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New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Amalgamation of companies

FO 11: When property passes on amalgamation other than resident’s restricted amalgamation

You could also call this:

“Property transfer rules when companies merge in non-resident restricted amalgamations”

When a company joins with another company, and it’s not a special kind of joining called a resident’s restricted amalgamation, here’s what happens to the property:

You should think of the company that’s joining as selling its property. The price they ‘sell’ it for is whatever the property is worth at the time they join.

The new, bigger company that forms after they join is treated as if they bought the property for that same price.

There’s a special rule about equipment that wears out over time, like machines. This rule is in Section EE 41 and it talks about how to figure out how much this equipment costs for the new, bigger company. This special rule is more important than the general rule we just talked about, unless there’s a good reason to use the general rule instead.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516803.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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FO 10: When property passes on resident’s restricted amalgamation, or

“Property transfer rules when companies combine”

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FO 12: Financial arrangements: resident’s restricted amalgamation, companies in wholly-owned group, or

“Rules for financial arrangements when closely related companies merge”

Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 11When property passes on amalgamation other than resident’s restricted amalgamation

  1. If property belonging to an amalgamating company becomes the property of the amalgamated company on an amalgamation that is not a resident’s restricted amalgamation,—

  2. the amalgamating company is treated as having disposed of the property for an amount equal to the market value of the property at the time of the amalgamation; and
    1. the amalgamated company is treated as having acquired the property at that market value.

      1. Section EE 41 (Transfer of depreciable property on certain amalgamations on or after 14 May 2002) overrides this section for the purposes of determining the cost of an item to an amalgamated company, unless the context requires otherwise.

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