Income Tax Act 2007

Definitions and related matters - Measurement of company ownership

YC 4: Look-through rule for corporate shareholders

You could also call this:

"A law that helps work out who owns what in companies, by looking at who owns the company that owns the shares."

You have a company that owns shares in another company. The law says you treat the people who own the first company as owning a portion of the shares in the second company. This portion is based on how many shares they own in the first company. You calculate this portion by multiplying the percentage of shares the first company owns in the second company by the percentage of shares you own in the first company. The law applies this rule to both voting interests and market value interests in companies. If you do not have a direct market value interest in a company, the law uses your direct voting interest instead. The law has links to other parts of the legislation, such as ss OD 3(3)(d) and OD 4(3)(d), (4), for more information. You can also look at the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 and the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 for amendments to this law. These laws help you understand how the look-through rule for corporate shareholders works in New Zealand.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523065.

This page was last updated on 5 April 2026 — View changes

Topics:

Money and consumer rights > TaxesBusiness > Industry rules

YC 3: Market value interests, or

"How much of a company you own based on your shares and options"

YC 5: Treatment of special corporate entities, or

"How special corporate entities are treated for tax purposes"

Part YDefinitions and related matters
Measurement of company ownership

YC 4Look-through rule for corporate shareholders

Subsection (2) applies if a company (the shareholder company) has or is treated as having, whether under subsection (2) or otherwise, a voting interest in another company (the issuing company).
Each person (the shareholder) who has a voting interest in the shareholder company is treated as having (to be added to any other percentage voting interest in the issuing company which the shareholder has) their portion of the shareholder company’s voting interest in the issuing company and the shareholder company is treated as not having that portion.
The shareholder’s portion of the voting interest is calculated by multiplying the shareholder company’s voting interest in the issuing company by the shareholder’s voting interest in the shareholder company.
Subsection (5) applies if a company (the shareholder company) has or is treated as having, whether under subsection (5) or otherwise, a market value interest in another company (the issuing company).
Each person (the shareholder) who has a market value interest in the shareholder company is treated as having their portion of the shareholder company’s market value interest in the issuing company and the shareholder company is treated as not having that portion. The shareholder’s portion is added to any other percentage market value interest in the issuing company which the shareholder has at that time.
The shareholder’s portion of the market value interest is calculated by multiplying the shareholder company’s market value interest in the issuing company by the shareholder’s market value interest in the shareholder company.
Subsection (8) applies if,—
in the case of a company (the first company), no direct market value circumstance exists; but
it is necessary to determine the direct market value interest of a person in the first company in order to apply subsection (5) in relation to an issuing company, whether that issuing company is the first company or any other company, because a direct market value circumstance exists for some other relevant company.

The direct market value interest of the person in the first company is equal to the direct voting interest of the person in the first company.

Compare

2004 No 35 ss OD 3(3)(d), OD 4(3)(d), (4)

Notes

Section YC 4(1): amended, on 29 March 2018 (with effect on 1 April 2008 and applying for the 2008–09 and later income years), by section 245(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section YC 4(4): amended (with effect on 1 April 2008), on 29 March 2025, by section 143(1) (and see section 143(2) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
Section YC 4 compare note: amended (with effect on 1 April 2008), on 6 October 2009, by section 567 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).