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Income Tax Act 2007

Income - Employee or contractor income - Definitions

CE 7B: Meaning of share scheme taxing date

You could also call this:

“When shares from an employee share scheme become taxable”

The share scheme taxing date is the earliest time when certain conditions are met for shares or related rights under an employee share scheme. This date can be one of two things:

Firstly, it can be when you, as an employee, own the shares and there’s no real chance that this ownership will change. Also, at this time, you don’t benefit if the shares lose value, and the shares’ terms aren’t likely to change in a way that affects their value.

Secondly, it can be when your shares or rights are cancelled, or when they’re given to someone who isn’t closely connected to you or your family.

When figuring out this date, some things aren’t considered. These include your right to sell the shares for what they’re worth at the time, any rights or requirements not mentioned in the scheme’s rules, any rights or requirements that were very unlikely to happen or weren’t really important when they were created, and any rules about transferring shares that apply to all shares, not just those in the employee share scheme.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS92763.

Topics:
Money and consumer rights > Taxes
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CE 7: Meaning of employee share scheme, or

"What employee share schemes are and how they work"

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CE 7C: Meaning of employee share scheme beneficiary, or

"Who can benefit from an employee share scheme"

Part C Income
Employee or contractor income: Definitions

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CE 7BMeaning of share scheme taxing date

  1. Share scheme taxing date means, in relation to shares or related rights under an employee share scheme, the earlier of the following dates:

  2. the first date when the shares are held by or for the benefit of an employee share scheme beneficiary (beneficial ownership) and after which, under the provisions of the scheme,—
    1. there is no material risk that beneficial ownership may change or that a right or requirement in relation to the transfer or cancellation of the shares may operate; and
      1. there is no benefit accruing to the employee share scheme beneficiary in relation to a fall in value of the shares; and
        1. there is no material risk that there will be a change in the terms of the shares affecting the value of the shares:
        2. the date when the shares or related rights of an employee share scheme beneficiary are cancelled or are transferred to a person who is not associated with a beneficiary described in section CE 7(a)(i) or (ii).

          1. For the purposes of applying subsection (1), the following requirements and rights are ignored:

          2. a right or requirement in relation to transfer by the employee share scheme beneficiary for market value consideration at the time of the transfer:
            1. a right or requirement that is not contemplated by the employee share scheme’s provisions:
              1. a right or requirement that, at the time it came into existence, had no material risk of operating or no material commercial significance:
                1. a right or requirement in relation to the transfer of shares, if the right or requirement is 1 that also applies to shares not under the employee share scheme.

                  Notes
                  • Section CE 7B: inserted, on , by section 22 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).