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Taxation Implications of Company Law Reform - Draft Legislation

Home > Publications > 1993 > The taxation implications of company law reform - a discussion document > Taxation Implications of Company Law Reform - Draft Legislation


New Zealand Government coat of arms in blue

The taxation implications of company law reform

A discussion document

December 1993


 

Taxation Implications of Company Law Reform - Draft Legislation

Income Tax Act 1976

Goods and Services Tax Act 1985

Inland Revenue Department Act 1974

Estate and Gift Duties Act 1968

Stamp and Cheque Duties Act 1971


Income Tax Act 1976

OO. Interpretation - Section 2 of the principal Act is hereby amended by -

(a) Inserting, after the definition of the term "charitable purpose", the following definition:

"Closely-held company" means, at any time, a company in respect of which at that time there are 5 or fewer persons (with persons who are associated at the time with each other being treated as one person for this purpose) -

(a) The aggregate of whose direct voting interests (as defined in section 8B of this Act) in the company exceeds 50 percent; or

(b) In any case where at the time a market value circumstance exists in respect of the company, the aggregate of whose direct market value interests (as so defined) in the company exceeds 50 percent:

(b) Omitting from paragraph (d) of the definition of the term "director", the figure "1955" and substituting the figure "1993":

(c) Repealing, from the definition of the term "expenditure on account of an employee", paragraphs (a)(i) and (d):

(d) Inserting, after the definition of the term "life insurance", the following definition -

"Liquidation”, in relation to a company, includes -

(a) Removal of the company from the register of companies under the Companies Act 1955 or the Companies Act 1993; and

(b) Dissolution of the company under the Companies Act 1955; and

(c) Termination of the company’s existence under any other procedure of law:

(e) In the definition of the term "major shareholder", -

(i) Omitting the words "private company (as defined in section 2 of the Companies Act 1955)" and substituting the words "closely-held company"; and

(ii) Omitting the word "private" from the three other places where it appears:

(f) Repealing the definitions of the terms "proprietary company" and "winding-up".

OO. Bonus issues - (1) Section 3(1) of the principal Act is hereby amended by -

(a) Repealing the definition of the term "bonus issue' and substituting the following definition -

"Bonus issue" means -

(a) The issue of shares in the company; or

(b) The giving of credit in respect of the whole or part of the amount unpaid on any shares in the company, -

where the company receives no consideration (other than an election by the shareholder not to receive money or money’s worth as an alternative to the issue) for the issue or crediting, except to the extent to which, in respect of any issue or crediting on or before the 20th day of August 1985, such issue or crediting was excluded from the meaning of the term "bonus issue" in accordance with subsection (3) or subsection (4) of this section as those subsections applied from time to time before their repeal by section 31(1) of the Income Tax Amendment Act (No.5) 1988:

(b) Omitting from the definition of the term "taxable bonus issue" the phrase "subsection (3)(a)(i)" and substituting the phrase "subsection (3)(a)":

(c) Repealing the definition of the term "ten year bonus issue":

(2) Section 3 of the principal Act is hereby further amended by repealing subsection (2).

(3) Section 3 of the principal Act is hereby further amended by repealing subsection (3) and substituting the following subsection:

"(3) Where a company which is resident in New Zealand (not being a company which, pursuant to a provision of arrangements to which effect is given by an Order in Council made under section 294 of this Act, is treated as not being resident in New Zealand for the purpose of the arrangements) proposes to make a bonus issue, other than a bonus issue in lieu, -

"(a) The company may elect, by -

"(i) Resolving, upon the making of the bonus issue, -

"(A) That the bonus issue will be a taxable bonus issue; and

"(B) The amount (being greater than nil) which will be treated as a dividend in respect of the bonus issue; and

"(ii) Notifying the Commissioner of the election and the amount, under section 13A of this Act, -

that the bonus issue will be a taxable bonus issue (in which case the bonus issue will be treated as a dividend under section 4(1)(f) of this Act); and

"(b) If the company fails to make an election under paragraph (a) of this subsection, the bonus issue shall be deemed to be a non-taxable bonus issue."

OO. Meaning of the term "dividends" - (1) Section 4(1) of the principal Act is hereby amended by -

(a) Omitting from paragraph (a) the words "or that are specified payments":

(b) Repealing paragraph (ba)(ii) and substituting the following subparagraph -

"(ii) The shareholder has been released from the obligation to pay that amount by the operation of the Insolvency Act 1967, the Companies Act 1955, the Companies Act 1993 or the laws of a country or territory other than New Zealand or by any deed or agreement of composition with the shareholder’s creditors; or":

(c) Omitting, from paragraph (f), the words "(as defined in subsection (3) of this section)":

(d) Repealing paragraph (g) and substituting the following paragraph -

"(g) All amounts (whether in money or money’s worth) distributed in any manner and under any name from and in respect of any -

"(i) Acquisition by the company of shares in the company; or

"(ii) Redemption or other cancellation of shares in the company; or

"(iii) Other reduction in or return of share capital of the company:":

(e) Omitting from paragraph (k) the words "proprietary company" and substituting the words "closely-held company".

(2) Section 4(3) of the principal Act is hereby amended by repealing the definition of the term "specified payments".

(3) Section 4 of the principal Act is hereby further amended by repealing subsection (6) and substituting the following subsection -

"(6) The amount of the dividend arising in respect of -

(a) A bonus issue in lieu shall be the amount of the money or money’s worth offered as an alternative to the bonus issue less, in the case of a bonus issue made to a shareholder where an amount of resident withholding tax is deducted in respect of the bonus issue in accordance with Part IXA of this Act, that amount of resident withholding tax; and

(b) Any other taxable bonus issue shall be such amount per share as the company elects when resolving upon the bonus issue."

(4) Section 4 of the principal Act is hereby further amended by inserting, after subsection (7), the following subsection -

"(7A) Where any dividend paid or provided by a company to a shareholder is subsequently recovered by the company from the shareholder under section 56 of the Companies Act 1993 (or the equivalent provision of any company legislation of a country or territory other than New Zealand), -

(a) The Commissioner shall, if notified in writing of the recovery -

(i) Notwithstanding anything in section 25 of this Act, amend any assessment of the shareholder for income tax, any determination of loss or loss carried forward of the shareholder, any assessment of the shareholder made under Part XIIB of this Act or any assessment of the company made under Parts IX, IXA and XIIA of this Act or by virtue of section 308A(3) of this Act; and

(ii) Notwithstanding anything in section 409 or 394ZO of this Act but otherwise subject to this Act, refund to the shareholder any income tax, dividend withholding payment (as defined in section 394ZK of this Act) or dividend withholding payment penalty tax (as defined in section 394ZZG of this Act) and to the company any non-resident withholding tax or resident withholding tax; and

(b) A credit or debit (as the case may be) shall arise, as at the date of recovery, to be recorded in the imputation credit account (as defined in section 394A of this Act) of the company or (in any case where the shareholder is an imputation credit account company (as so defined) or dividend withholding payment account company (as defined in section 394ZK of this Act)) the imputation credit account or dividend withholding payment account (as defined in section 394ZK of this Act) of the shareholder -

to such extent as is necessary in order, for the purposes of this Act, to disregard the dividend and any imputation credit (as defined in section 394A of this Act) or dividend withholding payment credit (as so defined) attached to the dividend and take into account the resultant refunds."

(5) Section 4 of the principal Act is hereby further amended by repealing subsection (12) and substituting the following subsection -

"(12) For the purposes of this Act, where any acquisition of shares in a company by a person (other than the company) is deemed, under section 99(5) of this Act, to be a dividend, the dividend shall be deemed to be an on-market acquisition (as defined in section 4A(2) of this Act) by the company if the dividend would have been an on-market acquisition had the person been the company.

