30 November 2020 - IRD is cracking down on investment property owners who sell without paying tax on the profits. In recent weeks, it has sent letters to tax agents warning them that some of their clients may have sold properties that are caught by the residential bright-line test. IR has new analytics capabilities and is matching property records with taxpayers’ returns to identify questionable transactions. Calculating where the bright line date falls can be complicated. A voluntary disclosure may be the best avenue to minimise an adverse tax outcome. If you are concerned, get in touch here.
28 July 2020 - An updated round-up of global tax responses to the COVID-19 pandemic has been posted to our COVID resource section. To view it, click here.
23 July 2020 - The Commissioner has released a practice statement dealing with dual civil and criminal action against taxpayers. It says that if a taxpayer is subject to criminal proceedings, that will be treated as an exceptional circumstance allowing the taxpayer to continue the civil tax disputes process out of time, if they opt to wait until the criminal matter has concluded. This is to avoid the risk that a taxpayer may undermine their criminal defence when dealing with the civil dispute.
16 July 2020 - A proposed amendment will provide a pathway for migrant foreign trusts, that have not made an election to pay tax on world-wide trustee income within the prescribed period, to become complying trusts. Under current law, such trusts are classified as non-complying trusts and distributions are taxed at 45%. When the new law passes, if such a trust makes a voluntary disclosure and pays the related tax, it can be a complying trust for the periods to which the voluntary disclosure relates. Inland Revenue’s commentary on the draft amendment notes that the definition of complying trust does not currently address the voluntary disclosure situation for migrant foreign trusts. Adding that “a purpose of the voluntary disclosure rules is to allow the taxpayer to “put right” their past tax position, subject to appropriate penalties and interest being imposed” Inland Revenue acknowledges that the proposed amendment will protect tax positions assessed under such voluntary disclosures by allowing tax-paid trustee income to be distributed tax-free to beneficiaries.
19 May 2020 - Figures from Inland Revenue show there were 104,443 instalment payment arrangements operating in March 2020 - up from 41,014 a year earlier. The total dollar value of the instalments rose from $659 million to $1.167 billion. The greater part of March fell before the COVID lockdown, so this trend can be expected to continue and the numbers to increase considerably.
15 April 2020 - A suite of tax changes has been announced to further assist businesses weather the cash flow impacts of the COVID-19 lock down and its aftermath. Legislation has still to be introduced to formalise these arrangements, which cover a tax loss carry back scheme, loosening the shareholder continuity rules, and flexibility over statutory deadlines. Legislation is to be introduced by the end of April. To read more click here.
2 April 2020 - IR has published an update of COVID-19 related advice to businesses, covering key issues such as remission of interest, broadened exchange of information within Government and its approach to some audit activity. To see this update, click here.
2 April 2020 - There is some confusion about the tax treatment of the Government's COVID-19 wage subsidy. A good summary of the tax treatment is available here.
17 March 2020 - Government's $12 billion business continuity package to counter the effects of coronavirus on the economy contains four main tax measures all effective for the tax year staring 1 April 2020: the permanent reintroduction of depreciation on commercial and industrial buildings; an increase in the threshold for immediate deduction of asset purchases from $500 to $5,000, to aid the investment required to work from home (applicable for one year only); an increase in the provisional tax threshold from $2,500 to $5,000; and the discretion for IR to waive use of money interest for taxpayers late paying tax who have been significantly adversely affected by COVID-19. To read more click here.
28 February 2020 - Two double tax agreement have been amended recently. The agreement with Switzerland has a new protocol whose coming into force is to be notified in the future. The amendment to the treaty with Guernsey gives effect to new agreements on the exchange of information on taxes and taxing rights.
20 February 2020 - Inland Revenue has just published new prosecution guidelines that in some respects supplement the Solicitor-General's guidelines. They are designed to improve consistency in prosecution decisions. The guidelines can be viewed here. We will shortly be publishing commentary on the significance of the guidelines.
19 February 2020 - Inland Revenue has announced that tax relief and income assistance is available to people affected by the downturn in business due to the Coronavirus COVID-19. Ways that IR can help are listed on the IR website that can be viewed here.
