IRD endorses NZX's share cancelling plan as non-taxable
But NZ stock market operator will still seek a special resolution and an order from the High Court.
The tax department says NZX's planned share buyback will be non-taxable up to about $22 million.
The stock market operator announced plans in February to return to shareholders, on a pro rata basis, surplus capital of $34.4 million, and a one-in-10 share cancellation on payment of $2.85 per ordinary share.
About 12.2 million shares will be cancelled.
NZX announced the IRD confirmed its buyback was not in lieu of dividend and was therefore non-taxable up to NZX's available subscribed capital of approximately $22m.
Anything above that will be taxed and fully imputed.
The buyback still requires a special resolution of shareholders at NZX's annual meeting at the end of the month and the company will also seek a High Court order sanctioning the move.
NZX hopes to complete the process by late May.
Companies use this method, which has certain criteria, to distribute excess capital back to shareholders without it being done as a taxable dividend.
Grant Thornton New Zealand partner Geordie Hooft, a tax expert, told NBR Online the shareholders were getting cash for NZX cancelling some of their shares.
"The IRD have given their stamp of approval on the fact that it's not going to be taxable to the shareholders, that it is not a dividend and they can simply take the money and run, without having to worry about any tax consequences.
"The only exception to that would be if you've got people who bought the shares with the intention of selling them for a profit."
Mr Hooft said the move was not common, but not unusual.
David Williams
Thu, 12 Apr 2012
Thu, 12 Apr 2012
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IRD endorses NZX's share cancelling plan as non-taxable
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