29 March 2004 Media Statement

Loophole closed on sale and lease of trademarks

A loophole involving the sale and leaseback of intangibles such as trademarks and newspaper mastheads will be closed through provisions in the taxation bill introduced in Parliament today.

Revenue Minister Michael Cullen announced last year to legislate to prevent a potential and significant revenue loss through use of this mechanism.

“The proposed changes do not affect normal sale and leaseback transactions that are entered into for commercial reasons - only those that could result in participants claiming tax deductions for what are, in substance, repayments of loan principal.

“The finance lease rules in the Income Tax Act are being amended to prevent this happening. The amendments will not apply to transactions entered into before the introduction of the bill.

“The government is aware of only one relevant transaction that was entered into before today. The new rules will not apply to that because the particular circumstances of the taxpayer involved mean that there would be no revenue advantage to the government from doing so,” Dr Cullen said.

Further information on the proposed legislation can be found in the commentary on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, available aw www.taxpolicy.ird.govt.nz.

ENDS

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