New Zealand Tax Agency Issues Decision Clarifying Taxation of Interest-Free Loan, Dividends

The New Zealand Inland Revenue July 3 issued Technical Decision Summary No. 24/14, clarifying the taxation of interest-free loans and dividends. The taxpayer, a New Zealand incorporated company, acquired a subsidiary and borrowed an interest-free shareholder loan from a nonresident company to settle the sale and purchase of the subsidiary’s assets. The taxpayer sought clarity on whether the interest-free loan constituted a taxable dividend and if its repayment was subject to withholding. The Tax Counsel Office (TCO) clarified that: 1) the interest-free loan didn’t give rise to a dividend at any point, including as a result of the issue or ...