New Zealand Tax Agency Clarifies Tax Treatment of Financing Arrangement to Fund Capital Asset Refurbishment

The New Zealand Inland Revenue Feb. 13 issued Technical Decision Summary No. 25/02, clarifying the tax treatment of a financing arrangement to fund capital asset refurbishment. DEF owned ABC, which had a license for the asset. DEF’s shareholders were also licensees and provided interest-free loans to ABC. The remaining costs were covered by ABC’s cash balances and future net operating cash flows, with capital works license fees charged on a straight-line basis over the tax life of the new assets. The taxpayers sought to clarify the income tax and GST treatment of the arrangement. The Tax Counsel Office found that: ...