While the thin capitalisation safe harbour thresholds are not set to change, Officials are proposing to plug a number of perceived “gaps” in the thin capitalisation rules.
This includes extending the rules to multiple non-residents holding/controlling more than 50% of a NZ company/ group if these parties are “acting together”.
A key concern is how this concept will be reflected in legislation, and practically applied/interpreted by Inland Revenue, in such a way that does not penalise non-resident investors who are genuinely operating at arm’s length from each other.
A further concern is the potential adverse impact on inbound investment, particularly in large-scale projects, such as infrastructure (at a time when infrastructure investment is a priority for Christchurch, Auckland and many other parts of the country).
Given the wide-ranging nature of the proposals, we strongly advise clients to consider the potential impacts on their business and make submissions.