Frucor Beverage's long-running battle with the Inland Revenue Department over the use of convertible notes more than a decade ago is set to hit the courtroom in 2018.
The Suntory Holdings-owned drinks maker whose brands include V, Just Juice and Fresh-up, has held out against claims by the tax department that its use of the notes constituted tax avoidance by letting companies juggle debt and equity components in their New Zealand divisions providing a tax advantage for their parent and a loss to the New Zealand revenue base.
Frucor has consistently rejected the assessment since 2009 when the IRD first lodged its notice, whereas other companies that used similar funding structures cut their losses and settled with the tax department after High Court and Court of Appeal rulings went against them in a test case. IRD filed court proceedings against Frucor in January 2012.
"The High Court has not allocated a hearing date for the income tax proceedings. However, it is presently expected that a hearing date will be allocated at some point after June 2018," Frucor said in financial statements lodged with the Companies Office. "The company remains of the view that the income tax adjustments proposed by Inland Revenue are incorrect, and the parties are continuing in formal dispute proceedings."
The tax department disputes deductions on the optional convertible notes between 2006 and 2009 that generated an income tax effect of $12.4 million, plus interest which has mounted to $7.9m as at the December 31, 2016 balance date. IRD is also looking to impose penalties of $3.7m.
