Snapshot of Recent Developments: May Tax Alert
Tax Alert - May 2019
Special reports on BEPS
On 29 April 2019, Inland Revenue released the finalised special reports on the base erosion and profit shifting (BEPS) measures that are now in force as a result of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 . These are special reports on separate topics for BEPS rules including interest limitation, hybrids, transfer pricing, permanent establishment, and administrative measures. The final versions were first published in the April 2019 Tax Information Bulletin (TIB) but there have been some minor corrections made since. These changes can be found on the Inland Revenue’s Tax Policy website.
SOP No 204 for the R&D Bill
On 30 April 2019, a Supplementary Order Paper (SOP) was introduced in relation to the Taxation (Research and Development Tax Credits) Bill. This SOP makes minor remedial typographic corrections and corrects a fault of expression, to ensure that Callaghan Innovation has access to necessary Inland Revenue administrative information for the administration of research and development tax credits. This bill is still on track to be enacted by the end of May 2019.
Information Release – Options for taxing the digital economy
On 3 April 2019, Inland Revenue released policy and cabinet papers on its policy website that were considered by Cabinet in February 2019 relating to the decision to proceed with a discussion document on taxing the digital economy. New Zealand considers the three OECD proposals for taxing the digital economy. In the information release, Inland Revenue comments that:
- the Digital Services Tax (DST) initially proposed would be like the one proposed by the UK;
- any DST would only be introduced if the OECD is unable to arrive at an international solution in a reasonable time-frame and a critical mass of other countries also adopt DSTs; and
- the DST would be an interim measure that would cease to apply once an international solution was fully implemented.
The papers also note that the Government sees real benefits in aligning New Zealand’s position on a DST with Australia. Since these cabinet papers were released, the Australian Government has announced it will not introduce an interim DST solution but will continue to participate in the OECD initiative. It will be interesting to see what affect this development has on the New Zealand Government’s thinking. A discussion document is still expected in May 2019.
Special Reports on the ARMTARM Act now available
On 12 April 2019, Inland Revenue released two special reports providing early information on the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019. The special reports cover the new rules for:
Complete coverage of the new Act will be published in the May 2019 edition of the Tax Information Bulletin.
Correction of Errors in Employment Income Information
The Tax Administration (Correction of Errors in Employment Income Information) Regulations 2019 came into force on 1 April 2019. These Regulations are made under section 23N of the Tax Administration Act 1994 about how errors in an employer’s employment income information for a payday may be corrected, including the nature and types of errors that are able to be corrected by employers and the manner in which errors may be corrected.
Finalised Inland Revenue Items:
Who can confirm an income statement of a deceased person?
On 15 April 2019, Inland Revenue released an operational statement 19/02. This lists the persons who are able to confirm an income statement of a deceased person under s RZ 15 of the Income Tax Act 2007 and who can provide information to the Commissioner to finalise a deceased person’s tax account under s 22F of the Tax Administration Act 1994 where the deceased does not have a will and no executor or administrator has been appointed.
Income tax – attribution rule for income from personal services – Interpretation Statement IS 19/02
On 18 April 2019, Inland Revenue released a finalised interpretation statement IS 19/02: Income tax – attribution rule for income from personal services. This item makes minor amendments to, and replaces, IS 18/03 which provides guidance on the application of ss GB 27 to GB 29 of the Income Tax Act 2007.
Question We’ve Been Asked – Provisional tax – impact on employees who receive one-off amounts of income without tax deducted – QB 19/03
On 24 April 2019, the QB 19/03: Provisional tax – impact on employees who receive one-off amounts of income without tax deducted was released by the Inland Revenue. This finalised statement concerns the provisional tax and UOMI implications when an employee receives a one-off amount of income that has not had tax deducted at source. It considers the implications for the year of receipt and the following year. For more information refer our previous article on the draft version.
Question We’ve Been Asked – Income tax – provisional tax and use of money interest implications for a person in their first year of business – QB 19/04
On 24 April 2019, Inland Revenue released QB 19/04: Income tax – provisional tax and use of money interest implications for a person in their first year of business. QB 19/04 covers the provisional tax and UOMI implications of a person in their first year of business and considers the relevance of the definition of a “taxable activity” – a concept borrowed from the Goods and Services Tax Act 1985. For more information refer to our previous article on the draft version.