18 February 2020 - IR has issued a new standard practice statement (SPS 20/01) covering when tax payments will be treated as received by it. The main differences introduced are that from 1 July 2020, over-the-counter payments at a Westpac branch must include an Inland Revenue bar-code and from 1 March 2020, IR will no longer accept cheques as a method of payment unless the Commissioner agrees that exceptional circumstances require that IR continue to receive payment by cheque.
14 November 2019 - IR has released guidance to reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, explaining the complex relationship between tax evasion and tax fraud, and money laundering, with examples. It also identifies specific aids to detect and deter money laundering, tax evasion and tax fraud. to read the guidance, click here.
8 November 2019 - A short-process rulings system has been introduced for taxpayers with effect from 1 October 2019. Short-process rulings state how a taxation law applies, or would apply, to a person in relation to their particular circumstances. These rulings are available at a lower cost than other rulings and are intended to be provided in a more streamlined fashion.
29 October 2019 - As part of renewed efforts to dissolve New Zealand's "hidden economy", estimated to be worth close to $1 billion, the tax department is targeting cafes, restaurants, bars and takeaway operators, bakeries and liquor stores who under-report cash sales and pay staff under the table. None of this is new, although Inland Revenue now has a very effective suite of forensic tools to be able to identify likely cash discrepancies. If you are worried that this crack down is going to affect you, contact us. Our team has years of experience representing members of the hospitality industry against Revenue.
24 September 2019 - Picking up recommendations from the Tax Working Group the Minister of Revenue has announced work on simplifying the deduction of feasibility expenditure and changing the rules for shareholder continuity that affect losses being carried forward. These steps are intended to make it easier for start ups to attract capital and to retain tax assets that have accrued as a result of exploratory expenditure, without losing them as the start up company grows and shareholding changes. This is not law yet, but will proceed though the standard tax reform process.
16 September 2019 - New Zealand has signed a protocol amending its Tax Information Exchange Agreement (TIEA) with Guernsey. The protocol updates the TIEA to include model treaty provisions to prevent tax treaty abuse and improve dispute resolution as recommended by the OECD and G20.
8 August 2019 - The Minister of Revenue has outlined the updated Inland Revenue work programme for the next 18 months. The tax treatment of land remains a focus as do the treatment of feasibility and "black hole" expenditure. It looks also as though the conduct of business by charities is likely to get a work over. To read more information about the work programme, click here.
24 July 2019 - The major Trusts Bill that will overhaul trust law in NZ has passed its third reading and now awaits the Royal Assent. When passed into law and operative, it will usher in a suite of new laws regulating the rights and obligations of trustees and beneficiaries. To read the statement by the Minister of Justice, click here.
4 June 2019 - A Government discussion document outlines two broad options for the future taxation of offshore digital companies:
• Changing the current international income tax rules to allow more taxation in market countries. This option is currently being discussed by the OECD and the G20 group of large economies.
• Applying a separate DST of 3% to certain revenues earned by highly digitalised multinationals operating in New Zealand.
30 May 2019 - In a Budget light on tax announcements the Government announced it will shortly release a discussion document exploring options for taxing the digital economy. No details of the proposed digital services tax are given in the Budget, but the Prime Minister has indicated that a 2–3% tax on turnover is one of the templates being considered.
21 May 2019 - The Government has announced changes to the GST treatment of outbound roaming services used by New Zealand residents overseas, intended to apply from 1 October 2020. From that date, telecommunications service providers would need to start charging GST on roaming services supplied to New Zealand-resident consumers. If implemented, the changes will mean 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 subject to GST.
14 May 2019 - Regulations have been passed to exempt support payments and any related income received by the victims of the Christchurch mosque attacks and their families when assessing a client’s income and cash assets. This ensures that donations to support those affected by the Christchurch mosque attacks of 15 March 2019 do not negatively impact recipients’ entitlements to government assistance through the tax credit and transfer system.
