Stop Press: Inland Revenue releases Multinational Compliance Focus

By Emma Marr

As we went to press, Inland Revenue released the Multinational Enterprises Compliance Focus 2019 document. Last released in 2016, this update aims to provide transparency and certainty to taxpayers.

As more and more businesses transact globally, and international organisations such as the OECD continue to proactively develop policies to prevent base erosion and profit shifting, New Zealand’s tax rules will continue to adapt to tackle the challenge of taxing international commerce. The document includes checklists of actions MNEs should take in considering whether they comply with their New Zealand tax obligations. We will cover this in more detail in future editions of Tax Alert.

The key message is that Inland Revenue want to make it easy for taxpayers to comply with the law, to be open and transparent with Inland Revenue, and to be proactive in seeking guidance from, or agreement with Inland Revenue, as to their tax positions.

Future focus

Inland Revenue’s future focus is to balance the need to ensure that multinationals pay their fair share of tax, while also creating a business environment that supports multinational businesses operating in and out of New Zealand, with few competitive distortions and the lowest possible compliance costs.

As part of this, Inland Revenue will focus on:

• International monitoring framework: New Zealand is party to a number of initiatives to share information between revenue authorities, such as Country by Country reporting, Exchange of Information on Tax Rulings, liaising with the New Zealand Customs Service, and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Combined with the annual International Questionnaire completed by substantial NZ-based MNEs, this provides a large data pool for Inland Revenue to mine.
• BEPS disclosures: The new disclosure requirements covered in this Tax Alert will allow Inland Revenue to monitor whether taxpayers are complying with New Zealand’s anti-BEPS measures.
• International compliance campaigns: The first example of this is the new questionnaire for wholesalers and distributors Inland Revenue released recently. Future campaigns will focus on areas such as losses, royalties, and debt/thin capitalisation. Inland Revenue encourage taxpayers who are likely to be affected by an increased focus on these areas to consider their compliance with existing rules ahead of Inland Revenue knocking on their door. As an example, if you are subject to the thin capitalisation rules, you should read this month’s article on how to tackle thin capitalisation calculations in a BEPS world.
• Monitoring hot spots: this includes a focus by Inland Revenue on financing risks such as cash pooling, guarantees, and derivatives, to ensure they are used appropriately within transfer pricing rules.
• Transfer pricing simplification: Inland Revenue is committed to simplifying our transfer pricing rules, particularly for smaller MNEs, and is open to suggestions as to how the rules could be easier to comply with, while still achieving the aim of avoiding BEPS.
• Continuing to develop plans to tax the digital economy: Inland Revenue will consider implementing domestic options if OECD proposals do not progress quickly enough.

The overall message is that Inland Revenue has a wide range of tools at its disposal, both in the legislation that has been enacted in recent years, and in the technology and increased information it has at its disposal following the Business Transformation programme. Inland Revenue will make full use of these tools to ensure taxpayers comply with our anti-BEPS rules.

If you have any concerns about your compliance with New Zealand’s comprehensive and robust international tax rules, please contact your usual Deloitte advisor.

November 2019 Tax Alert contents

·  OECD proposes a “unified approach” to addressing the digitalization of the economy

·  New compulsory online BEPS disclosure forms now required!

·  Stop Press: Inland Revenue releases Multinational Compliance Focus

·  Thin capitalisation calculations in a BEPS world

·  Attention Wholesalers & Distributors – Are you part of the chosen few?

·  Provisional tax changes: Two years on

·  Uncertain tax positions – it’s now time to report these in your financial statements

·  Deducting holding costs for privately used land that is taxable on sale

·  Recent Developments