

“Unused prepaid expenses can be transferred when companies merge”

When a company stops existing because it joins with another company, it might have some money it already paid for something but hasn’t used yet. This is called prepaid expenditure. If this happens, the new company that’s formed after joining gets to use the leftover prepaid money. The amount of leftover money is figured out using section EA 3. This rule helps make sure the money isn’t wasted when companies join together.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516798.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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“Property transfer rules when companies combine”

Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 9Unexpired portion of prepaid expenditure

  1. If an amalgamating company ends its existence on amalgamation, the unexpired portion under section EA 3 (Prepayments) of an amount of expenditure of the amalgamating company for the income year of amalgamation is treated as the amalgamated company’s unexpired amount of the expenditure.

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