Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Treatment of tax losses - Treatment of tax losses on amalgamation of companies

IE 4: Group companies’ treatment of tax losses on amalgamation

You could also call this:

“How companies can use previous tax losses when they join together”

When companies join together (amalgamate), they might have tax losses from before. If you’re part of a group of companies and you want to use these tax losses after joining together, there are some rules you need to follow.

You can use the tax losses if your company:

  • Meets the rules for carrying forward tax losses
  • Had a tax loss for part of the tax year before joining together
  • Is allowed to use the tax loss under the rules about using another company’s loss

To subtract the tax loss from the new joined company’s income, all the companies involved (the one with the loss, the new joined company, and any other companies that joined) must follow the rules about grouping tax losses.

These rules are found in different parts of the tax law. You can find them in the sections about general loss rules and foreign losses.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517771.

Topics:
Money and consumer rights > Taxes
Previous

IE 3: Treatment of tax losses by amalgamated company, or

“How a new company can use tax losses from companies that joined together”

Next

IE 5: Applying the continuity provisions when companies amalgamate, or

“How tax losses are treated when companies merge”

Part I Treatment of tax losses
Treatment of tax losses on amalgamation of companies

IE 4Group companies’ treatment of tax losses on amalgamation

  1. This section applies on an amalgamation if a company that is part of a group of companies—

  2. meets the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies); and
    1. has a tax loss for part of a tax year before the date of amalgamation; and
      1. may use the tax loss under section IC 5, IQ 4, or IQ 5 (which relate to a company’s use of another company’s loss, including foreign losses).

        1. The amount of the tax loss may be subtracted from the net income of the amalgamated company for the tax year only if both the company and the amalgamated company, and each company that before or during the amalgamation amalgamated with the amalgamated company, meet the requirements of subparts IA, IC, and IQ (which relate to the general loss rules and certain foreign losses) that allow companies to group tax losses.

        Compare
        Notes
        • Section IE 4(1)(a): amended (with effect on 1 April 2020), on , by section 108(1) (and see section 108(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).