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NZ Releases Guidance On Group Loss Relief Rules

by Mary Swire,, Hong Kong

27 December 2017

New Zealand's Inland Revenue Department has released standard practice statement SPS 17/03 – Loss offset elections between group companies - which sets out the rules for group companies that seek to elect to offset losses.

Although the statement is not intended to be a fully comprehensive guide on the relevant legal provisions in Subpart IC of the Income Tax Act 2007, it sets out the consequences of specific events that can impact on a loss offset and how these should be addressed, with examples.

The purpose of the loss offset provisions is to allow those companies that incur losses to utilize those losses even where different entities are involved. This means that there is similarity in the tax treatment of a group of companies, each carrying on separate enterprises, as compared with a single company that carries on the same enterprises in separate divisions.

The tax agency said the SPS is intended to explain the application of certain pre-requisites and other aspects of loss offset provisions in Subpart IC which allow loss offset elections to be made, discussing the requirements for giving notice, the Commissioner's practice with respect to part-year losses, and what should happen when the company's loss or the profit company's net income is increased or reduced. It also sets out the requirements for there to be a valid election and/or subvention payment.

As well as setting out examples, the guide explains the limitations concerning shareholding requirements for both the loss-making company and the profit-making company.

TAGS: tax | corporation tax | group taxation | transfer pricing | New Zealand | Tax

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