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A snapshot of recent developments 

Tax Alert - June 2016

Below is a summary of the key tax developments which have occurred since our last Tax Alert.

OS 16/01: Filing an IR 10 and section 108 of the Tax Administration Act 1994

On 31 May 2016, Inland Revenue released the finalised operational statement OS 16/01, which outlines Inland Revenue’s operational approach for applying section 108 of the Tax Administration Act 1994 (“the time bar”) when an IR 10 has been filed.  Our article in March covered the draft.  The conclusions reached are broadly consistent with the earlier draft with some of the discussion and explanations updated.

Taxation (Resident Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016

Also known as the ‘Netflix tax’ Bill, this bill passed its third reading on 3 May 2016 and received royal asset on 13 May 2016.  This Act imposes a range of new rules including the Residential Land Withholding Tax (“RLWT”), GST on remote services and intangibles supplied by offshore suppliers, and a remedial change regarding recently introduced bank account requirements.

Taxation (Transformation: First Phase Simplification and Other Measures) Bill

The Taxation (Transformation: First Phase Simplification and Other Measures) Bill passed its third reading on 31 May 2016 and received royal assent on 2 June 2016.  The Bill includes the first proposals relating to business transformation, changes to the collection of tax from employee share schemes and a simpler FIF exemption for ASX companies.

Commissioner’s mileage rates for 2016

The Commissioner of Inland Revenue completed her review for 2016 of the mileage rate for expenditure incurred for the business use of a motor vehicle and concluded that rate should be reduced to 72 cents per kilometre (from 74 cents in 2015) for both petrol and diesel fuel vehicles for the 2016 income year.

Customs and Excise Act amendments released

On 19 May 2016, Customs Minister Nicky Wagner announced a set of proposals to reform the Customs and Excise Act 1996.  The proposals include plans for Customs NZ and Inland Revenue to co-ordinate on the streamlining of GST payment at the border and a focus on reducing compliance costs.  The proposals also include changes to address a range of issues for New Zealand businesses, including:

  • An allowance for alcohol manufacturers to use off-site storage without incurring excise tax when the goods enter storage;
  • An internal process for appeals over the assessment of duty;
  • Importers will be able to declare a provisional value for goods in specific circumstances and declare a final value later; and
  • Customs will be able to issue binding valuation rulings.

Draft SPS on using losses to pay shortfall penalties

On 24 May 2016, Inland Revenue released a draft standard practice statement (“the draft SPS”) concerning section IW 1 of the Income Tax Act 2007.  Section IW 1 allows taxpayers to use tax losses to pay shortfall penalties imposed on income tax liabilities.  The draft SPS confirms that losses can only be applied to penalties on income tax.  It also discusses the conditions for using losses, how losses can be used for group penalties and the correct value of an individual or company’s losses when paying a penalty.

CS 16/01: OECD information sharing requirements for taxpayer rulings and determinations

On 17 May 2016, Inland Revenue released Commissioner’s Statement 16/01 (“CS 16/01”) CS 16/01.  The statement details the Commissioner’s obligation to share certain taxpayer rulings or determinations with tax authorities in other OECD countries as a part of Action 5 of the OECD’s BEPS Action Plan.

Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports

On 12 May 2016, Revenue Minister Michael Woodhouse announced that New Zealand has signed the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports.  This agreement “allows all signatories to bilaterally and automatically exchange Country-by-Country Reports with each other, as contemplated by Action 13 of the BEPS Action Plan”.

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