(6) Section 4 of the principal Act is hereby further amended by repealing subsection (15) and substituting the following subsection -

"(15) Notwithstanding any provision of this Act, where any dividend is derived by a person -

"(a) If the dividend is from and in respect of the acquisition, redemption or other cancellation by the company of a share in the company and any profit derived by the person from the acquisition, redemption or other cancellation would be assessable income of the person under section 65(2)(a) or (e) of this Act, the profit shall be assessable income of the person under section 65(2)(a) or (e) of this Act only to the extent (if any) to which it exceeds the amount of the dividend (exclusive of any imputation credit (as defined in section 394A of this Act) or dividend withholding payment credit (as defined in section 394ZK of this Act) attached to the dividend); and

"(b) The dividend shall not be treated as assessable income of the person under any provision of this Act other than section 65(2)(j) so as to result in double taxation of the person, except where the provision expressly or by necessary implication so provides and, for the avoidance of doubt but without limiting the application of this subsection, section 198 of this Act shall be treated as a provision which expressly so provides."

OO. Exclusion from term "dividends" - (1) Section 4A(1) of the principal Act is hereby amended by repealing paragraph (c) and substituting the following paragraphs:

"(c) Any amount (whether in money or money’s worth) returned upon the acquisition, redemption or other cancellation (in whole but not in part) by the company of any share in the company (other than upon the liquidation of the company) (referred to in this paragraph as the relevant cancellation) where -

"(i) If the share is not a fixed rate share (as defined in subsection (3) of this section), -

"(A) The relevant cancellation is as a result of a prorata offer (as so defined) where the company has a fifteen percent capital reduction (as so defined); or

"(B) The relevant cancellation is not as a result of a prorata offer but the shareholder suffers a fifteen percent interest reduction (as so defined); and

"(ii) If the share is a fixed rate share -

"(A) The share was not issued or acquired by the shareholder under an arrangement for the company to acquire, redeem or otherwise cancel fixed rate shares; and

"(B) The relevant cancellation was not made, -

in lieu of the payment of dividends on shares other than fixed rate shares, whether in whole or in part; and

"(iii) The Commissioner is satisfied that neither the whole nor any part of the relevant cancellation was made in lieu of the payment of dividends, having regard to -

"(A) The nature and amount of dividends paid by the company prior or subsequent to the relevant cancellation;

"(B) The issue, or proposed issue, of shares in the company subsequent to the relevant cancellation;

"(C) The expressed purpose or purposes of the relevant cancellation; and

"(D) Any other relevant factor; and

"(iv) To the extent to which the amount returned does not exceed the amount calculated in accordance with the following formula -

(a + b) x c

where -

a is the subscribed capital amount (as defined in subsection (3) of this section); and

b is -

(A) In any case where the share is not a fixed rate share, the excess return amount; and

(B) In any case where the share is a fixed rate share, nil; and

c is -

(A) In any case where the amount returned on the relevant cancellation is less than the market value of the share at the time at which notice is first given by the company to the shareholder or, in any case where the relevant cancellation is proposed by the shareholder, by the shareholder to the company proposing the relevant cancellation, the fraction calculated by dividing the amount returned by the said market value of the share; and

(B) In any other case, 1.

"(ca) Any amount (whether in money or money’s worth) returned upon the redemption or other cancellation of any share in the company upon the liquidation of the company to the extent that the amount returned does not exceed the aggregate of -

"(i) The subscribed capital amount (as defined in subsection (3) of this section); and

"(ii) The excess return amount (as so defined):

"(cb) Except for the purposes of sections 4(7A) and (12), 99(5) and 394E(l)(ab) and (2)(ab) of this Act, any amount returned upon an on-market acquisition by the company of any share in the company:"

(2) Section 4A(1) of the principal Act is hereby further amended by repealing paragraph (h).

(3) Section 4A(2) of the principal Act is hereby amended by -

(a) In the definition of the term "capital gain amount" -

(i) Omitting, from each place where the words appear, the words "winding up" and substituting the word "liquidation"; and

(ii) Omitting the phrase "subsection (l)(c)" and substituting the phrase "subsection (l)(ca)":

(b) Repealing the definition of the term "non-qualifying capital" and substituting the following definition -

"On-market acquisition" means an acquisition by a company of a share in the company where -

(a) The company acquires the share per medium of a broker in a recognised exchange (as defined in section 8B of this Act) or some other similar agent independent of the company; and

(b) As a result, at the time of the acquisition the shareholder is not aware that the acquirer of the share is the company:":

(c) In the definition of the term "shares of the same class", repealing paragraph (b)(ii), (iii) and (iv) and substituting the following subparagraph -

"(ii) Distributions of assets of the company on any acquisition, redemption or other cancellation by the company of its shares or other reduction in or return of share capital of the company, whether on its liquidation or otherwise:":

(d) Repealing the definition of the term "specified payments".

(4) Section 4A of the principal Act is hereby further amended by repealing subsections (3), (3A) and (4) and substituting the following subsections -

"(3) For the purposes of this subsection and paragraphs (c) and (ca) of subsection (1) of this section, in relation to a share and a company referred to in those paragraphs, -

"Excess return amount" means the amount calculated in accordance with the following formula -

d + e
   f

where -

d is the aggregate of capital gain amounts of the company available for distribution to shareholders at the time of the acquisition, redemption or other cancellation (referred to in this definition as the relevant cancellation); and

e is, in any case where the relevant cancellation is upon the liquidation of the company, the total market value of capital assets of the company received by shareholders at the time of the relevant cancellation, to the extent such total market value exceeds the aggregate of -

(i) The total cost to the company of such assets; and

(ii) The total capital losses arising from the realisation of capital assets (other than realisations to which subsection (9) of this section applies) incurred in the income year in which the capital assets were received by the shareholders, in any subsequent income year or in any preceding income year (being a preceding income year that commences on or after the 1st day of April 1994), not being losses already taken into account under subsection (11) of this section in calculating capital gain amounts, -

and, in any other case, nil; and

f is the number of shares (other than fixed rate shares) in the company on issue at the time of the relevant cancellation:

"Fixed rate share" means a share where -

(a) The only dividend payable (disregarding any dividend payable on issue of the share) in respect of the share is payable at a rate which is -

(i) A specific fixed percentage of the amount subscribed in respect of the issue of the share; or

(ii) A percentage of the amount subscribed in respect of the issue of the share which is determined by a fixed relationship to economic, commodity, industrial or financial indices, or to banking rates or general commercial rates of interest; or

(iii) A percentage that would be of a kind referred to in subparagraph (i) or subparagraph (ii) of this paragraph but for any variation in the rate of dividend that may occur only -

(A) By a fixed relationship to a rate of income tax; or

(B) As may be necessary to compensate the shareholder for any default on the part of the paying company or any expenditure or loss suffered by the shareholder (or a person associated with the shareholder) in respect of the holding of the share; and

(b) Such rate is not set with a purpose and does not have an effect of defeating the intent and application of subsection (l)(c)(i) or (ii) of this section; and

(c) The holder of the share does not have, in respect of that share, any shareholder decision-making rights (as defined in section 8B of this Act) except to the extent of any such right which -

(i) Arises only in circumstances where the position of the holder of the share may be altered to the holder’s detriment; and

(ii) Is granted to the holder of the share for the purpose of assisting that holder to prevent such alteration; and

(iii) At the time of issue of the share is not expected to arise:

"Fifteen percent capital reduction" means, in respect of any company and any prorata offer, where the aggregate amount paid to those persons who accept the offer is equal to or greater than 15 percent of the market value of all shares in the company at the time the company first notified shareholders of the offer:

