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Budget Extends the Ambit of the Thin Capitalisation Rules

Budget Extends the Ambit of the Thin Capitalisation Rules

No structural change to our international tax rules proposed

Changes, but no real surprises, were announced in relation to New Zealand’s thin capitalisation rules in today’s Budget, says Deloitte CEO Thomas Pippos.

Budget 2013 confirms that the Government will extend the thin capitalisation rules to where non-residents are “acting together,” and together having a controlling interest in a New Zealand investment.  The change is expected to generate $20m over three years from 2014/15.

Also confirmed is that shareholder debt will be excluded from worldwide group safe harbour debt calculations.  This follows a concern that shareholder debt allows companies to have excessive levels of debt without the thin capitalisation rule applying.

“More important than what’s there, is what’s not there,” says Mr Pippos.

“The last thing anyone needs is some precipitous actions on the part of the New Zealand regulators under the guise of Base Erosion and Profit Shifting - which is a major project being undertaken by the OECD.”

Positively, the Budget documents don’t sensationalise this issue such that material Tax Policy is developed by sound bite or under the shroud of darkness.”

“While those impacted won’t welcome the changes, the Government is merely extending the original policy settings to a subset of taxpayers that were originally anticipated to have been subject to them,” concludes Mr Pippos.


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