18 April 2019 - The Government's response to recommendations of the Tax Working group emphasises possible tax responses to land banking, seismic strengthening expenditure, investment in nationally significant infrastructure, loss continuity issues, securing tax debts, and director liability for company GST and PAYE debts. Matters, apart from a capital gains tax, that have been dropped include a taxpayer disputes service and additional tax resource for the Ombudsman. Read more about the Government's response here.
17 April 2019 - In a surprise announcement the Prime Minister has said that the coalition Government will not proceed with a capital gains tax and that the Labour Party will not advance such a policy while the PM is leader. Other initiatives suggested by the recent Tax Working Group will be considered by Inland Revenue, as part of its ongoing work program, or by the Productivity Commission.
10 March 2019 - A major consolidation of aspects of the Tax Administration Act has been carried into law. This changes a number of provisions relating to the Commissioner's investigative powers, although the changes are not supposed to involve any change of policy. As with any legislative amendment, however, alterations of language can have consequences.
6 March 2019 - The Department of Internal Affairs has released a discussion document on modernising the Charities Act. This is part of a consultation process that is open for submissions until 30 April 2019. The document can be read here.
5 March 2019 - From 1 April 2019 NZ will add 30 further jurisdictions to the 60 it already recognises for the purposes of Automatic Exchange of Information on tax matters. This marks a substantial expansion of NZ's commitment to the common reporting standard promoted by the OECD. The additional territories include the Cook Islands, Vanuatu, Niue, Panama, Switzerland and several Caribbean countries. To see the release by the Minister of Revenue, click here.
21 February 2019 - The final report of the Tax Working Group was released today. It makes a raft of recommendations for re-balancing the tax system but most focus is on the majority recommendation for a comprehensive capital gains tax. The Government is to respond in April with its policy choices from the report. The details of the report can be found here.
18 February 2019 - Frustrated with the time being taken to institute OECD reforms for taxation of international digital companies such as Google and Facebook, the Government has announced that it will shortly issue a discussion document canvassing steps it will take to impose a domestic digital services tax. This is likely to take the form of a levy on revenues generated in NZ from a range of online activity, from search engines to social networks. In the meantime the tax world (or at least NZ's tax world) awaits the final report of the Tax Working Group on 21 February!
15 February 2019 - Officials are urging the Government to pass retrospective legislation to overturn the effect of the High Court decision in Roberts. This case found that a charitable gift need not be one of money and that the words "monetary gift" include other financial benefits. The case is under appeal but IR wants to clarify the law, overturning its loss in the High Court. See our case note on Roberts here.
16 January 2019 - The Finance and Expenditure Committee has recommended that controversial provisions that would allow the IR to by-pass Parliament to remedy anomalies in the law be removed from the tax Bill it has just reported back. The Committee considers that these provisions require further consultation before coming back to it. The Committee is concerned that Parliament's law making role should be respected.
December 2018 - A new tax "Christmas" Bill has been introduced dealing with a number of previously announced tax initiatives. These include the introduction of GST on lower value retail goods imported from overseas and the ring fencing of residential property rental losses from 1 April 2019. To review the Bill, click here.
5 November 2018 - Inland Revenue released IS 18/06 Income tax – treatment of the costs of resource consents. This finalised interpretation statement considers the tax treatment of the costs of obtaining a resource consent after the Supreme Court decision in Trustpower Limited v CIR  NZSC.
29 June 2018 - The legislation seeking to protect New Zealand’s tax base from erosion through abuse of the tax system is now law. The Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018/16) received the Royal assent on 27 June 2018. The Act mainly comes into force on 1 July 2018.
29 March 2018 - The residential property bright-line test has been extended from two to five years with effect on properties acquired on or after 1 October 2018. Despite criticism that the five year test would impose tax on property sales having no connection with property speculation, the Government has implemented the change as a matter on which it had campaigned.
15 February 2018 - A supplementary order paper has been introduced to extend the residential property bright-line test from two to five years. This now forms part of the tax bill that is before Parliament and due for report back from the Finance and expenditure Committee by June 2018. The bright-line regime makes residential property sale proceeds taxable income (subject to deductions on an orthodox basis) if the sale is contracted for within the bright-line period after acquisition. To see the Ministerial release, click here.
