Shifting to Asia brings tax alert

Trans Tasman Properties has warned that the decision to shift its head office to Singapore could deprive New Zealand shareholders of tax advantages.

The group said its move, part of a plan to focus on Asian growth opportunities, would see it treated as a resident for tax purposes in the city state as well as New Zealand.

This means it will not be able to attach tax credits from earnings in New Zealand to future dividends.

Trans Tasman is not paying any dividends and the company would have to use up New Zealand tax losses amounting to $46 million at the end of last year before it could begin passing tax credits to shareholders.

Some shareholders may also become subject to the Foreign Investment fund regime, which taxes investors on any capital gains.

This applies to those with $50,000 invested in companies outside New Zealand, Japan Australia, Canada, Germany, Norway, the US and Britain.

Shareholders are already concerned about Trans Tasman's new focus and the influence of its 60 per cent shareholder SEA Holdings, run by the Hong Kong-based Jesse Lu.

Trans Tasman share prices are languishing, closing yesterday unchanged at 38 cents - well below its net asset backing of about 64 cents a share.

Trans Tasman executive chairman Don Fletcher said the loss of the tax advantages had to be considered against the growth prospects for the company in Asia.

Trans Tasman, which has invested $264.5 million in Hong Kong this year, could enjoy significant tax advantages from the shift.

Singapore taxes companies at around 15 per cent and grants exemptions if tax is paid in a jurisdiction that has rates higher than its own.

As a result its investments in Hong Kong, which has a tax rate of around 18 per cent, will enjoy significant advantages over those investments in New Zealand, where companies are taxed at 33 per cent.

Fletcher dismissed criticism of the group's strategy to focus on Asia as a vocal minority.