Section OB 72B — Income Tax Act 2007: Limit on using entitlement to refund after joining wholly-owned group

OB 72B Limit on using entitlement to refund after joining wholly-owned group When this section applies (1) This section applies when— (a) an ICA company joins a wholly-owned group of companies (the new group ) from another wholly-owned group of companies (the former group ); and (b) the ICA company is not liable for imputation additional tax under section OB 72(5) . Restricted refund amount for company and new group (2) Subsections (3) to (8) apply to an amount (the restricted refund amount ) for the ICA company and the new group that is greater than zero and calculated using the formula— refund amount – ICA credit balance. Definition of items in formula (3) In the formula,— (a) refund amount is the total of the following amounts, determined immediately before the ICA company joins the new group: (i) the amount in the tax pooling account provided by or for the benefit of the ICA company that is more than the company's liability to pay income tax or provisional tax at the time: (ii) the amount of the refund to which the ICA company is entitled under sections RM 2 and RM 4 to RM 6 (which relate to refunds of excess tax) other than an amount affected by a restriction under subsection (5) for the company and another group: (b) ICA credit balance is the credit balance of the ICA company's imputation credit account immediately before the company joins the new group. Payment to Commissioner (4) If the restricted refund amount is greater than the amount referred to in subsection (3)(a)(ii), the ICA company must pay to the Commissioner an amount equal to the excess and the Commissioner must hold the amount with the balance of the restricted refund amount as if the excess were a refund to which the company were entitled under section RM 2 (Refunds for overpaid tax). Use of restricted refund amount (5) The Commissioner must hold the restricted refund amount for the ICA company and the new group subject to the restriction that the amount— (a) may be refunded for an imputation credit only if the ICA company satisfies the Commissioner that the credit— (i) arises from taxation paid by the ICA company or by a company that is in the same wholly-owned group as the ICA company and was in the former group immediately before the ICA company joined the new group: (ii) is attached to a dividend received in relation to a shareholding by the ICA company or by a company that is in the same wholly-owned group as the ICA company and was in the former group immediately before the ICA company joined the new group and had the shareholding then; and (b) may be used to satisfy a tax liability of— (i) the ICA company: (ii) a company that is in the same wholly-owned group as the ICA company (the member ), if the ICA company satisfies the Commissioner that the member was in the former group immediately before the ICA company joined the new group. Restriction additional to other requirements (6) The restriction imposed by subsection (5) on the use of a restricted refund amount is in addition to the requirements under other provisions of the Act for a refund or the satisfaction of a tax liability from an amount to which the ICA company is entitled under sections RM 2 and RM 4 to RM 6 . Reducing restricted refund amount (7) The restricted refund amount for the ICA company and a group is reduced by the amount of— (a) a refund permitted under subsection (5)(a) relating to the restricted refund amount: (b) a satisfaction of a tax liability permitted by subsection (5)(b) relating to the restricted refund amount: (c) a payment of imputation additional tax under subsection (8) relating to the restricted refund amount: (d) a payment of imputation additional tax under section OB 71(4) relating to the restricted refund amount. Liability for imputation additional tax (8) The ICA company is liable for an amount of imputation additional tax equal to the restricted refund amount for the company and a wholly-owned group of companies (the old group ) determined immediately after a change in the holding of voting interests in the ICA company if, immediately after the change, a group of people hold common voting interests in the ICA company that exceed, by 67% or more, the common voting interests— (a) in the wholly-owned group of companies to which the company belonged immediately before the company joined the old group; and (b) that were held by the same people immediately before the company joined the old group. Defined in this Act: Commissioner , common voting interest , company , dividend , ICA company , imputation additional tax , imputation credit , income tax , provisional tax , tax pooling account , wholly-owned group of companies Section OB 72B: inserted (with effect on 1 March 2010), on 7 September 2010, by section 102 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).