"Fifteen percent interest reduction" means, in respect of any company and any acquisition, redemption or other cancellation (referred to in this definition as the relevant cancellation) by the company of any share of a shareholder in the company, where, as a result of the relevant cancellation (together with any other acquisitions, redemptions or other cancellations of shares (other than fixed rate shares) in the company occurring at the same time), the aggregate voting interests in the company immediately after the relevant cancellation of the shareholder and all persons associated with the shareholder (not being persons associated with the shareholder merely by virtue of being relatives of the shareholder, unless a spouse or minor child of the shareholder or a trustee for such spouse or minor child) (the counted associates being referred to in this definition as the relevant associates) do not exceed 85% of the aggregate voting interests in the company of the shareholder and the relevant associates immediately before the relevant cancellation and, in any case where at the time of the relevant cancellation a market value circumstance exists in respect of the company, the aggregate market value interests in the company of the shareholder and the relevant associates immediately after the relevant cancellation do not exceed 85% of the aggregate market value interests of the shareholder and the relevant associates immediately before the relevant cancellation:

"Fully credited" means, in respect of any dividend, that part of the dividend which is calculated by multiplying the dividend (exclusive of any imputation credit (as defined in section 394A(1) of this Act) or dividend withholding payment credit (as so defined) attached to the dividend) by the lesser of 1 and the following fraction -

a
-
b

where -

a is the combined imputation ratio (as so defined) and dividend withholding payment ratio (as defined in section 394ZK(1) of this Act) of the dividend; and

b is the maximum imputation ratio specified in section 394G(1) of this Act:

"Ineligible capital amounts" means, in any case where a company (referred to in this definition as the acquiring company) issues shares for consideration received, directly or indirectly and whether by one or a series of transactions, in the form of shares in another company (referred to in this definition as the acquired company), subscribed capital amounts of shares in the acquired company to the extent that -

(a) Such subscribed capital amounts are attributable to shares issued -

(i) In anticipation of the acquisition by the acquiring company of the shares in the acquired company; and

(ii) In consideration for cash or other liquid property; and

(b) Such subscribed capital amounts do not exceed consideration provided or to be provided in the form of cash or other liquid property (not being shares in the acquiring company) by the acquiring company in consideration for the acquisition of shares in the acquired company:

"Prorata offer" means an offer by a company to all persons holding shares (other than fixed rate shares) in the company to acquire, redeem or otherwise cancel all or part only of each such person’s shares (other than fixed rate shares) in the company where, if each such person were to accept the offer, the resultant acquisition, redemption or other cancellation would not alter the voting interest (or, in any case where at the time a market value circumstance exists in respect of the company, market value interest) of any person in the company:

"Subscribed capital amount" means the amount calculated in accordance with the following formula:

e + f - g
     h

where -

e is -

(i) In the case of any company which existed before the [application date], the transitional capital amount; and

(ii) In any other case, nil; and

f is the aggregate amount of consideration received by the company on or after the [application date] and prior to the acquisition, redemption or other cancellation, in respect of the issue of all shares in the company of the same class as the share being acquired, redeemed or otherwise cancelled (referred to in this subsection as the specified class), including as consideration -

(i) In the case of any bonus issue in lieu made on or after the [application date], the amount of money or money’s worth offered as an alternative to such bonus issue; and

(ii) In the case of any taxable bonus issue (other than a bonus issue in lieu) made on or after the [application date], the amount of the dividend arising in respect of the taxable bonus issue, -

but not including -

(iii) Any amount in respect of any other bonus issue; or

(iv) Any amount in respect of any taxable bonus issue (except to the extent fully credited) made to a shareholder who was exempt from income tax in respect of the bonus issue under section 63 of this Act; or

(v) Any consideration received by the company which is primarily attributable, directly or indirectly, to the payment by the company (or by any other company associated at the time of payment with the company) of a dividend (except to the extent fully credited) to a shareholder who was -

(A) Exempt from income tax under section 63 of this Act; and

(B) Not required by section 394ZL of this Act to deduct an amount by way of dividend withholding payment, -

in respect of the dividend; or

(vi) The amount of any consideration received by the company, directly or indirectly and whether by one or a series of transactions, in the form of shares in another company to the extent to which such consideration exceeds the aggregate subscribed capital amounts (calculated after deducting ineligible capital amounts) in respect of such shares in the other company at the date of the receipt; or

(vii) Any amount included in calculating the transitional capital amount in respect of the company; and

g is the aggregate amount of subscribed capital amounts returned -

(i) Upon the acquisition, redemption or other cancellation by the company of shares in the company of the specified class; and

(ii) On or after the [application date] and before the relevant acquisition, redemption or other cancellation; and

(iii) Excluded from the meaning of the term "dividends" by subsection (l)(c) or (ca) of this section; and

h is the aggregate number of shares of the specified class on issue immediately before the time of the acquisition, redemption or other cancellation:

"Transitional capital amount" means the amount calculated in accordance with the following formula -

i + j
----- x l
  k

where -

i is the aggregate amount of capital paid up before the [application date] in respect of shares of the specified class (whenever issued), not being -

(i) An amount paid up by a bonus issue made after the 31st day of March 1982 and before the 1st day of October 1988, except where -

(A) The date of the acquisition, redemption or other cancellation falls more than ten years after the date of the bonus issue; or

(B) The amount was paid-up by way of application of any capital gain amount or amount of qualifying share premium; or

(ii) An amount paid up by a bonus issue (other than a taxable bonus issue) made on or after the 1st day of October 1988, except where the amount was paid-up by way of application of any capital gain amount or amount of qualifying share premium; and

j is the aggregate amount of qualifying share premium paid to the company before the [application date] in respect of shares of the specified class (whenever issued), not being an amount subsequently (before the [application date]) applied to pay up capital on shares in the company; and

k is the number of shares in the specified class ever issued before the close of the [day preceding the application date]; and

l is the number of shares in the specified class on issue at the close of the [day preceding the application date].

"(4) For the purposes of subsection (l)(c) and (ca) of this section, in determining the amount not included within the term "dividends" on any acquisition, redemption or other cancellation by the company of a share in the company (whether upon liquidation of the company or otherwise), where any consideration paid to the company (in money or money’s worth) in respect of the issue of shares in the company is denominated and payable in a currency other than New Zealand currency, the consideration paid to the company shall be deemed to be equal to the consideration paid in the currency other than New Zealand currency converted into New Zealand currency as if that consideration had been paid on the date of the acquisition, redemption or other cancellation.

(5) Section 4A(6) of the principal Act is hereby amended by omitting the phrase "subsection (l)(c)" and substituting the phrase "subsection (l)(ca)".

(6) Section 4A(7) of the principal Act is hereby amended by omitting the phrase "subsection (l)(c)" and substituting the phrase "subsection (l)(ca)".

(7) Section 4A(8)(a)(ii) of the principal Act is hereby amended by omitting the word "made" and substituting the word "realised".

(8) Section 4A(10) of the principal Act is hereby amended by -

(a) Omitting the words "private company within the meaning of the Companies Act 1955" and substituting the words "closely-held company":

(b) Omitting the words "winding up" and substituting the word "liquidation".

(9) Section 4A(11) of the principal Act is hereby amended by -

(a) Omitting the phrase "subsection (l)(c)" and substituting the phrase "subsection (l)(c) and (ca)":

(b) Omitting the words "a profit or gain which is not included in the assessable income of the company for any income year" and substituting the words "capital gain amounts".

OO. Meaning of term source deduction payment - Section 6 of the principal Act is hereby amended by omitting, from each place where it appears, the word "private" and substituting in each place the words "closely-held".

