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Income Tax Act 2007

Definitions and related matters - Measurement of company ownership

YC 11: No look-through rule for companies in certain cases

You could also call this:

“When a company's ownership of another company isn't traced back to its shareholders”

This section talks about when a company’s ownership of another company is not looked through to its shareholders. It applies when a company (called the shareholder company) owns part of another company (called the issuing company).

The rule says that you don’t need to look through the shareholder company to see who owns it in two situations:

  1. When the shareholder company is a limited attribution company and owns less than 50% of the issuing company.

  2. When a person who owns part of the shareholder company would own less than 10% of the issuing company if you looked through, and that person isn’t connected to the issuing company.

In these cases, you don’t need to use the look-through rule in section YC 4 for the shareholder company’s ownership of the issuing company.

This rule helps keep things simple when figuring out who really owns a company, especially when the ownership is small or spread out among many people.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523090.

Topics:
Money and consumer rights > Taxes
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YC 10: Shareholders holding less than 10% direct interests, or

“Rules for shareholders with very small ownership in a company”

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YC 12: Public unit trusts, or

“Rules for treating ownership in public unit trusts”

Part Y Definitions and related matters
Measurement of company ownership

YC 11No look-through rule for companies in certain cases

  1. This section applies when a company (the shareholder company) has, before section YC 4 is applied to that interest, a voting interest or market value interest in another company (the issuing company) and either subsection (2) or (3) applies.

  2. The shareholder company—

  3. is a limited attribution company; and
    1. the voting interest or market value interest, when added to any interests which the shareholder company is treated as having under section YC 4, as modified by this section and section YC 10, is less than 50%.

      1. A person (the shareholder), who holds a voting or market value interest in the shareholder company, to whom the relevant portion of the voting interest or market value interest in the issuing company would be attributed under section YC 4, assuming section YC 10 does not then apply to the portion,—

      2. is not associated with the issuing company; and
        1. the relevant portion, before adding any other voting or market value interest which the shareholder has or is treated as having, is less than 10%.

          1. Section YC 4 does not apply to the voting or market value interest of the shareholder company.

          Compare
          Notes
          • Section YC 11(3): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 131(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).