A merger is a legal reorganisation under New Zealand law. Tax breaks facilitate mergers. In New Zealand, a merger involves the transfer of the activities and assets of one or more companies to a new or existing company. Since Company 3 and Company 4 sold the same products, the same business criterion would be accepted as met if there were no significant differences in the way they worked. Sales to customers in the Greater China region as a result of the merger would be treated as an expanded part of Company-4`s business due to organic growth. The losses carried forward by Company-4 could be used to offset them with company-3`s estimated profits after the merger. To carry forward tax losses from one income year to the next, a corporation must maintain shareholder continuity of at least 49% since the beginning of the income year in which the tax losses occurred. The government announced the introduction of a “same or similar business” test to increase the ability to transfer tax losses. The legislation is expected to be enacted in 2021. In addition, regulations on the retransfer of tax losses have also been announced, which are expected to be regulated by law in 2021. could be made available for the part of the fiscal year ending on the date of the merger and deducted from the net profit of the company resulting from the merger. This Section applies if a merging corporation that meets the requirements of Section IA 5(2) and (3) or ib 3(2) (which relate to the carry-forward of corporate tax losses) terminates its existence in the limited merger of a resident and has a tax loss for a tax year that – Company-1 and Company-2, incorporated in Hong Kong, are both wholly owned subsidiaries of the holding company.

Company-1 owned and operated an upscale restaurant in Central that served a distinctive style of Japanese cuisine. The name of the restaurant reflected the style of the kitchen and was a registered trade name of Company-1. Company-2 owned and operated a low-end Italian restaurant in Wanchai with a registered trade name. Company 1 suffered losses. Company 1 and Company 2 merged in accordance with Article 681 of the Companies Ordinance and Company 2 became the merged company. Company-3 and Company-4, registered in Hong Kong, were both wholly owned subsidiaries of the Holding Company in the United States. Company-3 and Company-4 traded the same products, but with different customer bases. Company-3 traded with customers in the Greater China region, while Company-4 traded with customers in ASEAN member countries. Company 4 suffered losses. Company-3 and Company-4 merge pursuant to § 681 of the German Joint Stock Companies Ordinance.

Company-3 became a merged company. New Zealand has a number of tax rules for dual residents. These are more restrictive than the rules that apply to businesses that do not have dual residence. For example, hybrid rules may deny deductions, tax losses cannot be offset, and a credit account cannot be maintained. In addition, New Zealand has adopted the tie-breaker criterion of the multilateral instrument of dual residence. As a result, dual-resident companies will now have to obtain formal confirmation from their tax authorities in order to agree on their tax residence once the multilateral instrument of the applicable double taxation treaty is in force. Losses and tax credits are not transferred to an asset acquisition. You stay in the company. If there is a common point of participation of at least 66% from the beginning of the income year in which the tax losses were incurred, a company may be able to offset its tax losses with another company in the group. It is difficult to maintain the value of tax losses after acquisition because the margin for refreshing tax losses is limited. If all the conditions are not met, the tax losses can only be used to offset the company`s profits from the merger from its own business or business.

Companies form a tax group in which there is an equal stake of at least 66%. The profits of a group company may be offset by the losses of another recipient company by the recipient company making a payment to the losing company. Alternatively, a loss-making company can make an irrevocable choice directly to offset its losses with the profits of a for-profit group company. Companies must be members of the group from the beginning of the loss year until the end of the year in which the loss is compensated. If you have other companies that are still in business, you should consider a merger. In the event of a merger, the assets and liabilities of one or more companies (merging companies) are “transferred” either to a new company or to an existing company that continues to operate (merged company). .