Snapshot of recent developments
Tax Alert - September 2021
Tax legislation and policy announcements
Consultation on scope of Long Term Insights Briefing
On 13 August 2021, Inland Revenue released a consultation document - Tax, investment and productivity, proposing to focus its 2022 Long Term Insights Briefing on tax and its impact on investment and productivity. The aim is to obtain a better understanding of how taxes affect costs of capital (or hurdle rates of return) and the consequent implications for inbound investment, productivity, and economic performance. Public submissions close on 6 September 2021.
Inland Revenue statements and guidance
Inland Revenue’s guidance on Clean Car Discount Scheme
Under the Clean Car Discount Scheme (“the Scheme”), a rebate will be paid to the first registered person of an eligible vehicle from 1 July 2021 until 31 December 2021. If proposed legislation changes become law, from 1 January 2022, the Scheme will be based on vehicle’s Co2 emissions. This means that vehicles with zero or low emissions will qualify for a rebate and those with high emissions will incur a fee. This will have tax consequences if businesses receive a rebate or pay a fee under the Scheme, or lease a vehicle that comes under the Scheme. Inland Revenue has recently released tax guidance on getting the rebate, paying the fee, claiming depreciation, Fringe Benefit Tax, and GST.
Calculating a foreign tax credit – draft issued
On 18 August 2021, Inland Revenue released draft interpretation statement PUB00370: Income tax - foreign tax credits - how to calculate a foreign tax credit. This consultation statement explains how to calculate a foreign tax credit under subpart LJ of the Income Tax Act 2007, outlines relevant compliance obligations, explains in greater detail how to segment foreign-sourced income, and illustrates how the foreign tax credit calculation applies in some specific scenarios. Submissions close on 28 September 2021.
Excusing estates from filing income tax returns
On 24 August 2021, Inland Revenue published finalised Operational Statement OS 21/03 - Excusing estates from filing income tax returns. The Commissioner’s position has remained unchanged from the draft statement. The Commissioner considers that executors and administrators are able to apply under s 43B of the Tax Administration Act 1994 to be excused from filing income tax returns where they have reached the point in administration of an estate that they are ready to distribute, or have distributed, the property in the estate to be held on trust for beneficiaries. It is also noted that a legislative change to s 43B that may alter some or all the matters covered in this statement is currently being considered by the Policy and Regulatory Stewardship Unit of Inland Revenue.
Apportioning expenditures for motels and hotels
On 26 August 2021, Inland Revenue released Questions We’ve Been Asked QB 21/10 - If I run a hotel, motel or boarding house and live on site, what expenditure can I claim? The Commissioner’s answer remains unchanged from the draft statement and states that if a person has a business of providing accommodation through a hotel, motel, boarding house, or other business premises, and live on-site, any expenses they incur relating solely to the running of their business are fully deductible. However, expenses relating to their private quarters or family life are not deductible as they are private or domestic in nature. If the expenses relate to both their private quarters and their business, they can claim a deduction to the extent that the expenses relate to the running of their business. This requires a person to calculate the portion of these mixed expenses that are attributable to their business.
Foreign Exchange Rates
On 30 August 2021 Inland Revenue released draft determination PUB00401. This draft determination approves sources for foreign exchange rates that may be used by any person who is required to convert a foreign currency amount into its New Zealand Dollar (NZD) equivalent for the purposes of determining their tax liability, unless the Act requires otherwise. It also approves the use of mid-month, end of month and rolling average rates. In addition, this approval explains how the relevant exchange rate should be used to convert foreign currency amounts to their NZD equivalent
Transfer Pricing country profiles
On 3 August 2021 the OECD published updated transfer pricing country profiles, reflecting the current transfer pricing legislation and practices of 20 jurisdictions, including New Zealand. The country profiles also contain new information on countries’ legislation and practices regarding the transfer pricing treatment of financial transactions and the application of the authorised OECD approach when attributing profits to permanent establishments.
Progress towards a fairer global tax system
Progress continues in combatting harmful tax practices as new outcomes on the review of preferential tax regimes has been approved by the OECD/G20 Inclusive Framework on BEPS. At its April 2021 meeting, the Forum on Harmful Tax Practices took new conclusions on 25 regimes as part of the implementation of the BEPS Action 5 minimum standard. A number of countries have since abolished the local regimes concerned.
Deloitte Global News Focus
Deloitte wins at International Tax Review Asia-Pacific Tax Awards
Deloitte New Zealand is delighted to have been recognised as market leading tax advisors by the International Tax Review Asia Tax Awards, winning the New Zealand Tax Firm of the Year. Submissions are judged based on innovation, impact and complexity of the projects completed. Deloitte also received five regional awards, including Asia-Pacific Tax Firm of the Year, Asia-Pacific Diversity & Inclusion Firm of the Year, Asia-Pacific Tax Policy Firm of the Year, Asia-Pacific Tax Technology Firm of the Year and Asia-Pacific Impact Deal of the Year. In addition to regional awards, Deloitte member firms’ tax practices in Hong Kong SAR, Indonesia, Japan, Malaysia, Taiwan and Vietnam won Tax Firm of the Year, and in Australia, Hong Kong SAR and Malaysia won Transfer Pricing Firm of the Year.
Deloitte Asia Pacific Tax Complexity Survey
Conducted in late 2020 and early 2021, Deloitte’s fourth Asia Pacific Tax Complexity Survey, involving 407 business leaders in 24 key jurisdictions across the region, gauges business leaders’ views on tax complexity, consistency and predictability to understand the current and anticipated tax environment and business landscape where they operate. This edition captures views on two additional factors that are seen to impact tax change: The digitization of business and the COVID-19 pandemic.
Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.
September 2021 Tax Alert contents
- COVID-19: What government support is available for businesses
- Objective and subjective factors to consider before claiming a wage subsidy
- Managing tax filings, payments and cashflow in light of COVID-19
- Running a business with ongoing border uncertainty
- COVID-19 Tax considerations for a locked down workforce
- How confident are you in your transfer pricing?
- Snapshot of recent developments