• Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 6/12/2014

New Zealand - Debt capitalisation, look-through elections as “tax avoidance” 

June 12:  Debt capitalisation and look-through company elections by liquidating companies are addressed in a recent draft “questions we’ve been asked” item by the Inland Revenue Department.

The position of the Inland Revenue in this draft guidance concludes that both debt capitalisation and look-through company elections are tax avoidance arrangements because there are alternatives to each that would create taxable income.

KPMG observation

The Inland Revenue’s draft position raises a fundamental issue—i.e., the basic proposition is that a taxpayer can no longer have due regard to the tax consequences of their actions when determining what to do. This suggests that taxpayers must take the course of action that results in the highest tax payable. Tax professionals note that this would be a significant change in approach.

There is an opportunity for taxpayers to comment on the draft guidance.

Read a June 2014 report [PDF 109 KB] prepared by the KPMG member firm in New Zealand: Debt capitalisation and look-through company elections potentially tax avoidance

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