Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
LK 8: Tax credits of consolidated companies
or “Tax credits are shared among companies in a consolidated group”
You could also call this:

“How a company in a group can use its leftover tax credits from the previous year”

When you’re part of a group of companies and you have extra credits from the previous tax year, you can use them in a specific way. First, you must use these credits to pay the group’s tax bill for the current year. But you can only use up to a certain amount, which is called the ‘quarantined amount’.

If you still have credits left after paying the group’s tax, you can use them to pay your own company’s tax bill or even help another group of companies pay their tax. However, there are some special rules in sections LK 10 and LK 11 that might change how you can use these leftover credits.

If you still have credits remaining after all of this, you don’t lose them. Instead, you can keep them and use them next year. This is explained in section LK 4(2).

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 It might be out of date or be missing some parts.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

Next up: LK 10: When group membership lacking in tax year in which credit arises

or “How tax credits work when a company joins or leaves a group”
Next

Part L Tax credits and other credits
Tax credits relating to attributed controlled foreign company income

LK 9Use of company’s credits carried forward

  1. This section applies when a company that is part of a consolidated group of companies in an income year has a credit carried forward for the tax year corresponding to the income year.

  2. The amount must first be used to satisfy the income tax liability of the consolidated group for the income year. However, the amount must not be more than the consolidated group’s quarantined amount.

  3. If, after applying subsection (2), an amount remains, the amount may be used to satisfy the income tax liability of the company or the income tax liability of another consolidated group in the income year. Sections LK 10 and LK 11 override this subsection.

  4. If, after applying subsections (2) and (3), a balance remains, the amount must be carried forward to the next income year under section LK 4(2).

Compare