New Zealand


  • Service: Tax
  • Type: Business and industry issue
  • Date: 3/07/2013

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John Cantin

John Cantin

Partner - Tax

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Submission - Thin capitalisation - technical issues 

The latest issues paper omits consideration of two key issues, which need to be addressed.
Firstly, if the preferred vehicle for investment into New Zealand is a limited partnership (or another look through entity, for tax purposes) this should be the tested entity for thin capitalisation purposes.
The application of the thin capitalisation rules to the partners, when the partnership will undertake the borrowing, is illogical and places non-residents investing through a limited partnership at a significant disadvantage to other investors (and investment structures) when considering interest deductibility.

Secondly, the thin capitalisation proposal for multiple non-residents holding a combined ownership interest of 50% or more, and “acting together” (however defined), needs to be available in a single non-resident controller scenario.
This is necessary to prevent different tax outcomes depending on whether investment is by a single non-resident, a consortium, or a consortium with a single non-resident investor holding greater than 50% control.