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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 9: Temporary disposals of direct control or income interests

You could also call this:

“Rules for temporary sales of interests in foreign companies”

You need to know about a rule for when someone temporarily gets rid of their control or income interests in a foreign company. This rule applies when certain things happen:

  1. You sell your interest in a foreign company before the end of a quarter.

  2. You don’t sell it to a New Zealander who would then own 10% or more of the company and get attributed CFC income from it.

  3. Within 183 days, you buy back an interest in the same company.

  4. The sale reduces the attributed CFC income for you, someone connected to you, or someone who owns part of your company (if you’re a CFC).

  5. The whole thing looks like it was set up to avoid international tax rules.

If all these things happen, then when working out how much of the company you control at the end of the quarter, it’s like you never sold your interest in the first place. This only applies to the part you bought back, though.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516898.

Topics:
Money and consumer rights > Taxes
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“This rule about overseas companies' money and taxes no longer applies”

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GB 10: Temporary acquisitions of direct control or income interests, or

“Rule for short-term ownership of foreign company shares to prevent tax avoidance”

Part G Avoidance and non-market transactions
Avoidance: specific

GB 9Temporary disposals of direct control or income interests

  1. This section applies when,—

  2. before the end of a quarter, a person (the disposer), directly or indirectly disposes of a direct control interest or direct income interest in a foreign company (the disposal); and
    1. the disposal is not to a New Zealand resident who, immediately after the disposal, has an income interest of 10% or more in the foreign company from which attributed CFC income is derived; and
      1. within 183 days after the disposal, the disposer directly or indirectly acquires a direct control interest or direct income interest in the foreign company (the reacquisition); and
        1. the disposal has the effect of reducing attributed CFC income of—
          1. the disposer; or
            1. an associated person of the disposer; or
              1. if the disposer is a CFC, a person holding an income interest in the disposer; and
              2. the disposal and reacquisition are part of an arrangement that has an effect of defeating the intent and application of the international tax rules.

                1. The disposal is treated as not having occurred, when the person’s control interest or income interest in the foreign company at the end of the quarter is calculated, to the extent to which the reacquisition reverses the disposal.

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                Notes
                • Section GB 9(1)(b): amended, on , by section 180(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                • Section GB 9(1)(d): amended, on , by section 180(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                • Section GB 9 list of defined terms attributed repatriation: repealed, on , by section 180(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).