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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 3BA: Arrangements for carrying forward loss balances: companies’ business activities

You could also call this:

“Rules for companies keeping past losses when ownership or business changes”

This law is about companies that have lost money and want to carry forward their losses to future years. It applies when someone changes how a company works or who owns it. Here’s what you need to know:

If someone changes a company within two years before it fails to meet the rules for keeping its losses, and this change helps the company meet different rules for keeping its losses, the law might not allow it. This is especially true if the change was made to get around the rules.

The law looks at changes like altering what rights come with owning parts of the company, or changing what kind of business the company does. If the law decides these changes were made just to keep the losses unfairly, the company won’t be allowed to keep them.

This rule is there to make sure companies don’t try to cheat the system when it comes to using their past losses to pay less tax in the future.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS482911.

Topics:
Money and consumer rights > Taxes
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Part G Avoidance and non-market transactions
Avoidance: specific

GB 3BAArrangements for carrying forward loss balances: companies’ business activities

  1. This section applies when—

  2. a share in a company (the loss company) or another company has been subject to an arrangement, including an arrangement—
    1. directly or indirectly altering rights attached to the shares:
      1. to change the nature of business activities carried on by the loss company; and
      2. the arrangement is entered into within the 2 years immediately preceding a breach of the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) that, if they had been met, would have enabled a tax loss component of the loss company to be carried forward to a tax year in a loss balance; and
        1. the arrangement allows the loss company to meet the requirements of section IB 3(2) (When tax loss components of companies carried forward despite ownership continuity breach) for the carrying forward of the tax loss component to the tax year; and
          1. a purpose of the arrangement is to defeat the intent and application of section IB 3.

            1. The loss company is treated as not meeting the requirements of section IB 3(2) in relation to the tax loss component.

            Notes
            • Section GB 3BA: inserted (with effect on 1 April 2020), on , by section 76(1) (and see section 76(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).