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Tax Administration Act 1994

Penalties - Civil penalties

141EB: Promoter penalties

You could also call this:

"Penalties for people who promote unfair tax plans"

Illustration for Tax Administration Act 1994

You can get a penalty if you promote a tax arrangement that is abusive. This happens when a taxpayer uses the arrangement and gets a shortfall penalty. The arrangement must be offered to at least 10 people in a tax year. You are treated as offering the arrangement to all owners of a look-through company or partners of a partnership if you offer it to the company or partnership. The penalty amount is the sum of tax shortfalls from the abusive tax position. You would have been liable for these shortfalls if you were a party to the arrangement. If you are a promoter, you are liable for the penalty jointly with other promoters. You can read more about who is a promoter in section 141EC. Some promoters are liable for part of the penalty, depending on who they offered the arrangement to.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM356477.

Topics:
Money and consumer rights > Taxes
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Part 9Penalties
Civil penalties

141EBPromoter penalties

  1. The promoter of an arrangement is liable to a promoter penalty if—

  2. a taxpayer becomes a party to the arrangement and a shortfall penalty for an abusive tax position is imposed on the taxpayer as a result of the arrangement; and
    1. the arrangement is offered, sold, issued or promoted to 10 or more persons in a tax year.

      1. For the purpose of subsection (1)(b), an arrangement is treated as being offered, sold, issued or promoted to 10 or more persons if 10 or more persons claim tax-related benefits as a result of the arrangement.

      2. An arrangement is treated as being offered, sold, issued or promoted to all owners of an effective look-through interest for a look-through company (the LTC) and partners of a partnership if the arrangement is offered, sold, issued or promoted to the LTC or partnership respectively.

      3. The amount of the promoter penalty is the greater of nil and the sum of tax shortfalls resulting from taking an abusive tax position on the arrangement, for which the promoter would have been liable if the promoter had—

      4. been a party to the arrangement in the place of each party to the arrangement to whom the arrangement was offered, sold, issued or promoted; and
        1. taken a tax position under which the arrangement is treated as producing for the promoter the taxation-related benefits that were intended by the parties to the arrangement; and
          1. had the taxation-related characteristics that would, under the tax position referred to in paragraph (b), produce for the promoter the maximum taxation-related benefits from the arrangement.

            1. A promoter who satisfies paragraph (a) of the definition of promoter in section 141EC is liable for the promoter penalty associated with the arrangement—

            2. jointly and severally with the other such promoters of the arrangement, for the whole promoter penalty:
              1. jointly and severally with each promoter of the arrangement who is liable for part of the promoter penalty under subsection (6), for the part of the promoter penalty for which the other promoter is liable.

                1. A promoter who does not satisfy paragraph (a) of the definition of promoter in section 141EC is jointly and severally liable, with the other promoters of the arrangement, for the portion of the promoter penalty that is associated with the arrangement entered into by taxpayers to whom the promoter offered, sold, issued or promoted the arrangement.

                Notes
                • Section 141EB: inserted, on (applying to arrangements entered into on and after 26 March 2003), by section 128(1) of the Taxation (Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Act 2003 (2003 No 5).
                • Section 141EB(1)(b): amended, on (effective for 2005–06 tax year and later tax years, except when the context requires otherwise), by section YA 2 of the Income Tax Act 2004 (2004 No 35).
                • Section 141EB(3): amended (with effect on 1 April 2011 and applying for income years starting on or after 1 April 2011), on , by section 171(1)(a) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                • Section 141EB(3): amended (with effect on 1 April 2011 and applying for income years starting on or after 1 April 2011), on , by section 171(1)(b) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                • Section 141EB(4)(b): amended (with effect on 26 March 2003), on (applying to arrangements entered into on and after 26 March 2003), by section 129(1) of the Taxation (GST, Trans-Tasman Imputation and Miscellaneous Provisions) Act 2003 (2003 No 122).