New Zealand set to alter GST treatment of capital-raising costs

September 20, 2015

New Zealand is set to implement a beneficial change to the tax treatment of capital-raising costs after a recent GST issues paper (released on September 17 2015) suggested that New Zealand GST law should be amended to allow GST recovery on the costs associated with raising capital.

Inland Revenue (IR) has been scrutinising capital-raising transactions involving IPOs and bond issues. IR has traditionally taken the view that the share or bond issue (to raise capital) is an exempt supply of a financial service.

Using this analysis, a business that makes taxable or partially taxable supplies is unable to deduct in its GST return any GST charged on capital-raising costs, such as GST on legal fees and valuation work.

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