OO. Defining when a company is under the control of any persons - Section 7 of the principal Act is hereby repealed and the following section inserted -

"7. Defining when company is under control of any persons - (1) For the purposes of this Act, a company shall be deemed to be under the control at any time of the persons -

"(a) The aggregate of whose direct voting interests (as defined in section 8B of this Act) in the company at the time exceeds 50 percent; or

"(b) In any case where at the time a market value circumstance exists in respect of the company, the aggregate of whose direct market value interests (as so defined) in the company at the time exceeds 50 percent; or

"(c) Who have at the time control of the company by any other means whatsoever.

"(2) For the purposes of this section, where any person (referred to in this subsection as the nominee) holds any rights at any time on behalf of or to the order of another person, the rights shall be deemed to be held at the time by the other person as well as by the nominee, as if the nominee, the other person and all other such nominees of the other person were at the time a single person."

OO. Defining when 2 persons are associated persons - Section 8 of the principal Act is hereby repealed and the following section substituted -

"8. Defining when 2 persons are associated persons - (1) For the purposes of this Act, unless the context otherwise requires, at any time associated persons or persons associated with each other are -

"(a) 2 companies where at the time there is a group of persons -

"(i) The aggregate of whose voting interests in each company is equal to or exceeds 50 percent; or

"(ii) In any case where at the time a market value circumstance exists in respect of either company, the aggregate of whose market value interests in each company is equal to or exceeds 50 percent; or

"(iii) Who have control of both companies by any other means whatsoever; or

"(b) A company and any person (other than a company) where at the time -

"(i) The person has a voting interest in the company equal to or exceeding 25 percent; or

"(ii) In any case where at the time a market value circumstance exists in respect of the company, the person has a market value interest in the company equal to or exceeding 25 percent; or

"(c) 2 persons who are at the time relatives; or

"(d) A partnership and any person who is -

"(i) At the time a partner in the partnership; or

"(ii) A person associated at the time (under any of the other provisions of this subsection) with a partner in the partnership.

"(2) For the purposes of subsection (l)(a) and (b) of this section, where any person (referred to in this subsection as the nominee) holds any rights at any time -

"(a) On behalf of or to the order of another person; or

"(b) Being a relative at the time of another person, -

the rights shall be deemed to be held at the time by the other person as well as by the nominee, as if the nominee, the other person and all other such nominees of the other person were at the time a single person.

OO. Interpretation - voting and market value interests - Section 8B of the principal Act is hereby amended by -

(a) Repealing the definition of the term "closely-held company":

(b) Omitting from the definition of the term "shareholder decision-making rights" the phrase "winding-up" and substituting the word "liquidation".

OO. Commissioner may in certain cases demand special returns, and make special assessments - Section 12(l)(f) of the principal Act is hereby amended by omitting the words "wound up" and substituting the word "liquidated".

OO. Incomes wholly exempt from tax - Section 61(34) of the principal Act is hereby amended by omitting the words "memorandum, articles of association" and substituting the word "constitution".

OO. Income and expenditure where financial arrangement redeemed or disposed of - Section 64F(l)(c)(ii) of the principal Act is hereby amended by omitting the words "or by any deed" and substituting the words "or the Companies Act 1993 or the laws of any country or territory other than New Zealand or by any deed or agreement".

OO. Shareholder-employee and shareholder superannuation contributions etc. - Section 65A of the principal Act is hereby repealed.

OO. Profits or gains from land transactions - (1) Section 67(2) of the principal Act is hereby amended by repealing paragraphs (a) and (b) and substituting the following paragraphs -

"(a) Any 2 companies where there is a group of persons -

"(i) The aggregate of whose voting interests in each company is equal to or exceeds 50 percent; or

"(ii) In any case where a market value circumstance exists in respect of either company, the aggregate of whose market value interests in each company is equal to or exceeds 50 percent; or

"(iii) Who have control of both companies by any other means whatsoever; or

"(b) A company and any person (other than a company) where -

"(i) The person; and

"(ii) Any spouse of the person; and

"(iii) Any infant child of the person; and

"(iv) Any trustee for such spouse or infant child, -

have, when aggregated, a voting interest in the company equal to or exceeding 25 percent or, in any case where a market value circumstance exists in respect of the company, a market value interest in the company equal to or exceeding 25 percent; or"

(2) Section 67 of the principal Act is hereby further amended by repealing subsection (3) and substituting the following subsection -

"(3) For the purposes of subsection (2)(a) and (b) of this section, where any person (referred to in this subsection as the nominee) holds, directly or indirectly, any rights at any time on behalf of or to the order of another person, the rights shall be deemed to be held by the other person as well as by the nominee, as if the nominee, the other person and all other such nominees of the other person were at the time a single person.

OO. Amounts remitted to be taken into account in computing income - Section 78(2)(b) of the principal Act is hereby amended by omitting the words ", or by any deed" and substituting the words "or the Companies Act 1993 or the laws of any country or territory other than New Zealand or by any deed or agreement".

OO. Payment of excess salary or wages etc - Section 97(1)(a) of the principal Act is hereby amended by omitting the word "proprietary" and substituting the words "closely-held".

OO. Certain deductions not permitted - Section 106(1) of the principal Act is hereby amended by repealing paragraph (j) and substituting the following paragraph -

"(j) Any expenditure or loss to the extent to which it is of a private or domestic nature:"

OO. Gifts of money by companies not closely-held - Section 147 of the principal Act is hereby amended by -

(a) Repealing subsection (1):

(b) Omitting, from subsection (2) in each place where the phrase appears, the phrase "public company" and substituting in each place the phrase "company (not being a closely-held company)".

OO. Contributions to employees’ superannuation schemes - Section 150 of the principal Act is hereby amended by repealing subsection (l)(d) and (e) and subsections (2) and (3) to (7).

OO. Pensions payable to former employees - Section 151(2) of the principal Act is hereby amended by omitting the word "proprietary" and substituting the words "closely-held".

OO. Notional interest on loans made to employees under employee share purchase scheme -Section 166 of the principal Act is hereby amended by repealing subsections (2) and (3).

OO. Refund from income equalisation reserve account of company on winding-up - Section 183 of the principal Act is hereby amended by -

(a) Omitting the words "wound up" and substituting the word "liquidated":

(b) Omitting the words "winding up" from both places where those words appear and substituting in each case the word "liquidation".

OO. Losses incurred may be set off against future profits - Section 188(6) of the principal Act is hereby amended by inserting, after the words "Companies Act 1955", the words "or the Companies Act 1993 or the laws of any country or territory other than New Zealand".

OO. Excessive remuneration by proprietary company to shareholder, director or relative -Section 190 of the principal Act is hereby amended by omitting the word "proprietary" and substituting the words "closely-held".

OO. Amalgamation - The principal Act is hereby amended by inserting the following heading and section after section 191WC of the principal Act -

"Amalgamation

"191WD. Amalgamation of companies - (1) For the purposes of this section -

"Amalgamated company" means the one company which is the result of and continues after an amalgamation, which may be one of the amalgamating companies or a new company;

"Amalgamating companies" means the two or more companies which amalgamate under an amalgamation:

"Amalgamation" means any amalgamation under Part VA or VC of the Companies Act 1955 or Part XIII or XV of the Companies Act 1993 or the law of any country or territory other than New Zealand which is to the same or similar effect, whereby two or more companies amalgamate and continue as one company:

"Financial arrangement" has the meaning assigned to that term by section 64B(1) of this Act:

"Issuer" has the meaning assigned to that term by section 64B(1) of this Act:

"Qualifying amalgamation" means any amalgamation where -

"(a) Each of the amalgamating companies and the amalgamated company is an eligible company (as defined in section 191D of this Act); and

"(b) If any of the amalgamating companies is a qualifying company (as defined in section 393B of this Act), each of the amalgamating companies and the amalgamated company is a qualifying company:

"Trading stock" has the meaning assigned to that term by section 85(1) of this Act.

