New Tax on Staple Stock

August 29, 2008 New Zealand Taxation  No comments

Legislation on staple stock has changed, making certain instruments be regarded as equity for the purpose of tax evaluation. According to statements issued by Finance Minister Michael Cullen and Revenue Minister Peter Dunne, the changes are aimed at preventing revenue losses arising from debt issued along side to shares in a staple stock system.

Further according to the statements, the change arises from companies utilizing staple-stock and paying shareholders tax-deductible interest to its shareholders in the place of dividends, from which problems arise when foreign shareholders are involved. Following the change, these stapled-instruments will be treated as equity. The issuing company will no longer be able to claim interest deductions on the paid returns, which will henceforth be treated as normal dividends.

It was also stated that there is still opportunity for interested and affected parties to make comment on these changes.