Tax Alert - October 2019
Snapshot of Recent developments
Canada deposits its instrument of ratification for the Multilateral BEPS Convention
On 29 August 2019, Canada deposited its instrument of ratification for the Multilateral BEPS Convention (MLI). The MLI enters into force on 1 December 2019 for Canada and the Canada/New Zealand DTA will also be modified with effect from 1 December 2019.
Protocol amending the TIEA with Guernsey signed
On 18 September 2019, a protocol amending the tax information exchange agreement (TIEA) was signed. This updates the TIEA to include model treaty provisions to prevent tax treaty abuse and improve dispute resolution as recommended by the OECD and G20.
GST treatment of supplies by hunting outfitters and taxidermists
On 28 August 2019, Inland Revenue released a draft interpretation statement, PUB00307: GST - Supplies by New Zealand hunting outfitters and taxidermists to overseas hunters, and three associated factsheets for public consultation.
This draft interpretation statement considers the GST treatment of supplies made by New Zealand hunting guides or outfitters and taxidermists to overseas hunters. It explains which supplies of goods and services to overseas hunters are standard-rated and which are zero-rated for GST purposes. PUB00337 is accompanied by three fact sheets - one each for overseas hunters, outfitters and guides, and taxidermists. The fact sheets briefly summarise the conclusions reached in the interpretation statement.
IR calling ‘time’ on cheques
Inland Revenue has announced that from 1 March 2020, it will no longer process any cheques if customers have an alternative payment option available as the technology used to process cheques will come to the end of its working life. Inland Revenue are also not accepting post-dated cheques dated 1 March 2020 or later.
Finalised Inland Revenue Items
Finalised QWBA – employee contribution to a fringe benefit
On 30 August 2019, Inland Revenue released the finalised QB 19/12: What is the fringe benefit tax, GST and income tax treatment of an employee contribution to a fringe benefit. QB 19/12 explains the fringe benefit tax, GST and income tax treatment of an employee contribution to a fringe benefit. The tax treatment depends on whether the employee makes a full or partial contribution to the value of the fringe benefit, and who the employee makes the payment to.
Finalised QWBA – Business Premises
On 30 August 2019, QB 19/13: Income tax - when does the business premises exclusion to the bright-line test apply, and QB 19/14: Income tax – When does the business premises exclusion in s CB 19 apply, were finalised and released by the Inland Revenue. QB 19/13 explains when the business premises exclusion applies to land that would otherwise be “residential land” and subject to the s CB 6A bright-line test. QB 19/14 considers when the s CB 19 business premises exclusion applies to sales of land that would otherwise be taxable under s CB 6 to s CB 11 of the land taxing provisions. These QWBAs have been redrafted to reflect submissions raised.
Finalised ruling on crypto-assets
On 30 August 2019, Inland Revenue released the finalised public ruling, BR Pub 19/04: Income tax – application of the employee share scheme rules to employer issued crypto-assets provided to an employee. This new ruling considers whether the provision of the crypto-assets by an employer (or other group company) to employees is an “employee share scheme” as defined in s CE 7. BR Pub 19/04 will apply for a period of three years beginning on 1 December 2019.
Commissioner’s Operational Position - treatment of a beneficiary as a settlor in certain circumstances
On 27 August 2019, the Commissioner issued an operational position on new section HC 27(6) - treatment of a beneficiary as a settlor in certain circumstances. Section HC 27 of the Income Tax Act 2007 was amended by the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 to ensure that beneficiaries whose current account balances at the end of the income year are not greater than $25,000 do not become settlors. This amendment comes into force on 1 April 2020, and does not have retrospective effect.
Sale and purchase agreement invalidly terminated
In Wang v Y&P NZ Ltd HC Auckland  NZHC 2112 the High Court considered a dispute between parties to a sale and purchase agreement in relation to whether land is subject to GST or not. The parties signed sale and purchase agreements for properties on the basis that the purchasers were not registered for goods and services tax (GST) which meant the sale would attract GST. The day before the proposed settlement, they advised the vendor they were registered for GST so the sale must be zero-rated. The vendor refused to settle and purported to cancel the agreements. The High Court held the vendor’s purported cancellation of the sale and purchase agreement was invalid and ordered specific performance of the contracts and payment of interest.
October 2019 Tax Alert contents
· Business Tax changes announced
· Habitual buying and selling of land – what is a regular pattern?
· Protecting the tax base at a limited compliance cost
· Is Australia re-thinking the scope of their corporate residence rules?
· New draft interpretation statement clarifies when foreign sourced distributions may be subject to tax as foreign trust distributions
· Glencore case – A transfer pricing win for taxpayer
· Recent developments