"(2) Where an amalgamation occurs, each amalgamating company shall, within 63 working days of the date upon which documents evidencing the amalgamation are delivered to the Registrar of Companies for registration under Part VA or VC of the Companies Act 1955 or Part XIII or XV of the Companies Act 1993 (or the date upon which the equivalent procedure occurs under foreign law), give notice in writing to the Commissioner in such form as the Commissioner may approve, detailing -

"(a) The name and tax file number (if any) of each amalgamating company and the amalgamated company; and

"(b) The date upon which the amalgamation has effect; and

"(c) In any case where the amalgamated company has a non-standard balance date, the non-standard balance date; and

"(d) Such other information as the Commissioner may require.

"(3) Where any amalgamated company issues any shares on an amalgamation in consideration for the cancellation of or in respect of the conversion of any shares (not being shares held by another amalgamating company) in an amalgamating company, for the purposes of this Act in calculating the subscribed capital amount (as defined in section 4A(3) of this Act) of those shares of the amalgamated company, the aggregate consideration for which those shares of the amalgamated company have been issued shall be deemed to be equal to the aggregate subscribed capital amounts of those shares of the amalgamating company at the date of the amalgamation, after deducting any such subscribed capital amounts attributable to shares issued -

"(a) In anticipation of the amalgamation; and

"(b) In consideration for cash or other liquid property, -

which do not exceed, in aggregate, consideration provided or to be provided in the form of cash or other liquid property (not being shares in the amalgamated company) to the holders of shares in the amalgamating company in consideration for the amalgamation.

"(4) Where -

"(a) Any shares in an amalgamated company held by an amalgamating company are cancelled on an amalgamation; and

"(b) Any other shares of the same class (as defined in section 4A(2) of this Act) held by persons other than an amalgamating company remain on issue notwithstanding the amalgamation, -

for the purposes of this Act in calculating the subscribed capital amount (as defined in section 4A(3) of this Act) of shares of that class on issue after the amalgamation, the amount of item g in the definition of the term subscribed capital amount in section 4A(3) of this Act shall be increased by the amount calculated in accordance with the following formula -

a x b

where -

a is the number of shares cancelled; and

b is the subscribed capital amount of each such share immediately prior to the amalgamation.

"(5) Where shares in any amalgamating company are -

"(a) Held by an amalgamating company; and

"(b) Trading stock of the shareholder or otherwise shares in respect of which any profit or gain derived on disposition would be required to be taken into account in calculating the assessable income of the shareholder; and

"(c) Cancelled on the amalgamation, -

for the purposes of this Act, the shares shall be deemed to have been disposed of by the shareholder immediately prior to the amalgamation for a consideration equal to -

"(d) In any case of trading stock held by the shareholder at the beginning of the income year in which the amalgamation takes place, the value of such trading stock at the beginning of the income year as determined under section 85 of this Act; or

"(e) In any other case, the cost to the shareholder of the shares.

"(6) Where any amalgamating company ceases to exist on an amalgamation, the amalgamated company shall, in accordance with section 209G of the Companies Act 1955 or section 225 of the Companies Act 1993, comply with all obligations of, and be entitled to all rights of, the amalgamating company under this Act with respect to the income year in which the amalgamation occurs and all preceding income years.

"(7) Where and to the extent that -

"(a) Any amalgamating company ceases to exist on an amalgamation; and

"(b) Before the amalgamation the amalgamating company supplies any services; and

"(c) The consideration in respect of those services is received by the amalgamated company after the amalgamation; and

"(d) The consideration would have been assessable income of the amalgamating company but is not, but for this subsection, assessable income of the amalgamated company, -

the consideration shall be assessable income of the amalgamated company.

"(8) Where any amalgamated company, on an amalgamation other than a qualifying amalgamation, acquires any property of an amalgamating company, or succeeds to any obligations of an amalgamating company in respect of a financial arrangement of which the amalgamating company was the issuer, for the purposes of this Act, -

"(a) The amalgamating company shall be treated as having disposed of the property or relieved itself of the obligations immediately before the amalgamation; and

"(b) The amalgamated company shall be treated as having acquired the property or assumed the obligations immediately after the amalgamation, -

for a consideration equal to the market value of the property, or market price for assuming such obligations, at the time.

"(9) Where any amalgamated company, on a qualifying amalgamation, acquires any property of an amalgamating company, for the purposes of this Act -

"(a) Except where paragraph (c) of this subsection applies, section 191N(1) to (4) of this Act shall apply as if -

"(i) The amalgamating company had disposed of the property and the amalgamated company had acquired the property at the time of the amalgamation; and

"(ii) The amalgamating company and the amalgamated company were at the time and at all times thereafter members of the same consolidated group; and

"(iii) The amalgamated company were the nominated company (as defined in section 191D of this Act) for the consolidated group; and

"(iv) The amalgamated company’s return of income were the consolidated group’s return of income; and

"(v) The reference in section 191N(4)(a)(iv) to deduction of such loss from the assessable income of the consolidated group for the income year under section 1910 of this Act were instead a reference to deduction of such loss from the assessable income of the amalgamated company for the income year under subsection (11) of this section; and

"(b) Where the property is trading stock for both the amalgamating company and the amalgamated company, the amalgamating company shall be deemed to have disposed of the trading stock and the amalgamated company shall be deemed to have acquired the trading stock -

"(i) In any case of trading stock held by the amalgamating company at the beginning of the income year in which the amalgamation takes place, the value of such trading stock at the beginning of the income year as determined under section 85 of this Act; or

"(ii) In any other case, the cost to the amalgamating company of the trading stock; and

"(c) In any case where the property is either trading stock of the amalgamating company or otherwise property in respect of which any profit or gain on disposition would be required (other than under section 117 of this Act) to be taken into account in calculating assessable income of the amalgamating company (referred to in this paragraph as revenue property) and is neither trading stock nor revenue property of the amalgamated company, the amalgamating company shall be deemed to have disposed of the property and the amalgamated company shall be deemed to have acquired the property at the time of the amalgamation for a consideration equal to its market value at the time.

"(10) Where any amalgamated company succeeds, on a qualifying amalgamation, to the obligations of an amalgamating company in respect of a financial arrangement to which sections 64B to 64L of this Act apply of which the amalgamating company was the issuer, then, notwithstanding section 64J of this Act, for the purposes of this Act -

"(a) In any case where -

"(i) The method of calculating expenditure or income in respect of the financial arrangement under section 64C of this Act remains the same notwithstanding the amalgamation; and

"(ii) The amalgamated company so elects by filing accordingly its return of income for the income year; and

"(iii) Neither the amalgamating company nor the amalgamated company is entitled, under section 188 of this Act, to claim to carry forward to the income year and deduct or set off any loss incurred by it in any preceding income year (except where the whole of such loss may be deducted from the assessable income of the amalgamated company for the income year under subsection (11) of this section), -

with respect to the income year in which the amalgamation takes place and each subsequent income year -

"(iv) The amalgamating company shall be treated as if it had never been the issuer of the financial arrangement prior to the amalgamation, with the result that section 64F of this Act does not apply to the amalgamating company with respect to the succession; and

"(v) The amalgamated company shall be treated as if it had -

"(A) Issued the financial arrangement at the same time and for the same acquisition price as the amalgamating company; and

"(B) Incurred all expenditure and derived all other gains incurred or derived by the amalgamating company with respect to the financial arrangement before the succession; and

"(C) Included in its returns of income under this Act the same amounts of expenditure and income with respect to the financial arrangement as were included by the amalgamating company; and

"(b) In any other case where the method of calculating income or expenditure in respect of the financial arrangement under section 64C of this Act remains the same notwithstanding the amalgamation, the consideration for which the succession has taken place shall be deemed to be equal to such amount as will result in the base price adjustment in relation to the amalgamating company calculated in respect of the succession under section 64F of this Act being such amount (whether negative, positive, or a nil amount) as will result effectively in a fair and reasonable allocation, having regard to the tenor of section 64C of this Act, between the amalgamating company and the amalgamated company, of the expenditure or income which would have been deemed to be incurred or derived by the amalgamating company in respect of the financial arrangement in the income year in which the amalgamation takes place had the amalgamation not taken place; and

"(c) In any other case, the consideration for which the succession takes place shall be deemed to be equal to the market price for which an assumption of such obligations would have taken place at the date of amalgamation.

