New Zealand: Tax avoidance identified, certain employee share schemes

New Zealand: Tax avoidance identified, share schemes

New Zealand’s Inland Revenue released a “tax avoidance revenue” alert concerning employee share schemes. Because employee share scheme benefits are taxed when the shares are acquired, the Inland Revenue’s concern is arrangements that fix an early acquisition date so that subsequent increases in the shares’ value are not taxable.

Related content

The policy for taxing employee share benefits is that they are substitutable for salary and wages (and bonuses) and are taxed in the same way. The revenue alert focuses on certain employee share purchase arrangements, for example:

  • When the acquisition is in substance an option to acquire shares
  • When the shares are issued as one class and subsequently reclassified

Inland Revenue considers that these arrangements are designed primarily to avoid tax because, in both cases, the value of the shares at acquisition are artificially reduced.

KPMG observation

The revenue alert was issued in advance of what is expected to be a likely review of the tax rules in 2016. Also, there is a current proposal to collect tax on share benefits from employers.


Read a November 2015 report [PDF 683 KB] prepared by the KPMG member firm in New Zealand: Employee share scheme tax avoidance alert

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