Snapshot of Recent Developments: June Tax Alert

Policy Developments:

Digital economy discussion document

The Government released (on 4 June 2019) a discussion document Options for taxing the digital economy (“discussion document”) (available here). The discussion paper sets out the background to the issue, considers a DST and the OECD measures, and also includes background Appendices on the size and importance of the digital economy and New Zealand’s policy for taxing multinationals. We will have more detail on this in the July edition of Tax Alert.

R&D Tax Bill receives Royal Assent

On 7 May 2019, the Taxation (Research and Development Tax Credits) Bill received Royal Assent. The Taxation (Research and Development Tax Credits) Act 2019, introduces a R&D tax incentive with effect for the 2019-20 income year. Finalised guidance is expected next month. Refer to our earlier article on this development.

GST rules on telecommunication services to change

On 17 May 2019, the Minister of Revenue, Stuart Nash made a pre-budget announcement proposing that the Government will align the GST rules on telecommunications services with OECD guidelines and with the treatment of other remote services. An issues paper has been released by the Inland Revenue for public consultation. It is proposed that from 1 October 2020, most of the special rules in the Goods and Services Tax Act 1985 for supplies of telecommunications services be repealed. The GST treatment of most telecommunications services would be aligned with the treatment of other remote services and determined based on the residency of the consumer.

The proposed changes would mean that:

• Outbound mobile roaming services received by New Zealand residents overseas would be subject to GST at the standard rate of 15%; and
• Inbound mobile roaming services received by non-residents in New Zealand would no longer be technically subject to GST.

A fact sheet was also issued. Submissions close on 28 June 2019.

Betting levy to be repealed

On 17 May 2019, the Racing Minister, Winston Peters announced that the betting levy will be repealed progressively over a three year period. The levy paid by the racing industry to the Crown will be redirected to the racing and sports sectors.

Finalised Inland Revenue Items:

Income equalisation deposits and refunds – SPS 19/03

On 20 May 2019, Inland Revenue released a finalised standard practice statement, SPS 19/03: Income equalisation deposits and refunds. This item applies from 4 April 2019 and replaces SPS 17/01. It has been reworded to recognise the repeal of the Income Equalisation Adverse Event Scheme from the 2020 income year and also fixes some incorrect section references. It should be noted that whilst the Adverse event scheme has been repealed, the main income equalisation scheme is still available to cover the same circumstances.

National average market value (NAMV) of specified livestock Determination 2019

On 23 May 2019, the finalised National average market values of specified livestock determination 2019 were released by the Inland Revenue. The determination sets the national average market values to apply to specified livestock on hand at the end of the 2018-2019 income year.

Question We’ve Been Asked – Short term accommodation - QB 19/05 – QB 19/09

On 24 May 2019, Inland Revenue released the two Determinations and five Questions we’ve been asked (QWBA) items that explain tax obligations for a person who rents out their home, a room or separate residential property. The focus is on short term accommodation provided through peer-to-peer platforms (e.g. Airbnb or Bookabach). An overview with a flowchart has been provided to assist with determining which set of rules apply. The items released include:

• QB 19/05: Renting your own home
• QB 19/06: Which income tax rules apply?
• QB 19/07: Applying the mixed-use asset rules
• QB 19/08: Applying the standard rules
• QB 19/09: GST registration
• Determination DET 19/01: Standard-cost household service for private boarding service providers and a worksheet for using Determination DET 19/01
• Determination DET 19/02: Standard-cost household service for short-stay accommodation providers

For more information refer our previous article on the draft statements noting there have been some minor changes.

Tax Cases:

Definition of financial services for GST purposes discussed

Provident Insurance Corporation Limited v the Commissioner of Inland Revenue [2019] NZHC 995

The Court held that the premia paid for insurance products that are designed for asset protection (covering vehicles written off in an accident and repayment obligations for credit contracts for the purchase of motor vehicles), were not exempt from GST output tax under the financial services exemption.

June 2019 Tax Alert contents

• How are you affected by new individual tax assessment regime?
• Cautionary tale of GST in land transactions
• IR and ATO release administrative approach to determining residence
• What’s the buzz with tax and charities?
• KiwiSaver – flexibility, suspensions, and those over 65
• Tax Bill returns from the Finance and Expenditure Committee with modifications
• Depreciation myths debunked
• GST legislation one step closer to enactment
• GST obligation changes for digital services to Singapore
• Correcting errors under s. 113 update