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 5: Applying the continuity provisions when companies amalgamate

You could also call this:

"What happens to tax losses when companies merge"

Illustration for Income Tax Act 2007

When companies amalgamate, the law treats them as if they were always one company. You work out if a tax loss can be used or carried forward as if the amalgamated company was the same as the companies that amalgamated. This helps you determine if you can use the loss under sections IA 3 and IA 4, or if you can subtract it from another company's income under section IC 5, IQ 4, or IQ 5. You also use this rule to work out if a group company can subtract a loss from the amalgamated company's income under section IC 5, IQ 4, or IQ 5. The law applies as if the amalgamated company had the same shareholders and ownership as the companies that amalgamated. This means you look at the number and type of shares and options each shareholder had in the original companies.

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 It might be out of date or be missing some parts.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=DLM1517773.

This page was last updated on — View changes

Topics:
Money and consumer rights > TaxesBusiness > Industry rules
Previous

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

"What happens to tax losses when companies merge?"

Next

IP 1: When this subpart applies, or

"When rules about company ownership and tax losses are broken"

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

IE 5Applying the continuity provisions when companies amalgamate

  1. The provisions of this Act apply as if the amalgamated company did not exist separately before amalgamation, and was instead the amalgamating companies with the same holders of shares and options over shares, each with the same number and class of shares and options over shares, as they held in the amalgamating company, to determine whether a tax loss or loss balance,—

  2. may be used or is carried forward under sections IA 3 and IA 4 (which relate to the general use of tax losses):
    1. may be subtracted from the net income of another company 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. in the case of a group company, may be subtracted from the net income of the amalgamated company under section IC 5, IQ 4, or IQ 5.

        Compare