The Deductibility of Management Fees - A Note on Lockwood Buildings Limited v. Commissioner of Inland Revenue

摘要

The New Zealand High Court recently delivered a decision concerning the deductibility of management fees paid by a subsidiary to a holding company. Lockwood Buildings Limited v. Commissioner of Inland Revenue' concerned a company which was a member of a privately held business group known as the La Grouw Group (the "Group"). The Group comprised an ultimate holding company (La Grouw Holdings ("LGH")) and an intermediate holding company (La Grouw Corporation ("LGC")) which in turn owned approximately 13 subsidiaries involved in manufacturing, trading and raw material supply as well as some dormant companies and property investment subsidiaries. The principal business of the Group was the manufacture and distribution of kit-set timber houses which utilized proprietary technology developed by the founder, Mr La Grouw, in the 1950s. The houses were erected from the kit-sets supplied by the Group to franchised builders throughout New Zealand.