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NZ Court Backs Vector In Tax Dispute

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

22 August 2016


The New Zealand Court of Appeal has sided with Vector, New Zealand's largest distributor of gas and electricity, in its ongoing dispute with the Inland Revenue Department (IRD) over payments received for infrastructure access rights.

The case in question concerns a NZD53m (USD38.5m) payment received by Vector from Transpower, which owns and operates New Zealand's national electricity grid. The payment was consideration for various rights Vector granted to Transpower, including access rights to a tunnel and a transmission corridor.

At the center of the dispute was the differing interpretations of this payment under New Zealand income tax law by the IRD and Vector. The Revenue considered that such a payment should be considered as revenue, and therefore taxable. However, Vector argued that the payment was capital in nature, and therefore not taxable.

In a decision released on August 12, the Court of Appeal upheld the decision of the High Court on the matter in 2014 that the payment received by Vector was not income for tax purposes.

Vector said in a statement that it has taken a "prudent approach" by returning the payment at issue as taxable, spread over six years from 2011. However, it will be entitled to a NZD tax credit plus interest, subject to any further appeal proceedings by the IRD.

TAGS: court | tax | interest | energy | law | New Zealand

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