New Zealand: Shareholder debt is forgiven, or converted to equity

New Zealand: No tax when shareholder debt forgiven

New Zealand's Cabinet has approved a proposal that there would be no adverse tax consequences when shareholder debt is forgiven or converted to equity (i.e., debt remissions and capitalisations). The rule would apply within the same wholly owned group or when there is a pro-rata remission or debt capitalisation (i.e., no dilution in ownership or change in each owner’s proportionate ownership). The announcement confirms that the rule would also apply when the lender is a non-resident. Accordingly, inbound debt remissions and debt capitalisations would not be treated any differently.


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The government expects to introduce legislation early next year. On current timetables, that means the legislation could be enacted sometime between September and November 2016. The proposal is to have retroactive (retrospective) application to the 2007-08 income year to safeguard taxpayers’ historic positions.


Read a September 2015 report [PDF 528 KB] prepared by the KPMG member firm in New Zealand: Positive debt capitalisation change announced

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