NEW ZEALAND Law and Practice Contributed by: Deemple Budhia, Ling Yan Pang, Fred Ward and Matt Kersey, Russell McVeagh
7.3 Withholding Taxes In relation to withholding taxes, where an SPE is non-resident and acquires financial assets which are interest bearing, and obligors are New Zealand resident, non-resident withholding tax is applicable, for example, where the financial assets constitute residential backed mortgages. There is no practical manner in which the with - holding tax can be dealt with. Consequently, for such securitisations, the SPE is generally a resident entity for New Zealand income tax pur - poses to ensure that non-resident withholding tax is not applicable to interest flows which may arise from the financial assets transferred to the SPE. New Zealand does have a withholding tax for residents, but the SPE will typically be able to avail itself of an exemption for this tax. 7.4 Other Taxes New Zealand has no stamp duty or other transfer taxes which apply to the transfers of financial assets. Similarly, New Zealand goods and ser - vices tax (GST) generally does not apply to the transfer of financial assets as such a transfer is treated as an exempt supply for GST purposes. No other material tax issues arise in connection Legal opinions are obtained for securitisations and those legal opinions are generally focused on the tax neutrality of an SPE (ie, to ensure that it has no – or materially no – net income on an annual basis from the securitisation). That con - clusion is typically reached in relation to secu - ritisations in New Zealand. with securitisations in New Zealand. 7.5 Obtaining Legal Opinions The opinion is typically given subject to a range of qualifications, based on the circumstances of the particular structure of the securitisation.
where the consideration exceeds the cost (or, where the reverse is the case, will give rise to deductible expenditure). The tax treatment of the transfer of operating leases is somewhat more complex, as the con - sideration for the transfer gives rise to income, typically with no offsetting costs basis, and therefore acceleration of the income for the originator. The DF SPV regime in the Income Tax Act 2007 can be used to ensure that income acceleration (for both debt instruments referred to above and operating leases) does not arise. The DF SPV regime, in short, allows the originator to elect to treat the SPE as transparent for tax purposes, thereby attributing the SPE’s property, purpos - es, activities and arrangements to the originator. The effect is that no tax consequences attach to transactions occurring between the SPE and the originator. In order to use the DF SPV regime, the SPE must be consolidated with the originator for financial reporting purposes. The originator is able to elect into the DF SPV regime under the Income Tax Act 2007 from the commencement of its securitisation arrange - ments. Alternately, it can elect into the regime from when it files its tax return for the relevant income year (and the election then has effect for that year). 7.2 Taxes on Profit SPEs are subject to income tax in relation to the income earned from those financial assets which are subject to securitisation. Typically, the SPE is debt funded in such a manner that its deductions offset substantially all of the income derived. The consequence is that generally no net income (or no material net income) arises for an SPE for New Zealand income tax purposes.
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