IRD explains tax legislation for court free amalgamations and succession of specified assets

The Inland Revenue Department (IRD) has recently issued Departmental Interpretation and Practice Notes No. 63 (DIPN 63) explaining how it would interpret the various provisions of the legislation.

While the above legislation only applies to qualifying amalgamations that occur on or after 11 June 2021, the legislation is in fact largely a codification of the interim assessing practice that the IRD has all along adopted for qualifying amalgamations that occurred before that date. The interim assessing practice is now also stated in Appendix 1 to DIPN 63.

Of note is that DIPN 63 includes an additional example on what constitutes the amalgamated company succeeding the “same trade” of an amalgamating company where, post amalgamation, the amalgamated company has made some alteration or expansion of the trade previously carried on by the amalgamating company. The satisfaction of the “same trade” condition would be crucial for determining whether or how pre amalgamation tax losses of the amalgamating company could be utilized post amalgamation.