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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 1: What this subpart does

You could also call this:

“This subpart explains how companies can choose special tax treatment as qualifying companies”

This part of the law talks about companies that choose to be taxed in a special way. These are called qualifying companies. Here’s what you need to know:

A company can choose to give out its profits to its shareholders in a way that might lower the tax they have to pay. The company can do this by using something called imputation or by giving out some of the money as exempt income. This means the shareholders might not have to pay as much tax on the money they get.

To be a qualifying company, the company has to follow certain rules. These rules are explained in other parts of the law. The company also has to keep following these rules all the time.

When the law talks about an income year, it can mean a whole year or just part of a year.

For a company to become a qualifying company, all of its directors and shareholders who are legally able to must sign a special form. This form is called an election. There’s one exception to this rule for some small shareholders, which is explained in another part of the law.

If you’re a shareholder and you sign this form, you’re agreeing to be personally responsible for some things. The details of what you’re responsible for are explained in another part of the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517128.

Topics:
Money and consumer rights > Taxes
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“Definition of a qualifying company for tax purposes”

Part H Taxation of certain entities
Qualifying companies (QC)

HA 1What this subpart does

  1. The rules in this subpart allow a company to choose, for taxation purposes,—

  2. to have a distribution of profits to shareholders imputed or, to the extent not imputed, distributed as exempt income; and

      1. A qualifying company must meet the requirements of sections HA 5 to HA 9, and must maintain the conditions set out in section HA 4.

      2. Repealed

      3. In this subpart, a reference to an income year includes a reference to part of an income year.

      4. For a company to be a qualifying company, all the directors of the company, and every shareholder in the company with legal capacity, must sign an election referred to in section HA 5. An exception applies for a minority shareholder in the situation described in section HA 29.

      5. A shareholder who makes an election referred to in subsection (5) must agree to take personal liability to the extent described in section HA 8.

      Compare
      Notes
      • Section HA 1(1)(a): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 57(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section HA 1(1)(b): repealed, on (applying for income years beginning on or after 1 April 2011), by section 70(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
      • Section HA 1(3) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section HA 1(3): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section HA 1(5): amended, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section HA 1 list of defined terms exempt income: inserted (with effect on 1 April 2008), on , by section 57(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section HA 1 list of defined terms loss-attributing qualifying company: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).