Tourism Holdings could see its net profit jump by up to $3m thanks to incoming tax changes in the United States that will see the company’s tax rate cut by more than a quarter.
The new tax plan, soon to be signed into law by President Trump, will cut the federal coporate income tax rate from 35% to 21% for companies in the US.
Tourism Holdings owns Road Bear RV, El Monte RV, Mighway USA and Roadtrippers in the US.
“Based on the current distribution of thl earnings across US States, and the current State tax rates, the effective total income tax rate including State taxes for thl in the USA is expected to reduce from around 40% to around 27%,” said the company in a statement to the NZX yesterday on the impact of the US tax changes.
The new income tax legislation comes into force on 1 January 2018 but Tourism Holdings said it was not clear whether there would be an impact on its tax bill in the current financial year ended 30 June 2018, apart from a one-off deferred tax balance adjustment.
“The first full year in which the lower federal tax rate will apply to thl is expected to be the year ended 30 June 2019 (FY19).The positive annual recurring financial impact of this change on reported net profit after tax, based on current levels of earnings and current exchange rates, is expected to be in the range of NZD $2.3m – $3m.”
The company reported a 24% jump in net profit to $30.2m for its FY17 and expects its FY18 profit to be between $36m – $39m. Its shares have risen by 52% in the past year to $5.53 today.
The new US tax legislation would also increase and extend the ‘bonus depreciation’ claimable for the purchase of new capital assets, said the company.
“New qualifying assets, which we understand includes RVs, will be subject to 100% deductibility in the year of purchase for tax years until 2022. The full deductibility of fleet asset purchases will have the effect of deferring tax cashflows, but will not impact income tax expense.”
The company said a further update on the tax implications of the new legislation would be provided once further analysis is complete, likely to be at the time of its interim results release in late February.