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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 35: Period of grace following revocation of election

You could also call this:

“Time given to fix issues when a company loses its qualifying status”

This section explains what happens when a company stops being a qualifying company because a shareholder takes back their election. If someone revokes their election, the company has a grace period to fix the situation.

You have 63 days to get someone else to make an election for the same shares. This keeps the company’s qualifying status. This rule doesn’t apply if someone dies or if a joint election is taken back.

If the election was revoked because of an event, you also have 63 days from when that event happened to make a new election or have one already in place for those shares.

If you need more time, you can ask the Commissioner to extend the 63-day period. This applies to both situations mentioned above.

Remember, only people who are allowed to make an election under section HA 5 can do so in these cases.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517218.

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HA 34: Period of grace following death of shareholder, or

“Extra time allowed for company to keep its status after shareholder's death”

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HA 36: Period of grace following revocation of joint election, or

“Grace period for making a new election after a joint decision is cancelled for a qualifying company”

Part H Taxation of certain entities
Qualifying companies (QC)

HA 35Period of grace following revocation of election

  1. This section applies when a company has been a qualifying company but no longer meets the requirement of section HA 5 through revocation of a shareholder’s election under section HA 32 or HA 33. But this section does not apply when—

  2. the revocation is brought about by the death of a person; or
    1. a joint election is revoked.

      1. When section HA 32 applies, the company’s status as a qualifying company does not end if, within 63 days of the date on which the company received the notice of revocation, a person other than the shareholder who revoked the election makes an election relating to the whole of the relevant shareholding.

      2. When section HA 33 applies, the company’s status as a qualifying company does not end if, within 63 days of the date when the event that gave rise to the revocation occurred, an election relating to the whole of the relevant shareholding is made or is in effect.

      3. In subsections (2) and (3), the Commissioner may extend the 63-day period on the application of the company or a person who is entitled to make an election under section HA 5.

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      Notes
      • Section HA 35 list of defined terms apply: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).