With BNZ losing the case against IRD - pertaining to avoiding a payment of $416 million in tax - it would now have to pay Inland Revenue (IRD) $654 million.

IRD's claims of tax avoidance had been denied by BNZ, following which it had knocked the High Court's door with the hope of not paying an extra $416 million in tax, said a judgment released today against BNZ.

The case deals with the bank entering transactions, including "repo" deals prior to 2005, that involved complex cross border lending by overseas-owned banks.

It was held by the commissioner that the transactions were devoid of commercial purpose and designed to avoid paying tax. An amended tax bill sent by IRD to BNZ was afterwards challenged in court.

Six structured finance transactions with offshore counterparties were involved in the case.

A source close to the matter said: "The tax in dispute for all transactions is $416 million. In addition, as at 30 June 2009, BNZ is liable to "use of money" interest of $238 million."