Income Tax Act 2007

General collection rules - Employment-related taxes - Introductory provisions

RD 3B: Shareholders who are employees, for some companies: income other than PAYE

You could also call this:

"Income rules for shareholder-employees in certain companies"

If you are both a shareholder and an employee of a company, this law might apply to you. It's for companies that are not look-through companies and are either close companies or have 25 or fewer shareholders. You can choose to use this law if you meet certain conditions.

You might be able to use this law if you don't get regular monthly salary or wages throughout the year. Or, if less than 66% of your yearly income comes from regular salary or wages. It also applies if you get paid money that might later be counted as your employee income for the year.

If this law applies to you, all the money the company pays you as an employee, both now and in future years, is treated differently. It's not considered as income from a PAYE (Pay As You Earn) payment. This means it's treated as a different type of income for tax purposes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7224992.

Topics:

Money and consumer rights > Taxes

RD 3: PAYE income payments, or

"Payments subject to PAYE tax rules"

RD 3C: Shareholders who are employees, for some companies: PAYE and income other than PAYE, or

"Rules for shareholder-employees of certain companies on how their pay is taxed"

Part RGeneral collection rules
Employment-related taxes: Introductory provisions

RD 3BShareholders who are employees, for some companies: income other than PAYE

This section applies for an income year for a person who is a shareholder and an employee of a company that is not a look-through company and is a close company or has 25 or fewer shareholders if the person elects to apply this section and—
the person does not derive as an employee payments of salary or wages of a regular amount for regular pay periods of 1 month or less throughout the income year:
the person derives less than 66% of their annual gross income as an employee from payments of salary or wages of a regular amount for regular pay periods throughout the income year:
an amount is paid as income that may later be allocated to the person as an employee for the income year.

Repealed
All amounts paid to the person in the income year and in later income years in their capacity as employee of the company are treated as income other than from a PAYE income payment.

Notes

Section RD 3B: inserted, on 30 March 2017, by section 261 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section RD 3B(1): amended, on 29 March 2018 (with effect on 30 March 2017), by section 187(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section RD 3B(1)(a): replaced, on 29 March 2018 (with effect on 30 March 2017), by section 187(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section RD 3B(1)(ab): inserted, on 29 March 2018 (with effect on 30 March 2017), by section 187(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section RD 3B(2) heading: repealed, on 29 March 2018 (with effect on 30 March 2017), pursuant to section 187(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5)
Section RD 3B(2): repealed, on 29 March 2018 (with effect on 30 March 2017), by section 187(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).