Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 29: Elections by majority shareholders

You could also call this:

“How major shareholders can decide a company's tax status”

If you own more than half of a company, you can make it a qualifying company even if other shareholders own less. You do this by telling the tax office. But you have to agree that you might have to pay more taxes yourself.

If you own less than half of the company, and the big shareholders decide to make it a qualifying company, you’re treated as if you agreed too. This happens even if you didn’t say yes yourself.

You can still make other choices about your shares in the company, even if this happens.

This rule is part of how the government figures out taxes for certain types of companies.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517204.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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“Trustee shareholders must choose who to make elections with”

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HA 30: When elections take effect, or

“Choosing when your company becomes a qualifying company”

Part H Taxation of certain entities
Qualifying companies (QC)

HA 29Elections by majority shareholders

  1. This section applies when 1 or more shareholders (the majority) in a company have, at the time of making an election, effective interests in the company of 50% or more, and the effective interest of 1 or more other shareholders (the minority) is less than 50%.

  2. The majority may sign a notice of election advising the Commissioner that the company is to become a qualifying company. The notice has effect only if the majority agree to an extension of their personal liability under section HA 8(3).

  3. The minority is treated as having made an election under section HA 5 in relation to their shareholding in the company at the time the election is made.

  4. An election under this section may be made in addition to any other election a shareholder may make or have made under section HA 5.

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