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Thread: Tax advice

  1. #71
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    Rights issues (Below is a blurb from an IRD publication)
    Companies can offer their shareholders rights to buy new shares, generally at a discount to the market value.

    Legislative changes have been made to make it clear that the discounted amount is not a taxable dividend for shareholders that exercise the right, and that the right itself (which has value and may in some cases be traded or renounced) is not a taxable dividend.

    The policy rationale for ensuring that rights and discounted shares issued under a rights issue are not treated as dividends is that the company does not give up anything of value. A rights issue involves the company raising new equity when the shareholders invest new funds in the company.


    So the discount is not a taxable dividend from the company and the right itself is NOT a taxable dividend therefore if you sell the right, I guess this means the proceeds from the sale of the rights is also not a dividend? (or taxable income) for that matter.

    Does anyone have any information on this or have experience with the IRD regarding proceeds from selling rights and whether it is taxable?

    Tried a search but nothing came up.

    Specifically someone asked me about the AIR NZ rights issue which must have had some value on the secondary market.

    Another blurb I found was that "the issue of shares at a discount is not a dividend if the person subscribes for shares under the right, provided the company does not, as part of the rights issue, give the person the right to dispose of the shares back to the company"

    This blurb does not relate to the sale of the right to a third party so not much help.
    Last edited by Aaron; 08-11-2022 at 08:20 AM.

  2. #72
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    Quote Originally Posted by Aaron View Post
    Rights issues (Below is a blurb from an IRD publication)
    Companies can offer their shareholders rights to buy new shares, generally at a discount to the market value.

    Legislative changes have been made to make it clear that the discounted amount is not a taxable dividend for shareholders that exercise the right, and that the right itself (which has value and may in some cases be traded or renounced) is not a taxable dividend.

    The policy rationale for ensuring that rights and discounted shares issued under a rights issue are not treated as dividends is that the company does not give up anything of value. A rights issue involves the company raising new equity when the shareholders invest new funds in the company.


    So the discount is not a taxable dividend from the company and the right itself is NOT a taxable dividend therefore if you sell the right, I guess this means the proceeds from the sale of the rights is also not a dividend? (or taxable income) for that matter.

    Does anyone have any information on this or have experience with the IRD regarding proceeds from selling rights and whether it is taxable?

    Tried a search but nothing came up.
    Not sure why you did a search when you have already been to the IRD and they have given you the answer. The bit in bold answers your question.

    The only time the proceeds of 'selling a right' would be taxable, would be if you bought those rights with the intention of selling them to make a profit
    It's the same deal with head shares.

    SNOOPY

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    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #73
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    Quote Originally Posted by Snoopy View Post
    Not sure why you did a search when you have already been to the IRD and they have given you the answer. The bit in bold answers your question.

    The only time the proceeds of 'selling a right' would be taxable, would be if you bought those rights with the intention of selling them to make a profit
    It's the same deal with head shares.

    SNOOPY

    .
    Cheers Snoop, obvious now you point it out.

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