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Income Tax Act 2007

Taxation of certain entities - Other entities

HR 10: What happens when vehicle stops being transparent debt funding special purpose vehicle?

You could also call this:

“What happens when a special company stops helping with debt funding?”

When a company or trustee stops being a special purpose vehicle, some things happen. You need to know what a special purpose vehicle is. It is a company or trustee that helps with debt funding.

If the company or trustee stops being a special purpose vehicle, the person who started it is treated as selling its property. The company or trustee is treated as buying the property. This means the property is transferred from the person who started it to the company or trustee.

The transfer of property is treated as if it happened with a third party, and the price is the market value of the property. If the arrangement is a liability, the company or trustee is treated as receiving money for it. If the arrangement is an asset, the person who started it is treated as receiving money for it.

There is something called an unwind, which is when guarantees and debts are cancelled, and interests are transferred to the person who started it. The company or trustee is then terminated.

This section of the law overrides another section, section HZ 10. It does not affect the Goods and Services Tax Act 1985.

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This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2575746.

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HR 10B: What happens when persons stop being originators?, or

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Part H Taxation of certain entities
Other entities

HR 10What happens when vehicle stops being transparent debt funding special purpose vehicle?

  1. When a company or a trustee of a trust (the vehicle) stops being a debt funding special purpose vehicle for any reason, other than on unwind, and an election has been made under section HR 9BA or HZ 9 (Elections to treat existing debt funding special purpose vehicles as transparent) that relates to the special purpose vehicle, the following apply:

  2. the relevant originator is treated as disposing of its property (the property) that has been subject to section HR 9(b) in relation to the vehicle immediately before the vehicle stops being a special purpose vehicle:
    1. the vehicle is treated as acquiring the property immediately after the vehicle stops being a special purpose vehicle:
      1. the relevant originator is treated as not being a party to an arrangement (the arrangement) that the originator was treated as being a party to under section HR 9(c) in relation to the vehicle immediately before the vehicle stops being a special purpose vehicle:
        1. the vehicle is treated as being a party to the arrangement immediately after the vehicle stops being a special purpose vehicle.

          1. The disposition of property in subsection (1)(a) and the acquisition of property in subsection (1)(b) are treated as occurring with a single third party for payments equal to the property’s market value.

          2. At the time of the relevant originator becoming not a party to an arrangement, and the vehicle becoming a party to the arrangement, under subsection (1)(c) or (d),—

          3. if the arrangement is a liability of the originator,—
            1. the vehicle is treated as receiving consideration equal to the market value of the liability, expressed as a positive amount, from a single third party:
              1. the originator is treated as paying consideration equal to the market value of the liability, expressed as a positive amount, to a single third party; or
              2. if the arrangement is an asset of the originator,—
                1. the originator is treated as receiving consideration equal to the market value of the asset from a single third party:
                  1. the vehicle is treated as paying consideration equal to the market value of the asset to a single third party.

                  2. In this section, unwind means a process, ignoring section HR 9, by which—

                  3. guarantees, securities, and debts, as applicable, described in the definition of debt funding special purpose vehicle, paragraph (d), are cancelled; and
                    1. interests described in the definition of debt funding special purpose vehicle, paragraph (b) are transferred to the relevant originator; and
                      1. the vehicle is terminated, by liquidation or otherwise.

                        1. This section overrides section HZ 10 (What happens when election is made under section HZ 9?).

                        2. This section does not give rise to a supply of goods or services under the Goods and Services Tax Act 1985.

                        Notes
                        • Section HR 10: replaced, on , by section 225(1) (and see section 225(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section HR 10(1): amended, on , by section 93(1)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(1)(a): amended, on , by section 93(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(1)(b): amended, on , by section 93(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(1)(c): amended, on , by section 93(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(1)(d): amended, on , by section 93(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(6) heading: inserted, on , by section 93(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                        • Section HR 10(6): inserted, on , by section 93(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).