October Tax Alert


Snapshot of recent developments

Tax Alert - October 2020

Tax legislation and policy announcements

OECD Tax Policy Reforms 2020

The Tax Policy Reforms 2020 report tracks the tax policy developments over time and provides an overview of the latest tax reform trends for OECD countries. It identifies major tax policy trends emerging before COVID-19 but includes a special feature which takes stock of the tax and broader fiscal measures introduced by countries in response to the pandemic, from its outbreak to June 2020. The report shows that initial government COVID-19 responses focused on providing income support to households and liquidity to businesses, and the responses were then expanded. Most recent measures suggest that the recovery phase will be supported by expansionary fiscal policy in several countries. With countries facing such high levels of uncertainty, policy agility will be key and targeted support measures should be maintained to avoid scarring effects. Once recovery is well underway, governments should shift from crisis management to more structural tax reforms. In addition, the rising pressure on public finances as well as increased demands for fairer burden-sharing should also provide new impetus to reach an agreement on digital taxation.

Inland Revenue statements and guidance

GST and agency interpretation statement

On 7 September 2020, Inland Revenue released public consultation item PUB00327: Goods and Services tax – GST and agency. This draft interpretation statement considers whether a person is acting as an agent or as a principal for the purposes of the Goods and Services Act 1985. It is primarily concerned with the application of sections 60(1) and (2) and identifies features that indicate when an agency relationship will exist in relation to a supply. Submissions close on 20 October 2020.

Liquidation question we’ve been asked

On 9 September 2020, Inland Revenue released an item for consultation PUB00366: First step legally necessary to achieve liquidation when a liquidator is appointed. The draft clarifies that the first step legally necessary to achieve liquidation in a long-form liquidation (being the appointment of a liquidator) is not the same for a short-form liquidation. In a short-form liquidation, a resolution by shareholders, board of directors or another overt decision-making step is required. Submissions close on 21 October 2020.

Land for the compulsory zero-rating rules

On 23 September 2020, Inland Revenue released a public consultation item PUB00381 – Do certain supplies wholly or partly consist of land for the compulsory zero-rating (CZR) rules? This draft Questions We’ve Been Asked concludes the following types of supplies (which wholly or partly consist of land) will be subject to CZR rules:

  • the sale of transferable development rights;
  • the sale of standing timber;
  • the sale of a purchaser’s interest in a binding sale and purchase agreement for land, even if it is conditional.

In comparison, the statement concludes that the following supplies do not consist of land for the CZR rules:

  • the sale of a purchaser’s interest in a non-binding sale and purchase agreement for land;
  • and the grant of a licence to use land.

The deadline for submissions is 3 November 2020.

Tax treatment of cryptoassets

On 8 September 2020, Inland Revenue updated its guidance on the tax treatment of cryptoassets in New Zealand to clarify how the income tax rules apply. Essentially, cryptoassets are treated as a form of property for tax purposes, and so the proceeds from selling, trading or exchanging cryptoassets are broadly taxable. The guidance defines “cryptoassets”, sets out the tax treatment for individuals and businesses who are buying, selling and mining cryptoassets, the effect of tax residency status on cryptoasset income, the PAYE and fringe benefit tax issues when providing cryptoassets to employees, record keeping obligations and how to calculate net income to include in tax returns.

GST and Leaky Homes Financial Assistance Scheme

On 21 September 2020, Inland Revenue issued a Commissioner’s Statement CS 20/05 – GST treatment of payments received by a GST registered body corporate from the Ministry of Business, Innovation and Employment (MBIE) under the Leaky Homes Financial Assistance Package (FAP). The Commissioner considers that a payment made under the FAP scheme from MBIE to a body corporate is not a payment in respect of any actual supply of goods and services made by the body corporate in return for that payment. However, the Commissioner considers that these payments are in the nature of a grant or subsidy from the Crown under section 5(6D) of the Act and therefore are deemed to be in response to a supply from the body corporate. As a result, these payments are subject to GST. A GST registered body corporate which receives such payments is therefore obliged to include the GST component in its GST return and to pay for any net GST output tax. A body corporate which is not registered (and not liable to be registered) for GST will not be obliged to account for GST.

Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.

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