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New Zealand Supreme Court Clarifies Interest Deduction on Specified Loans, Intra-Group Arrangements

Oct. 4, 2022, 5:00 AM

The New Zealand Supreme Court Sept. 30 issued Decision No. NZSC 113/2022, regarding improper tax deductions for interest payments, and related penalties. A company issued a promissory note to a bank, payable at maturity by the issuance of the borrower’s shares to the bank. The borrower’s parent company, through a forward arrangement, funded part of the bank’s payment to the borrower for the note. The borrower deducted the full amount of the interest it paid on the note, including the portion funded by its parent company. The Supreme Court: 1) confirmed that the borrower was only allowed to deduct interest ...