"(11) Where -

"(a) Any amalgamating company ceases to exist on a qualifying amalgamation; and

"(b) The amalgamating company has, in respect of an income year (referred to in this subsection as the income year of loss), incurred a loss, an attributed foreign loss (as defined in section 245A of this Act) or a foreign investment fund loss (as so defined) or a tax credit available for crediting under section 245K(1) of this Act; and

"(c) The loss has not, under section 188,191 A, 245M, 245N, 245RJ or 245RK of this Act, been deducted from or set off against assessable income derived by the amalgamating company or any other company in any period prior to the amalgamation (including any part of the income year in which the amalgamation takes place) or the tax credit has not, under section 245K or 245L of this Act, been credited against the income tax payable by any such company in respect of any such period; and

"(d) Under section 191A, 245N or 245RK of this Act, the loss could have been deducted from, or set off against, assessable income (on the assumption that there was sufficient such income) derived, in that part of the income year of the relevant company which ends with the date of the amalgamation, by each of the amalgamated company (unless it is a company incorporated only on the amalgamation) and any company which has, at any time prior to or during the income year in respect of which the loss is deducted or set off under this subsection, amalgamated with the amalgamated company or, under section 245L of this Act, the credit could have been credited against income tax payable (if any) in respect of such period by such companies, -

the loss shall be treated as if incurred by the amalgamated company and may be deducted from or set off against, under section 188, 191A, 245M, 245N, 245RJ or 245RK of this Act, or the tax credit shall be treated as a tax credit of the amalgamated company and may be credited, under section 245K or 245L of this Act, against income tax payable in respect of, assessable income derived by the amalgamated company or any other company in periods commencing on or after the amalgamation but applying section 188 and 191 A(l)(b) of this Act (and any other provisions of this Act the application of which is dependent upon the application of those provisions) as if, with respect to all periods prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares as the amalgamating company.

"(12) Where losses incurred by or tax credits of two or more amalgamating companies are permitted under subsection (11) of this section to be deducted from, or set off against income tax payable in respect of, the assessable income derived in an income year by the amalgamated company, those losses or tax credits shall -

"(a) If incurred, or resulting from tax payable, in 2 or more income years, be deducted in the same order as incurred or arising; and

"(b) If incurred, or resulting from tax payable, in the same income year, be deducted or credited, so far as the assessable income or tax extends, -

"(i) In the order elected by the amalgamated company by notice to the Commissioner in such form as the Commissioner may allow; or

"(ii) If no such election is made, on a pro rata basis.

"(13) Where any amalgamating company ceases to exist on an amalgamation, the residual income tax of the amalgamated company in the income year preceding the income year in which the amalgamation takes place shall be deemed, for the purposes of Part XII of this Act (but only with respect to instalments of provisional tax payable after the amalgamation), to be equal to the amount which would have been such residual income tax had the amalgamating company and the amalgamated company always been one company.

"(14) Where any amalgamating company ceases to exist upon a qualifying amalgamation -

"(a) If, immediately before the amalgamation, a credit or debit exists, determined by applying the procedure set out in section 394E(4), 394ZW(4) or 394ZZP(6) of this Act, in the amalgamating company’s imputation credit account (as defined in section 394A of this Act), dividend withholding payment account (as so defined), branch equivalent tax account (as so defined) or policyholder credit account (as so defined), the credit or debit shall be treated with effect from the time of the amalgamation as a credit or debit in the equivalent account of the amalgamated company (or, if the amalgamated company does not have an equivalent account and except in the case of a branch equivalent tax account credit or debit, in its imputation credit account) and not as a credit or debit in the relevant account of the amalgamating company but applying section 394E(l)(g), 394ZW(l)(f) and 394ZZP(l)(e) and (3)(d) of this Act as if, with respect to all periods prior to the amalgamation, the amalgamated company did not separately exist and was instead the amalgamating company with the same holders of shares and options over shares as the amalgamating company; and

"(b) Any credit (not being a credit arising under section 394ZZP(l)(e) of this Act) or debit (not being a debit arising under section 394E(l)(g), 394ZW(l)(f) or 394ZZP(3)(d) of this Act) would have arisen, but for the amalgamation, to be recorded in the imputation credit account, dividend withholding payment account or branch equivalent tax account of the amalgamating company on a date after the amalgamation, the credit or debit shall instead arise to be recorded in the equivalent account of the amalgamated company (or, if the amalgamated company does not have an equivalent account and except in the case of a branch equivalent tax account credit or debit, its imputation credit account); and

"(c) Sections 394M and 394ZO of this Act shall apply with effect from the time of the amalgamation, with any necessary modifications, in respect of any tax paid by the amalgamating company as if it and the amalgamated company were a single company.

OO. Deduction for dividends paid on certain preference shares - (1) Section 194(2) of the principal Act is hereby amended by omitting the words "private company (as defined in section 2 of the Companies Act 1955)" and substituting the words "closely-held company".

(2) Section 194(5) of the principal Act is hereby amended by -

(a) Omitting the words "nominal value" and substituting the words "subscribed capital amount (as defined in section 4A(3) of this Act)":

(b) Omitting the words "ordinary paid-up capital" and substituting the words "subscribed capital amount (as so defined) of all the ordinary shares".

OO. Interest on debentures issued in substitution for shares - Section 195(2) of the principal Act is hereby amended by -

(a) Omitting the words "nominal value or to the paid-up value" and substituting the words "subscribed capital amount (as defined in section 4A(3) of this Act)":

(b) Omitting the words "wound up" and substituting the word "liquidated".

OO. Distribution of trading stock to shareholders of company - Section 197(2) of the principal Act is hereby amended by omitting the words "winding up" and substituting the word "liquidation".

OO. Primary producer co-operative companies - Section 197G(5) of this Act is hereby amended by -

(a) Omitting the words "paid-up value" and substituting the words "subscribed capital amount (as defined in section 4A(3) of this Act)":

(b) Omitting the words "winding up" and substituting the word "liquidation".

OO. Non-resident may elect to be treated as resident - Section 204M(3) of the principal Act is hereby amended by omitting the word "allotted" and substituting the word "issued".

OO. Special partnerships - Section 211B(10)(b) of the principal Act is hereby amended by omitting the words ", or by any deed" and substituting the words "or the Companies Act 1993 or the laws of any country or territory other than New Zealand or by any deed or agreement".

OO. Interpretation - petroleum mining - Section 214D(1) of the principal Act is hereby amended by omitting the words "and with the requirements of the Companies Act 1955" from both places where those words appear.

