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A snapshot of recent developments

Tax Alert - May 2017

2017 Deloitte Asia Pacific Tax Complexity Survey

The 2017 Deloitte Asia Pacific Tax Complexity Survey (Survey) has been published. The Survey received over 330 responses from tax and finance executives across the region. The Survey showed that predictability about the future development of tax law is the most important factor for businesses deciding to enter or exit a market within the region. With the recent political developments in the US and across Europe, businesses will adopt a generally conservative approach in their tax management strategies, and will devote more time and resources to managing their tax liabilities in complex tax jurisdictions like China and India in the coming years. In contrast to China and India, respondents to the Survey considered New Zealand to have one of the most stable and predictable tax systems across the Asia Pacific region.

IS 17/04: Income tax – computer software acquired for use in a taxpayer’s business

Inland Revenue has finalised IS 17/04, which considers the income tax treatment of software acquired for use in a taxpayer’s business.  The statement outlines the income tax implications for software purchases, periodic payments for the right to use or access software, software developed in-house, commissioned software and the lease of software under a finance lease.

IS 17/03: Goods and services tax – single supply or multiple supplies 

On 11 April 2017, Inland Revenue finalised interpretation statement IS 17/03: Goods and services tax – single supply or multiple supplies. IS 17/03 explains how to determine whether the different elements contained in a transaction should be treated as a single composite supply or multiple separate supplies. To assist with this determination, the statement suggests considering the true and substantial nature of what is supplied to the recipient, the relationship between the supplied elements and whether it is reasonable to sever the elements into separate supplies.

Draft guidance on key-person insurance released

On 13 April 2017, Inland Revenue released a draft QWBA, entitled Income Tax: Insurance – key-person insurance policies.  The draft QWBA considers what a key-person insurance policy is and the income tax treatment of key-person insurance policies.  It concludes that proceeds and premiums in relation to the insurance policy should be taxable and deductible respectively to the extent the insurance is based on estimated loss of business profits.  Alternatively, proceeds and premiums should not be taxable and deductible respectively where the insurance policy relates to the replacement of capital.  Finally, the draft QWBA notes that amounts may need to be apportioned where the insurance policy is for a mixture of loss of business profits and replacement of capital.

The deadline for comment is 23 May 2017.

Draft QWBA on RWT and NRWT on non-cash dividends

On 10 April 2017, Inland Revenue released a draft QWBA, entitled Resident and non-resident withholding taxes: Non-cash dividends.  The draft QWBA considers whether the income of a person receiving a non-cash dividend includes withholding taxes.  It concludes the amount of income in this situation would include the non-cash dividend as well as any withholding taxes paid in relation to the dividend.

The deadline for comment is 23 May 2017.

Special Reports released following the CHC Bill’s enactment

After the enactment of Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Act 2017, Inland Revenue released two Special Reports.  The first special report considers NRWT and AIL changes and provides early information and worked examples on the changes to the taxation of interest payments for non-residents.  The second special report considers a number of significant changes to the taxation of closely-held companies.

Tax response to the April Flood Events

On 19 April 2017, the Tax Administration (April Flood Events) Order 2017 (LI 2017/66) came into force. The Order allows Inland Revenue to waive all use of money interest payments on late tax payments for taxpayers who have been affected by the floods in Edgecumbe and the Bay of Plenty. Inland Revenue will allow taxpayers to make late deposits from the 2016 income year and to apply for early refunds on income equalisation, which will allow farmers and fishers to average their taxable income over several years more easily in light of the recent April Flood Events.

QWBA on the period for which a private or product ruling applies now finalised

On 21 April 2017, Inland Revenue finalised QB 17/03, which considers the period for which a private or product ruling applies.  QB 17/03 concludes that the Commissioner has discretion to decide on the period for which a private or product ruling applies. Despite this, Inland Revenue note that the period will generally be three years from the date of issue of the final ruling or five years where a ruling is re-issued. 

Two Draft General Determinations released

Inland Revenue has recently released two draft depreciation determinations on campervans/motorhomes and “rapid DC car charging stations”.  The deadlines for comment are 19 May and 10 June 2017 respectively.

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