IRD takes Methanex to Court
February 9, 2009 New Zealand Taxation
The New Zealand Inland Revenue Department (IRD) is taking international methane producer Methanex to court over what it claims was “tax avoidance” behaviour.
The issue behind the ordeal is that Methanex sold and payed out on promissory notes that were issued by Methanex to its parent company, Wendover Holdings. Generally a promissory note is one which acknowledges that they will pay another company a set amount of money at a set time, and probably with a set interest rate, similar in some respects to a bond or IOU.
The IRD is contesting that by issuing promissory notes to its parent company, Methanex was committing tax fraud, they have held this view since Methanex’s 2005 audit. Upon finding this behaviour, the IRD changed the Methanex resident’s withholding-tax and demanded $18 million in tax payment. Methanex is yet to pay any of this amount.
The details of the court proceedings are out of sight of the general public as it was a closed door case, as such information can only be obtained through filed documents, research and press releases. It is reputed that currently Methanex and the IRD are in discussion in an attempt to reach a conclusion to the situation.