IRD Release Interpretation on Tax Avoidance

July 2, 2013 New Zealand Taxation

Protest Against Tax AvoidanceThe Inland Revenue Department has issued new guidance on the criteria which will be used to judge and classify tax avoidance.

On July 1st the Inland Revenue Department issued a new Interpretation Statement “…to provide greater certainty on the principles the Commissioner will apply in reaching a view on whether an arrangement is ‘tax avoidance’.”

The Statement set out the Commissioners view that an arrangement may be regarded as tax avoidance if any element of the transaction utilizes provisions in the Income Tax Act in a manner which was not originally intended by Parliament.

The assessment of whether an arrangement should be considered to be tax avoidance will also take into account the commercial and economic reality surrounding the situation.

If a transaction is found to be tax avoidance, the IRD has the power to counteract any tax advantages that any party involved in the arrangement would have gained.

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