Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.Launch Radio player
The New Zealand arm of the French bank, BNP Paribas, is the latest international bank to fall foul of the New Zealand tax department's campaign against the use of cross-border convertible notes, quietly agreeing to pay back tax of $18.435 million in an out of court settlement reached on March 21, according to Companies Office filings.
The disclosure of the settlement, after balance date in the accounts for the financial year to Dec. 31, is the first time Paribas has been linked to the use of either Optional or Mandatory Convertible Notes - OCNs and MCNs - which tax planners used to try and reduce tax liability in New Zealand by a swag of foreign corporations, most of them in Australia.
The notes allowed debt and equity to be structured across borders in the most tax-efficient way, but only if tax authorities did not deem them to be avoidance.
A test case involving Perth-based Alesco, which the New Zealand Court of Appeal decided in the Inland Revenue Department's favour in March last year, has created a flood of settlements with taxpayers using similar structures to avoid tax in New Zealand.
Notes to the accounts for BNPP (NZ) Ltd say the IRD issued notices for unpaid tax in March 2009 relating to the 2003, 2004 and 2005 tax years on OCNs issued in 2001 and 2002, for unpaid tax of $8.778 million. That assessment was challenged in the High Court in April 2009, but in March this year, the company "agreed to pay the IRD 11,547,995 euros (NZ$18,435,246) in settlement of the issued notice of assessment denying interest deductions for Optional Convertible Notes issued by the company in 2001 and 2002."
That allowed the reversal of assessments for $4.389 million in penalties, $1.357 million in late interest payments and $259,250 in core tax in 2013.
Among those caught in the IRD operation against the use of MCN's and OCN's were Telstra Corp, Toll Holdings, and former Mediaworks owners Ironbridge Capital.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Xero executive and SaaS expert joins Velpic board
- LGFA bonds lure foreign investors seeking liquid, highly-rated alternative to NZ government debt
- Job Done for winning pitch in Fonterra innovation competition
- NZ's earthquake-prone building standard half that of the US - NZSEE
- Pressing need for basic infrastructure overtakes Christchurch 'smart city' plan