DB 8 Interest: money borrowed to acquire shares in group companies
Deduction: borrowing to acquire group company shares

(1)

A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that is part of the same group of companies.

Exclusion: group not in existence at year end

(2)

Subsection (1) does not apply if the 2 companies are not part of the same group of companies at the end of the tax year that corresponds to the income year in which the deduction is allowed.

Deduction: interest after resident’s restricted amalgamation

(3)

A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ended its existence on a resident’s restricted amalgamation.

Exclusion: group not in existence immediately before resident’s restricted amalgamation

(4)

Subsection (3) does not apply if the 2 companies were not part of the same group of companies immediately before the resident’s restricted amalgamation.

Application from income year of resident’s restricted amalgamation

(5)

Subsection (3) applies in the income year in which the resident’s restricted amalgamation occurs and in later income years.

Consolidated groups

(6)

Section FM 12 (Expenditure when deduction would be denied to consolidated group) may apply to allow a deduction under this section to a company that is part of a consolidated group.

Relationship with subpart DE

(6BA)

Subpart DE (Motor vehicle expenditure) overrides this section for expenditure to which that subpart relates, if a company is a close company that has chosen to apply that subpart instead of the FBT rules, in accordance with section CX 17(4B)(c) (Benefits provided to employees who are shareholders or investors).

Relationship with subpart DG

(6B)

Subpart DG (Expenditure related to use of certain assets) overrides this section for expenditure to which that subpart relates.

Conduit financing arrangements[Repealed]

(7)

[Repealed]

Link with subpart DA

(8)

This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.

Defined in this Act: close company, company, consolidated group, deduction, exempt income limitation, FBT rules, general limitation, general permission, group of companies, income year, interest, resident’s restricted amalgamation, share, supplement, withholding tax limitation

Compare: 2004 No 35 s DB 8

Section DB 8(6BA) heading: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 70(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section DB 8(6BA): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 70(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section DB 8(6B) heading: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years), on 17 July 2013, by section 26(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

Section DB 8(6B): inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years), on 17 July 2013, by section 26(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

Section DB 8(7) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 71(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section DB 8(7): repealed (with effect on 30 June 2009), on 6 October 2009, by section 71(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section DB 8 list of defined terms close company: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 70(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section DB 8 list of defined terms FBT rules: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 70(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).