A snapshot of recent developments
Tax Alert - December 2017
The Minister of Revenue’s speech at the 2017 CAANZ Tax Conference
The Minister of Revenue Stuart Nash delivered the opening address to the 2017 CAANZ tax conference, held in Auckland on Thursday 16th and Friday 17th November. The Minister’s speech included comments regarding the Coalition Government’s 100-day plan, future challenges that New Zealand faces, BEPS, and an update on Inland Revenue’s Business Transformation program. For further information, refer to our Tax Working Group – Terms of Reference article in this edition of Tax Alert.
Reinstatement of Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill
On 8 November 2017, Parliament reinstated the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill. The Finance and Expenditure Committee will now continue its consideration of the Bill. The Bill, introduced on 6 April 2017, contains measures relating to collecting employment and investment income information, reforms to the taxation of employee share schemes and sets the annual tax rates for 2017–18. Parliament did not re-instate the Income-Sharing Tax Credit Bill, introduced in August 2010.
Speech from the Throne
On 8 November 2017, Her Excellency The Rt Hon Dame Patsy Reddy delivered the “Speech from the Throne”. Her Excellency noted that the Government will “review the tax system, looking at all options to improve its structure, fairness and balance, including better supporting regions and exporters, addressing the capital gain associated with property speculation and ensuring that multinationals contribute their share. Penalties for corporate fraud and tax evasion will increase. Personal income taxes, taxes on the family home and GST will remain at the same rates as they are today.”
Research & Development Tax Credits – proposed timeline in the works
Minister of Research, Science and Innovation, Megan Woods, says that the new Coalition Government is “hopeful” to reintroduce the 12.5% tax credit for R&D for the 2018-19 tax year. The exact timeline will be finalised once the Minister has received more advice from Officials. The Minister also hinted that a major restructure could be on the way for Callaghan Innovation Grants, the Crown agency, and that the key is “getting the balance between the grants and the tax credit” right.
The Coalition Government’s goal is to lift R&D expenditure from its current level of 1.3% of the GDP to the OECD average of 2.4%. The policy is expected to cost $100 million in the first year, increasing to $300 million by its fourth year.
OECD Council approves the 2017 update to the OECD Model Tax Convention
On 21 November 2017, the OECD Council approved the contents of the 2017 Update to the OECD Model Tax Convention (the OECD Model). The 2017 Update, which was previously approved by the Committee on Fiscal Affairs on 28 September 2017, will be incorporated in a revised version of the OECD Model that will be published in the next few months. Refer to the OECD’s full press release here.
Government notifies third protocol to Convention between India and New Zealand
The New Delhi Government recently notified the New Zealand Government that it has completed domestic procedures required to bring the third protocol for amendment of the Double Tax Agreement between India and New Zealand into force. The Protocol updates the existing framework of exchange of tax related information to the latest international standard, which would help curb tax evasion and tax avoidance between the two countries and enable mutual assistance in the collection of taxes. Read more here, and for the text of the protocol, click here.
Binding Rulings – Effect of the Commissioner changing her mind in relation to the application of section BG 1
Inland Revenue has released a draft Question We’ve Been Asked (PUB00318) considering what would happen if the Commissioner issues a binding ruling for an ongoing arrangement, but later changes her mind as to how the general anti-avoidance rules apply to that arrangement. The item concludes that the Commissioner is entitled to apply a new interpretation of the law following the expiry of the ruling, as long as this does not have the effect of reversing the tax outcomes in the period covered by the ruling.
The deadline for comment on this item closes on 20 December 2017.
When is income from a cash dividend paid on ordinary shares derived?
This draft Question We’ve Been Asked (PUB00296) considers the timing differences between cash basis and accrual basis taxpayers (other than when a specific timing regime applies). It also considers the tax treatment of dividends derived from closely held companies where more diverse practices concerning dividends can arise. Once finalised, the draft QWBA is intended to apply from the income year commencing 1 April 2018, or the first day of any income year starting after 1 April 2018 where a non-standard balance date applies.
The deadline for comment closes on 22 December 2017.
CAANZ and TMNZ Annual IR Satisfaction Survey
Chartered Accountants Australia and New Zealand (CAANZ) and Tax Management NZ (TMNZ) have commissioned their annual survey of the views of members in public practice (i.e. tax agents, tax professionals) and businesses on Business Transformation, the new provisional tax rules and AIM.
Some highlights from survey’s results include:
- In relation to the administration of GST online via myIR, 60% of respondents believe that filing GST returns online was working well.
- Three quarters of respondents in public practice believe that their clients will be better off due to the new provisional tax changes. In contrast, only 36% of respondents from the business sector believe that the new provisional tax changes are positive.
- Most respondents in the business sector agree that the new provisional tax calculation method, AIM, will provide more certainty around provisional tax. However, only 24% of those in public practice believe that their clients would use AIM, decreasing from the 38% recorded last year.
- Other unsatisfactory areas included lengthy phone calls and wait times for phone calls with Inland Revenue.
Read the press release and download the results from the full survey here.
When is an arrangement considered to be “materially different” from the arrangement identified in a private or product ruling?
On 27 November 2017, Inland Revenue released a draft Questions We’ve Been Asked (PUB00319[WA(-A1] ) considering when a revised arrangement is considered to be “materially different” from the arrangement identified in a private or product ruling.
The draft item concludes that if the revised arrangement is revised to the extent that it is capable of affecting the tax outcome referred to in the ruling, the revised arrangement will be considered as “materially different” from the ruling identified in a private or product ruling.
Deadline for comment on this item closes 31 January 2018.
2017 Deloitte Top 200 Awards
Deloitte New Zealand held its annual Top 200 awards on 23 November 2017. The awards evening acknowledged business excellence and noteworthy leadership across 10 award categories. The finalists and winners of the 2017 Deloitte Top 200 Awards are listed here.
December 2017 Tax Alert contents
- Tax Alert - December 2017
- BEPS proposals now before New Zealand Parliament
- Terms of reference announced for Tax Working Group
- R&D Tax Credits: Reflections from New Zealand and Australia
- Is AIM the right provisional tax method for you?
- GST on online shopping – the holiday is coming to an end
- Proving arm’s length pricing is set to become a taxpayer’s burden
- Impact of changes to the look-through company rules
- Are your GST processes and controls up to scratch?
- Recent tax developments