Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
GB 10: Temporary acquisitions of direct control or income interests
or “Rule for short-term ownership of foreign company shares to prevent tax avoidance”
You could also call this:

“Temporary changes in foreign company control may be ignored for tax purposes”

This law applies when there are changes in how much control someone has over a foreign company. If you have less control or income from a foreign company because someone else got more control, but then they reduce their control within a year, the law might ignore that you had less control for a while.

This can happen if:

  • The total amount of direct control in the foreign company goes up
  • This causes you to have less control or income from the company
  • Within 365 days, the total amount of direct control goes back down
  • Your reduced control or income meant you or someone connected to you had less ‘attributed CFC income’
  • These changes in control are part of a plan to avoid international tax rules

If all of this happens, when figuring out how much control or income you have from the foreign company at the end of every three months, the law might pretend that your control never went down. This only applies to the amount that was reversed when the total control went back down.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: GB 12: Temporary reductions in totals for control interest categories

or “Temporary changes in foreign company control to avoid tax rules may be disregarded”
Next

Part G Avoidance and non-market transactions
Avoidance: specific

GB 11Temporary increases in totals for control interest categories

  1. This section applies when,—

  2. before the end of a quarter, an increase occurs in the total of direct control interests in a foreign company in any of the control interest categories (the total increase); and
    1. the total increase results in a person (the interest holder) having a reduced income interest or control interest in a foreign company (the interest reduction); and
      1. within 365 days after the total increase, a reduction occurs in the total for the control interest category (the total reduction); and
        1. the interest reduction has the effect of reducing attributed CFC income of—
          1. the interest holder; or
            1. an associated person of the interest holder; or
              1. if the interest holder is a CFC, another person holding an income interest in the interest holder; and
              2. the total increase and total reduction are part of an arrangement that has an effect of defeating the intent and application of the international tax rules.

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

                Compare
                Notes
                • Section GB 11(1)(d): amended, on , by section 181(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                • Section GB 11 list of defined terms attributed repatriation: repealed, on , by section 181(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).