OO. Associated persons - Section 214E(1) of the principal Act is hereby amended by repealing paragraphs (a) and (b) and substituting the following paragraphs -

"(a) Any 2 companies where there is a group of persons -

"(i) The aggregate of whose voting interests in each company is equal to or exceeds 50 percent; or

"(ii) In any case where a market value circumstance exists in respect of either company, the aggregate of whose market value interests in each company is equal to or exceeds 50 percent; or

"(iii) Who have control of both companies by any other means whatsoever; or

"(b) A company and any person (other than a company) where -

"(i) The person has a voting interest in the company equal to or exceeding 50 percent; or

"(ii) In any case where a market value circumstance exists in respect of the company, the person has a market value interest in the company equal to or exceeding 50 percent; or"

OO. Profit or gain from sale of mining shares by companies - Section 218 of the principal Act is hereby amended by -

(a) Omitting from subsections (3) and (10) the word "allotted" and substituting in each case the word "issued":

(b) Omitting from subsection (9) the words "winding up" from both places where those words appear and substituting in each case the word "liquidation".

OO. Interpretation - trusts - Section 226(1) of the principal Act is hereby amended by -

(a) Repealing the definition of the term "arrangement":

(b) Omitting from the definition of the term "disposition of property" the word "allotment" and substituting the word "issue".

OO. Interpretation - attributed foreign income - Section 245A(1) of the principal Act is hereby amended by omitting, from the definition of the term "accounting period", the words "winding up" and substituting the word "liquidation".

OO. Definition of term "associated persons" - (1) Section 245B(a) of the principal Act is hereby amended by omitting subparagraphs (i) and (ii) and substituting the following subparagraph -

"(i) Any group of persons -

"(A) Has voting interests in each of those companies totalling in aggregate 50 percent or more; or

"(B) In any case where a market value circumstance exists in respect of either company, has market value interests in each of those companies totalling in aggregate 50 percent or more; or

"(C) Has control of each of those companies by any other means whatsoever; or"

(2) Section 245B(h)(ii) of the principal Act is hereby amended by omitting the words "25 percent or more of the paid-up capital of and substituting the words "a direct voting interest (as defined in section 8B of this Act), or, where a market value circumstance exists in respect of the settlor, a direct market value interest (as so defined), of 25 percent or more in".

(3) Section 245B(i)(ii) of the principal Act is hereby amended by omitting the words "25 percent or more of the paid-up capital of and substituting the words "a direct voting interest (as defined in section 8B of this Act), or, where a market value circumstance exists in respect of the other person, a direct market value interest (as so defined), of 25 percent or more in".

OO. Calculation of control interest - Section 245C(4) of the principal Act is hereby amended by -

(a) Repealing paragraphs (a) and (b) and substituting the following paragraph -

"(a) The percentage of the total shares (measured by reference to their subscribed capital amounts (as defined in section 4A(3) of this Act)) of the foreign company:":

(b) Omitting from paragraph (e) the words "winding up" and substituting the word "liquidation".

OO. Calculation of income interest - Section 245D(2) of the principal Act is hereby amended by -

(a) Repealing paragraphs (a) and (b) and substituting the following paragraph -

"(a) The percentage of the total shares (measured by reference to their subscribed capital amounts (as defined in section 4A(3) of this Act)) of the foreign company:":

(b) Omitting from paragraph (e) the words "winding up" and substituting the word "liquidation".

OO. Variation in control or income interests - Section 245E(1) of the principal Act is hereby amended by repealing, from the definition of the term "foreign company aggregates", paragraphs (a) and (b) and substituting the following paragraph -

"(a) The subscribed capital amounts (as defined in section 4A(3) of this Act) of shares in the foreign company:"

OO. Brandi equivalent income calculation - Section 245J(12) of the principal Act is hereby repealed.

OO. Liability for tax payable by company left with insufficient assets - (1) Section 276(1) of the principal Act is hereby amended by omitting the phrase "Companies Act 1955" and substituting the phrase "Companies Act 1993".

(2) Section 276 of the principal Act is hereby further amended by -

(a) Omitting the words "wound up" from each place in subsections (8) and (10) where those words appear and substituting in each case the word "liquidated":

(b) Omitting from subsection (8) the words "winding-up" and substituting the word "liquidation".

OO. New interpretation provision in relation to non-resident withholding tax - Section 309(2)(a)(ii) of the principal Act is hereby amended by -

(a) Omitting the phrase "section 4A(l)(c)" and substituting the phrase "section 4A(l)(ca)":

(b) Omitting the words "winding-up" in each case where those words appear and substituting in each case the word "liquidation".

OO. Deduction of resident withholding tax - Section 327C(1) of the principal Act is hereby amended by -

(a) Omitting from paragraph (c) the words "taxable bonus issue" and substituting the words "bonus issue in lieu":

(b) Repealing paragraph (d) and substituting the following paragraph -

(d) To the extent to which that payment consists of dividends being a bonus issue in lieu, the amount calculated in accordance with the following formula:

(a x (b + c)) - c

where -

a is the rate of resident withholding tax, expressed as a percentage, specified in clause 2 of the Nineteenth Schedule to this Act; and

b is the amount of the money or money’s worth offered as an alternative to the bonus issue (before the deduction of resident withholding tax); and

c is -

(A) In the case of any dividend paid in relation to shares issued by a company that is at the time of payment not resident in New Zealand, the amount of foreign withholding tax paid or payable in respect of that amount of dividend paid; or

(B) In the case of any other dividend, the aggregate of the amounts of any imputation credit attached to the dividend and any dividend withholding payment credit attached to the dividend:

OO. Records to be kept - Section 327P(6)(b)(iii) of the principal Act is hereby amended by omitting the words "wound-up and dissolved" and substituting the word "liquidated".

OO. Interpretation - fringe benefit tax - Section 336N(1) of the principal Act is hereby amended by omitting, from the definition of the term "shareholder-employee" -

(a) The words "private company (as defined in section 2 of the Companies Act 1955)" and substituting the words "closely-held company":

(b) The word "private".

OO. Payment of fringe benefit tax on income year basis in respect of shareholder-employees -Section 336TB(1) of the principal Act is hereby amended by omitting the words "private company as defined in section 2 of the Companies Act 1955" and substituting the words "closely-held company".

OO. Tax deductions to be credited against tax assessed - Section 362(2) of the principal Act is hereby amended by omitting the words "private company within the meaning of the Companies Act 1955" and substituting the words "closely-held company".

OO. Recovery of tax deductions from employers - Section 365(2) of the principal Act is hereby amended by repealing paragraph (b) and substituting the following paragraphs -

"(b) Where the employer is a company, upon the liquidation of the company, the amount of the tax deduction shall have the ranking provided for in the Seventh Schedule to the Companies Act 1993 (whether or not the company has been incorporated or registered under that Act); and

"(c) Where the employer is a company, upon the appointment of a receiver on behalf of the holder of any debenture given by the company secured by a charge over any property of the company or upon possession being taken on behalf of the debenture holder of the property, the amount of the tax deduction shall have the ranking provided for in the Seventh Schedule to the Companies Act 1993 (whether or not the company has been incorporated or registered under that Act), as if the receiver were a liquidator.

OO. Unpaid tax deductions etc. to constitute charge on employer’s property - Section 367(1) of the principal Act is hereby amended by inserting, after the words "Companies Act 1955" the words "or the Companies (Registration of Charges) Act 1993".

OO. Determination of assessable income - Section 374B(l)(g) of the principal Act is hereby amended by omitting the words "private company (as defined in section 2 of the Companies Act 1955)" and substituting the words "closely-held company".

OO. Guaranteed minimum family income credit of tax - Section 374E(1) of the principal Act is hereby amended by omitting from paragraph (c) of the definition of the term "employment" the words "private company (as defined in section 2 of the Companies Act 1955)" and substituting the words "closely-held company".

