Tax Financing

What is tax financing?

The tax pooling regime enables TPS to finance taxpayers' provisional tax payments. When TPS finances a tax payment, the taxpayer pays the interest charges upfront and TPS makes a deposit equal to the amount of the loan into the tax pooling account.

When the loan matures, the taxpayer repays the principal and Public Trust transfers the tax deposit into the taxpayer's account at the IRD. The effective date of the tax deposit is the date that it is paid into the TPS tax pooling account rather than the date that it is paid into the taxpayer's account so the taxpayer satisfies its obligation to make a payment on its provisional tax date and does not have to pay any UOMI or other penalties.

Tax financing is attractive to taxpayers because, in most cases, the interest rate is significantly lower than that charged under their existing bank facilities. This is because TPS always has recourse to a tax deposit in the tax pooling account equal to the amount of the loan and does not have any exposure to the taxpayer's credit risk. The taxpayer benefits by reducing its borrowing costs and freeing up its bank facilities for other purposes.

Calculate your savings.