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IB 5: When group companies treated as single company
or “Group companies in New Zealand are treated as one for certain tax purposes”
You could also call this:

“Sharing tax losses between companies in the same group”

This law is about companies sharing their tax losses with other companies in the same group. You need to know that when a company (let’s call it Company A) has lost money in a tax year, it can sometimes let another company in its group (Company B) use that loss to pay less tax.

For Company A to share its tax loss with Company B, they must follow some rules. First, they need to meet certain levels set out in another part of the law. Second, they must follow all the rules in section IC 5.

If the companies don’t meet these levels, they usually can’t share the tax loss. But there are some special cases for part-year losses that might still let them share.

When this law talks about a tax year for a company, it also means any other type of accounting year the company uses that matches up with the tax year.

This part of the law is more important than some other parts about using tax losses. It overrides sections IA 3 and IA 4, which are about how tax losses are usually used.

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Next up: IC 2: Threshold levels for grouping tax losses in tax year

or “Rules for sharing tax losses between connected companies in a year”
Next

Part I Treatment of tax losses
Grouping tax losses

IC 1Company A making tax loss available to company B

  1. This subpart applies if 1 company that is part of a group of companies (company A) has a tax loss for a tax year that it makes available to another group company (company B) to subtract from its net income for the tax year.

  2. The amount of a tax loss that company A has for a tax year may be made available to company B to subtract from its net income for the tax year only if—

  3. the threshold levels in section IC 2 are met; and
    1. the companies meet all the requirements of section IC 5.

      1. If company A or company B fail to meet 1 or both of the threshold levels referred to in subsection (2)(a), a tax loss may not be grouped unless section IP 4 or IP 5 (which relate to the grouping of part-year losses) applies.

      2. In this subpart, a reference to a tax year of a company includes a reference to a non-standard accounting year of the company that corresponds with the tax year.

      3. This section overrides sections IA 3 and IA 4 (which relate to the general use of tax losses).

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