24 October 2017 - The coalition agreement between Labour and New Zealand First signals increased penalties for corporate fraud and tax evasion.
4 September 2017 - Inland Revenue has released a standard for the use of electronic signatures on documents submitted to it. The signature must be a secured authority that complies with section 209 of the Contract and Commercial Law Act 2017. To view the standard, click here.
3 August 2017 - The Government has announced a suite of measures to combat BEPS by multinationals. These follow on from initiatives signaled earlier in the year. They address interest rates, avoidance of permanent establishment rules, economic substance rules and rules to counter mismatched treatment of structures. They also propose increased investigative powers for IR. The Government says that non-NZ income derived by a foreign trust with a NZ trustee will be taxed in NZ if it is not taxed elsewhere. This is a complete reversal of the present exclusion of such income from NZ tax. To see the release and link to the underlying papers, click here.
To read commentary see below.
25 May 2017 - The first budget of Finance Minister Steven Joyce includes a substantial tax and tax-credit package for families but also addresses the vexed area of feasibility and "black hole" expenditure, narrowing considerably the unhelpful decision of the Supreme Court in TrustPower. The Treasury summaries of the budget can be found here. For the last case note on TrustPower, click here.
17 May 2017 - Geoff Clews and Sam Davies have successfully argued in the High Court that the China/NZ double tax agreement allows tax sparing credits to be claimed by a NZ resident shareholder of a controlled foreign company in China. Read the CCH summary here.
3 March 2017 - At the international Fiscal Association Conference today 3 discussion documents were released setting out Government proposals to tighten NZ's laws affecting large multinational companies doing business in NZ. The initiatives span transfer pricing and permanent establishment avoidance, strengthened interest limitation rules and the implementation of the multilateral convention on tax treaty matters. The Government seeks feed back by the end of April. To read more click here, here and here.
14 December 2016 - A Cabinet paper has been released setting out measures IR and Treasury will work on to strengthen transfer pricing and permanent establishment rules as a NZ response to BEPs, outside the OECD initiatives also being pursued. To read more, click here,
9 September 2016 - The IRD's paper on hybrid financial instruments adopts most of the OECD's recommendations for addressing hybrid tax avoidance opportunities. However the paper has been criticized for targeting a mischief that has been overtaken by the approach of our courts to tax avoidance. A case of much ado about yesterday's problem?
27 June 2016 - The report on New Zealand's foreign trust disclosure regime has been released. While endorsing the view that NZ is not a tax haven it recommends a number of changes to the registration of foreign trusts, the information collected about them and access to that information. To read more, click here.
27 May 2016 - New Zealand has signed the instruments for multilateral exchange of information aimed at allowing countries to better understand how multinational enterprises have structured their tax affairs. To see more click here.
13 April 2016 - New initiatives to simplify provisional tax have been signaled for future introduction, along with removal of use of money interest for many taxpayers. To read more, click here.
11 April 2016 - Respected tax expert John Shewan has been appointed to report on New Zealand's longstanding foreign trust laws. He is to consider their fitness for purpose and reputational risks arising from the foreign trust regime.
8 April 2016 - Some of the hysteria over New Zealand's foreign trust regime has been balanced by comments from former IRD policy guru, Robin Oliver. He writes in today's NBR that secret trusts are as dated as ABBA and that, far from foreign trusts making NZ a tax haven, they reflect the county's reputation as a safe haven in a volatile and unstable world.
4 March 2016 - The NZLS has welcomed signaled changes in the Tax Administration Act, which could lead to a new approach to the imposition of tax penalties. To read more click here.
20 January 2016 - Legislation enacting the 2 year bright line for the taxation of property sale profits has now been passed and a further bill containing a withholding tax mechanism for tax collections on property sales has been introduced.
25 November 2015 - A discussion draft has been issued by IRD dealing with the tax treatment of lump sum settlement payments for claims comprising both revenue and capital elements. The draft suggest a presumption of income which arguably marks a change in law. Consultation closes on 16 January 2016.
