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Income Tax Act 2007

Definitions and related matters - Measurement of company ownership

YC 5: Treatment of special corporate entities

You could also call this:

“How special corporate entities are treated for tax purposes”

This section explains how special corporate entities are treated for certain purposes in the Income Tax Act 2007. If a special corporate entity hasn’t issued any shares, it’s treated as if it has. These imaginary shares are considered to have all the decision-making rights and ownership rights for the entity.

The law says these imaginary shares are held by different people depending on the situation. If the special corporate entity has members, the members are treated as holding the shares. If there are no members, the directors are treated as holding the shares. For public authorities or state enterprises without members or directors, the Minister of the Crown who does a director’s job is treated as holding the shares.

The people treated as holding the shares are also treated as if they hold any options to buy shares and any rights that come from owning shares or options. This includes interests described in section YC 4.

The members, directors, or Ministers are considered to hold these shares and rights in their official roles, not as individuals. They’re treated as one imaginary person who exists as long as the special corporate entity does. This imaginary person is seen as only holding shares and rights related to the entity, nothing else.

This section applies to sections YC 2 to YC 6 of the Income Tax Act 2007.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523074.

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Part Y Definitions and related matters
Measurement of company ownership

YC 5Treatment of special corporate entities

  1. This section applies for the purposes of sections YC 2 to YC 6 to a company that is a special corporate entity.

  2. If no shares have been issued by the special corporate entity, it is treated as having issued shares that carry all shareholder decision-making rights and all other rights of ownership in relation to the special corporate entity.

  3. The shares are treated as held by—

  4. the members for the time being of the special corporate entity, if any:
    1. the directors for the time being of the special corporate entity, if no members exist:
      1. in the case of a public authority or state enterprise that has neither members nor directors, the Minister of the Crown for the time being who performs a director’s functions.

        1. The persons treated under subsection (3) as holding the shares are also treated as holding—

        2. any options over the shares; and
          1. any rights derived from the shares and options, including any interests treated as held under section YC 4.

            1. The members, directors, or Ministers are treated as holding their shares and related rights—

            2. in their capacity as members, directors, or Ministers; and
              1. as a notional single person that—
                1. exists as long as the special corporate entity exists; and
                  1. holds nothing other than shares and related rights concerning the entity.

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