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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 6: Corporate requirements

You could also call this:

“Rules for companies to qualify for special tax status”

To be a qualifying company in an income year, you need to have 5 or fewer shareholders who meet certain rules, or be a flat-owning company. You can’t be a qualifying company if you’re not based in New Zealand, or if you’re based in New Zealand but treated as not living there because of a tax agreement with another country.

For a company to be eligible, a group of people must own at least 50% of the company for a specific time period. This is called the QC continuity period. If you give your shares to a close family member, it’s treated as if one imaginary person owned those shares from when you first got them.

The minimum QC interest is the smallest amount of control or value a person has in the company during the QC continuity period. The QC continuity period starts when a certain law was passed and ends on the last day of the income year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517141.

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Part H Taxation of certain entities
Qualifying companies (QC)

HA 6Corporate requirements

  1. A qualifying company must, in an income year,—

  2. have 5 or fewer shareholders who meet the requirements of section HA 7; or
    1. be a flat-owning company.

      1. A company is not eligible to be a qualifying company if, at any time in an income year, it is—

      2. a company that is not resident in New Zealand; or
        1. a company that is resident in New Zealand but is treated under and for the purposes of a double tax agreement, as not resident in New Zealand; or

            1. A company is not eligible to be a qualifying company unless, at all times in an income year, a group of persons holds for the QC continuity period, minimum QC interests in the company that add up to at least 50%.

            2. For the purposes of subsection (3), a share transferred by a transferor to a close relative is treated as being held by a single notional person for the company from the time that the transferor acquired the share. A share subsequently transferred to a close relative of a subsequent transferor is similarly treated as held by the same single notional person.

            3. In this section—

              minimum QC interest, for a person and the QC continuity period, means the lowest voting interest or market value interest they have in the company during the QC continuity period

                QC continuity period means the period starting on the day that the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 receives the Royal assent and ending on the last day in the income year.

                Compare
                Notes
                • Section HA 6(2)(c): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                • Section HA 6(3) heading: inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6(3): inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6(4) heading: inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6(4): inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6(5) heading: inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6(5): inserted, on (applying for the 2017–18 and later income years), by section 123(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6 list of defined terms close relative: inserted, on , by section 123(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                • Section HA 6 list of defined terms market value interest: inserted, on , by section 123(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6 list of defined terms minimum QC interest: inserted, on , by section 123(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6 list of defined terms QC continuity period: inserted, on , by section 123(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                • Section HA 6 list of defined terms voting interest: inserted, on , by section 123(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).