A step in the right direction – relaxation of the bank account requirements for IRD number / GST applications

Tax Alert - April 2016

By Sam Hornbrook and Rosalind Li

Since 1 October 2015, non-residents have been required to have a fully functional New Zealand bank account before applying for an IRD number.  This change was introduced as part of the suite of measures to assist Inland Revenue with its enforcement of the taxation of property rules and ensure that New Zealand’s full anti-money laundering rules apply to non-residents.  However, the requirement to have a fully functional bank account has proved to be extremely problematic for a number of non-residents that have limited physical presence in New Zealand and no other need for a New Zealand bank account.

It is pleasing to note that Officials have listened to concerns and have proposed amending legislation which will see this rule relaxed in certain situations.  The key exemption will allow non-residents to apply for an IRD/GST number without the need for a fully functional New Zealand bank account in situations where the application for an IRD number is for GST purposes only.   

On 21 March 2016, the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill ("the Bill") was reported back from the Finance and Expenditure Committee.  The Bill already contains an exemption to the bank account requirements for non-resident suppliers of “remote services” (who will be required to register for GST when the ‘Netflix’ tax is introduced – see here. The Bill as reported back also goes a step further to exempt the bank account requirement for all other non-resident suppliers applying to just register for GST.

This bank account exemption will particularly benefit non-residents responsible for supplying high value commercial goods into New Zealand (often with one-off supplies) as they will more easily be able to register for GST and claim back import GST incurred by them on importation. The bank account exemption will also simplify GST grouping between offshore head offices and New Zealand subsidiaries.

It must be noted that the bank account exemption will not apply to non-residents where they may have other non-GST tax obligations in New Zealand.  Therefore, it is likely that many non-residents will continue to encounter issues/delays in obtaining IRD/GST numbers for the foreseeable future as they will still need to obtain a fully functional New Zealand bank account.

The Bill is expected to be enacted before the end of April 2016.  These exemptions will apply with effect from the date of royal assent. For further information, please do not hesitate to contact your usual Deloitte advisor.

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