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New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 8: Shareholders’ personal liability

You could also call this:

“When shareholders agree to be personally liable for company taxes”

If you choose to be a shareholder in a certain type of company, you need to agree to be personally responsible for some of the company’s taxes. This means you’ll have to pay your share of the company’s income tax each year. You also need to pay any taxes for other companies that your company has invested in.

If you’re a trustee, you can make this choice too, but you’ll need to do it with at least one other person who is allowed to make decisions. As a trustee, you only have to pay up to the amount of money and things the trust owns.

If you and some other people own more than half of a company, you can agree to be responsible for the taxes of the people who own less than half.

When more than one person agrees to be responsible for taxes, everyone who agreed has to work together to pay. This is called being “joint and several”.

Remember, these rules are part of a bigger set of rules about how certain companies and the people who own them are taxed.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517145.

Topics:
Money and consumer rights > Taxes
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Part H Taxation of certain entities
Qualifying companies (QC)

HA 8Shareholders’ personal liability

  1. A person making an election as shareholder as described in section HA 5 must agree for each income year in which the election is in effect, to take personal liability on the basis of their effective interest in the company—

  2. for their share of the company’s income tax liability for the income year; and
    1. if the company has made an election as shareholder in another company, for any income tax payable in relation to that other company for the income year.

      1. A person making an election as trustee under section HA 28 must agree to take personal liability under subsection (1), modified as follows:

      2. the trustee together with 1 or more beneficiaries who have legal capacity must make the election; and
        1. the personal liability as trustee is limited to the extent of the net assets of the trust; and
          1. if the election is made for a majority shareholding under section HA 29, the personal liability includes the effective interests of the minority shareholding.

            1. One or more persons whose effective interests in a company at a particular time add up to 50% or more, may make an election under section HA 29, agreeing to take personal liability described in subsection (1) in relation to the effective interests in the company of the minority shareholding.

            2. In subsection (1), the person includes a beneficiary who makes an election under section HA 28 or a person who assumes liability on their behalf.

            3. In sections HA 13 to HA 27, when more than 1 person agrees to take personal liability as described in subsection (3) for a percentage of an income tax liability or for income tax payable in an income year, the liability is joint and several.

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