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Michael Hill Settles IP Dispute With NZ Revenue

by Mary Swire, Tax-News.com, Hong Kong

18 August 2016


Michael Hill International Limited, the jewelry retail group, announced on August 17 that it has settled a tax dispute with the New Zealand Inland Revenue Department to remove a source of uncertainty for its shareholders.

The dispute concerned the tax treatment of financing arrangements between members of the group located in Australia and New Zealand for the years 2009 to 2015, which arose from the transfer of the Group's intellectual property to Australia in 2008.

The company initially launched proceedings in the High Court of New Zealand contesting the Inland Revenue's claim of NZD39.95m (USD29m) in additional tax.

While the company will incur an additional tax liability of NZD30.3m as a result of the settlement, it has decided to conclude the dispute in order to provide certainty for its shareholders.

"In settling this dispute the Board has been conscious of the increasing difficulties for our shareholders in trying to understand and quantify the potential price impact of the contingency should an adverse outcome result (reflecting the uncertainty and risk involved in any formal litigation)," the company said in a statement.

The statement added that the firm remains "comfortable" that the tax treatment of the transaction in question "fully complied with all relevant tax laws at that time." However, the company's board came to the decision that "removing the continued uncertainty and the significant cost associated with the dispute, is in the overall best interests of shareholders" and is "a sensible commercial outcome."

Michael Hill International, founded in 1979, currently has 293 Michael Hill branded stores in New Zealand, Australia, Canada and the US and 11 Emma & Roe branded stores in New Zealand and Australia. The Group's global headquarters including its wholesale and manufacturing divisions is located in Brisbane, Australia.

TAGS: tax | interest | law | intellectual property | Australia | manufacturing | transfer pricing | Canada | New Zealand | retail

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