OO. Qualifying company regime - Section 393 of the principal Act is hereby amended by omitting the words "closely held".

OO. Period of grace for new election - Section 393F(3) of the principal Act is hereby amended by omitting the word", allotment,".

OO. Revocation of loss attribution elections, and new elections - Section 393O(2) of the principal Act is hereby amended by omitting the words "or allotment".

OO. Taxation on election to become qualifying company - Section 393K(2) of the principal Act is hereby amended by -

(a) Omitting the words "wound up" and substituting the word "liquidated":

(b) Repealing paragraph (iv) of the definition of item a and substituting the following paragraph -

"(iv) Paragraph (i) of the definition of item i of the definition of the term "transitional capital amount" in section 4A(3) of this Act were repealed; and"

OO. Dividends from qualifying company - Section 393M(l)(a) of the principal Act is hereby amended by repealing paragraph (ii) and substituting the following paragraph -

"(ii) The amount of the dividend which would not be a dividend if paragraph (i) of the definition of item i of the definition of the term "transitional capital amount" in section 4A(3) of this Act were repealed; and".

OO. Loss attributing qualifying companies - Section 393N of the principal Act is hereby amended by repealing paragraphs (b)(ii)(B), (C) and (D) and substituting the following sub-sub-paragraph -

"(B) Distributions of assets of the company on any acquisition, redemption or other cancellation by the company of its shares or other reduction in or return of share capital of the company, whether on its liquidation or otherwise, -"

OO. Interpretation - full imputation - Section 394A(1) of the principal Act is hereby amended by, omitting, from the definition of the term "paid", the word "allotment" and substituting the word "issue".

OO. Debits arising to imputation credit account - (1) Section 394E(1) of the principal Act is hereby amended by inserting, after paragraph (aa), the following paragraph -

"(ab) In the case of any on-market acquisition (as defined in section 4A(2) of this Act) by the company of a share in the company, the amount (not being less than nil) calculated in accordance with the following formula -

                   c
(a - b) x ------
                1 - c

where -

a is the amount of the dividend arising from the on-market acquisition (calculated as if section 4A(l)(c) of this Act did not apply); and

b is the amount calculated with respect to the share and the on-market acquisition under the formula in section 4A(l)(c)(iv) of this Act applied as if the time of notice of, or proposing, the cancellation were the time of the acquisition; and

c is the rate of resident withholding tax, expressed as a percentage, stated in clause 2 of the Nineteenth Schedule to this Act and applying at the time the acquisition occurs:"

(2) Section 394E(2) of the principal Act is hereby amended by inserting, after paragraph (aa), the following paragraph -

"(ab) In the case of a debit referred to in paragraph (ab) of that subsection, on the date the acquisition occurs:"

OO. Limits on refunds of tax - Section 394M(4) of the principal Act is hereby amended by omitting the words "wound up" and substituting the word "liquidated".

OO. Debits arising to dividend withholding payment account - Section 394ZW(l)(c) is hereby amended by omitting the words "pursuant to section 394ZO of this Act".

OO. Further dividend withholding payment payable etc - Section 394ZZF(5) of the principal Act is hereby amended by omitting the words "wound up" and substituting the word "liquidated".

OO. Deduction of tax from payment due to defaulters - Section 400(1) of the principal Act is hereby amended by repealing paragraphs (a) and (b) of the definition of the term "bank".

OO. Keeping of business records - Section 428(4) of the principal Act is hereby amended by omitting the words "wound up and finally dissolved" and substituting the word "liquidated".

OO. Keeping of returns where return information transmitted electronically - Section 428A(2) of the principal Act is hereby amended by omitting the words "wound up and finally dissolved" and substituting the word "liquidated".

Goods and Services Tax Act 1985

OO. Interpretation - Section 2(1) of the Goods and Services Tax Act 1985 is hereby amended by

(a) Omitting from the definition of the term "associated person" the words "or more" from both places where those words appear; and

(b) Omitting, from the definition of the term "non-profit body" the words "memorandum, articles of association" and substituting the word 'constitution".

OO. Recovery of tax - Section 42(2) of the Goods and Services Tax Act 1985 is hereby amended by repealing paragraph (b) and substituting the following paragraphs -

"(b) Where the person is a company, upon the liquidation of the company, the amount of the tax payable shall have the ranking provided for in the Seventh Schedule to the Companies Act 1993 (whether or not the company has been incorporated or registered under that Act):

"(ba) Where the person is a company, upon the appointment of a receiver on behalf of the holder of any debenture given by the company secured by a charge over any property of the company or upon possession being taken on behalf of the debenture holder of the property, the amount of the tax payable shall have the ranking provided for in the Seventh Schedule to the Companies Act 1993 (whether or not the company has been incorporated or registered under that Act), as if the receiver or person taking possession were a liquidator:

OO. Deduction of tax from payments due to defaulters - Section 43(1) of the Goods and Services Tax Act 1985 is hereby amended by repealing paragraphs (a) and (b) of the definition of the term "bank".

OO. Group of companies - Section 55(8) of the Goods and Services Tax Act 1985 is hereby amended by omitting the words "registered under the Companies Act 1955".

OO. Keeping of records - Section 75(4) of the Goods and Services Tax Act 1985 is hereby amended by omitting the words "wound up and finally dissolved" and substituting the word "liquidated".

Inland Revenue Department Act 1974

OO. Evidence in proceedings before an authority - Section 35 of the Inland Revenue Department Act 1974 is hereby amended by -

(a) Omitting from subsection (2) the words "public company" and substituting the words "widely-held company":

(b) Repealing from subsection (4) the definition of the term "public company" and substituting the following definition -

"Widely-held company” has the meaning assigned to that term by section 8B of the Income Tax Act 1976.

Estate and Gift Duties Act 1968

OO. Interpretation - Section 2(2) of the Estate and Gift Duties Act 1968 is hereby amended by omitting, from the definition of the term "disposition of property", the word "allotment" and substituting the word "issue".

OO. Dutiable estate - Section 6(2)(i) of the Estate and Gift Duties Act 1968 is hereby amended by adding the words "or the Companies Act 1993".

OO. Valuation of shares - Section 22 of the Estate and Gift Duties Act 1968 is hereby amended by -

(a) Omitting the words "including a private company,":

(b) Omitting the words "memorandum or articles of association" and substituting the word "constitution".

OO. Exemption for certain payments by employers - Section 75(1)(b) and (c) are hereby amended by omitting the words "nominal value of allotted shares" and substituting in each case "issued shares (measured by reference to their subscribed capital amounts (as defined in section 4A(3) of the Income Tax Act 1976))".

Stamp and Cheque Duties Act 1971

OO. Interpretation - Section 2 of the Stamp and Cheque Duties Act 1971 is hereby amended by -

(a) Omitting from the definition of the term "instrument of nomination of shares" the words "or allotment" and "or allot" in each place where those words appear:

(b) Omitting from the definition of the term "shares in a flat or office owning company" the word "articles" and substituting the word "constitution".

OO. Conveyance duty - Section 15(3) of the Stamp and Cheque Duties Act 1971 is hereby amended by inserting, after the words "Companies Act 1955", the words "or Companies Act 1993".

OO. Valuing shares - Section 44 of the Stamp and Cheque Duties Act 1971 is hereby amended by omitting the words "memorandum or articles of association" and substituting the word "constitution".

OO. Valuation of consideration - Section 47(l)(b) of the Stamp and Cheque Duties Act 1971 is hereby amended by omitting the words "or allotment".

OO. Offence to issue certain shares - Section 90 of the Stamp and Cheque Duties Act 1971 is hereby amended by omitting the words "or allot".


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