A snapshot of recent developments
Tax Alert - August 2017
Applying for IRD numbers online
Inland Revenue has developed a new feature on their website which allows individuals and non-individuals to apply for IRD numbers here. While the tool is currently accessible via myGST on Inland Revenue’s myIR webpage, it is available to all taxpayers to register for an IRD number, whether or not they also need to register for GST. Inland Revenue are currently seeking feedback on the tool. Please let us know your experience with the tool and if you encounter any issues with it.
Inland Revenue’s departmental restructure
Further to Inland Revenue’s Business Transformation program, the Commissioner has announced significant internal changes that will take place within the Department. Earlier this year, Inland Revenue staff had the opportunity to comment on a draft restructure plan. Following feedback from the consultation, the Commissioner announced that the number of frontline customer services staff currently employed will not be reduced. Instead, new roles are being offered to the 3,300 customer-facing staff currently employed at Inland Revenue. In addition, 900 other staff would see their jobs change, with a reduction in management roles, and more roles for tax specialists introduced (18 new specialist positions will be added across Inland Revenue’s organisation).
The Commissioner has noted that the proposed changes will commence from 12 February 2018.
Draft Standard Practice Statement ED0197: Six-monthly GST return filing
Inland Revenue has released a draft SPS on six-monthly GST return filing. Draft Standard Practice Statement ED0197: Six-monthly GST return filing sets out certain practices that the Commissioner will exercise in applying the discretion to allow registered persons to remain or become six-monthly return filers for GST purposes. This item also replaces GNL 420 Six-monthly GST return thresholdw, as reported in the December 2001 edition of Tax Information Bulletin, Vol 13, No 12.
The deadline for comment is 18 August 2017.
Draft Standard Practice Statement ED0198: Loss offset elections between group companies
Inland Revenue has released a draft standard practice statement (SPS) on loss offset elections between group companies. Draft Standard Practice Statement ED0198: Loss offset election between group companies sets out the extent to which the Commissioner will accept loss offset elections between group companies, and consequences of specific events that can impact on a loss offset and how these should be addressed.
The deadline for comment is 18 August 2017.
Draft Standard Practice Statement: ED0199 – Elections to change a balance date
On 19 July 2017, Inland Revenue released draft standard practice statement ED0199: Elections to change a balance date for public consultation. The draft statement sets out Inland Revenue’s practice for considering when to approve a taxpayer’s request to change their balance date for income tax purposes. The draft item includes more examples of when the Commissioner may consent to a change in balance date compared to an earlier item published in February 2009, SPS 08/04: Elections to change a balance date. The item also considers the GST and provisional tax consequences of changing a balance date and further updates SPS 08/04 for changes in legislation and Inland Revenue’s online process.
The deadline for comment is 25 August 2017.
Update - Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill
Given that it is Election year, we understand that any further progress on the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill will be on hold until November. We do not expect the Officials’ Report to be released until 24 November 2017. Submissions on the Bill closed on 5 July 2017.
Inland Revenue publications on Automatic Exchange of Information and the Common Reporting Standard
Inland Revenue has published several documents and guidelines relating to the Automatic Exchange of Information (AEOI) and Common Reporting Standard (CRS) initiative on their website. New Zealand’s financial institutions that are affected by CRS should click here for information on what they need to do to comply with CRS due diligence and reporting requirements. The webpage also includes information about what qualifies as a financial institution for CRS purposes and an initial list of participating jurisdictions.
CRS Determinations published
Several determinations relating to CRS have also been published by Inland Revenue. Broadly, these determinations clarify that certain financial accounts are excluded or included for the purposes of CRS. Determination CRS 2017/002 for example clarifies that a member’s account within a KiwiSaver scheme (and the scheme itself) is a non-reporting financial institution for the purposes of CRS.
For more information on CRS, please also refer to our July Tax Alert article.
Tax Information Bulletin – July 2017
The July 2017 edition of Tax Information Bulletin has been published. This issue covers the Order in Council debt reporting threshold, latest interpretation statements, QWBA’s, CRS publications, binding rulings and determinations.
Labour Party proposes to introduce Diverted Profits Tax on multinationals
On 18 July 2017, the Labour Party announced that it will introduce a Diverted Profits Tax (DPT) on multinational companies that are not paying their “fair share of tax” if it is elected into government at the general election on 23 September 2017. The DPT is a tax that is charged on profits that are considered to be artificially diverted out of the country. Labour has not released any technical details about the scope of the DPT, or how the DPT will be administered in New Zealand. However, from the announcements, it appears that the proposed DPT will mirror the UK’s, i.e., the DPT will apply to business arrangements that are structured to avoid having a New Zealand permanent establishment, or payments that lack economic substance (or end up in a low tax company that lacks economic substance). The DPT would likely be higher than our corporate tax rate of 28% given that the UK DPT is set at 25% (5% higher than the UK corporate tax rate of 20%). Former leader Mr Little projected that an additional $600 million in tax revenue will be collected from multinationals over three years and aims to resource Inland Revenue’s investigations unit with an additional amount of $30 million each year to assist in achieving this.
Recent changes to the leadership of the Labour Party may result on changes to their tax policies.
New Zealand – Hong Kong Double Tax Agreement updated for AEOI
On 28 June 2017, Minister of Revenue Judith Collins signed an amending tax protocol between New Zealand (NZ) and Hong Kong (HK) to give effect to the automatic exchange of information between NZ and HK, in compliance with the G20 and OECD global standard. The protocol will allow the New Zealand competent authority to disclose information to the Office of the Ombudsman in the investigation of complaints against the administrative actions of the New Zealand Inland Revenue Department.
For more information, refer to the Minister of Revenue’s media statement.
August 2017 Tax Alert contents