16 November 2015 - IRD has released a discussion document which foresees a real time tax interface between it and businesses, permitting them to auto file for PAYE and GST from their accounting software. To read more, click here.
13 November 2015 - IRD has released a revenue alert about employee share schemes where aggressive attempts have been made to reduce the ostensible taxable value to the employee. To read the revenue alert, click here.
13 November 2015 - IRD is reported to have increased non resident withholding tax recovery by $113 million in the first quarter of fiscal 2016. This is the result of initiatives such as increased investigation of approved issuer levy arrangements, especially since the expansion of the associated persons rules in 2010.
8 November 2015 - The Cook Islands Government has agreed with New Zealand to progress legislation in 2016 which will implement automatic exchange of financial information with parties to its Tax Information Exchange Agreements.
15 October 2015 - FATCA competent authority procedures have been implemented by New Zealand, establishing the rules for administering the bilateral agreement with the USA on FATCA.
17 September 2015 - An officials issues paper on several GST "fixes" has been released for submissions by 30 October 2015.
September 2015 - Consultation papers have been released dealing with closely held companies, loss grouping and offsets.
21 July 2015: A draft standard practice statement on the remission of student loan debts has been issued and can be viewed here.
21 May 2015: Budget day tax announcements can be viewed here
27 January 2015: Inland revenue has reported assessing high worth individuals (those controlling $50 million or more) for an additional $77 million of income tax in the last financial year.
17 November 2014: Commentators are suggesting a breakthrough in international taxation could be close. The G20 nations are said to be ready to introduce rules which would impose tax in the jurisdiction where income is accrued, ie where payment of the income occurs. This would have significant repercussions for international tax norms, tax treaties and where multinationals have to book income.
29 August 2014: A call has been made for the costs of seismic strengthening of buildings to be made tax deductible. At present commercial building owners face non-deductible and non-depreciable costs in the millions to bring buildings up to code, yet are taxed on the rents that this work preserves. 15 May 2014: The Budget signals a new cash-out for tax losses arising from R & D expenditure by start-ups. The benefit will be clawed back in certain cases such as a later disposal of the research or a company buy out.
12 May 2014: In pre-budget announcement the Government has pledged $132 m over 5 years to strengthen IRD's tax compliance activities. The pledge is for $48.6 m cash and the balance by way of a write off of tax that is not collectible. The Government expects a gross return of $297.5m.
17 February 2014: The Alesco case has apparently been settled before the Court of Appeal's criticised decision on tax avoidance can be tested by the Supreme Court. The scale of the settlement will not be known for some time until Alesco's parent reports.
12 February 2014: IR has released a new statement (QB 13/05) on the deduction of companion travel expenses. Most of the previously understood rules for deduction have been scotched. Essentially the companion must be making a substantial contribution to the traveller's business in undertaking the travel before their costs can be deducted. Simply providing support to the traveller will not suffice, even if the attendance of a spouse or partner is expected.
10 February 2014: IR has released an Interpretation Statement (IS 13/03) dealing with the deductibility of non-interest costs of borrowing such as related fees. It covers the application of the financial arrangements rules, the rules relating to mixed use assets and section DB 5 of the ITA. The IS sets out what is required to establish the necessary nexus with borrowing.
12 November 2013: The Government has released its tax policy work programme for the next 18 months. The key focus areas are: Further improvements to tax and social policy rules, including a review of tax rules for annuities, closely-held companies and measures to improve growth and innovation; International tax reform, including an active income exemption for branches, mutual recognition and various items on the OECD tax action plan; and IRD’s business transformation to deliver a 21st century tax system. To read more about the programme, click here.
7 November 2013: IRD's actions against the property sector are being talked up in the media. The number of active investigation files related to the taxation of property profits signals a real effort by IRD to review and revisit the Kiwi staple of home "do-ups" for sale. There are arguably large numbers of taxpayers who have either inadvertently or deliberately failed to return profits on such property sales.The recovery of tax from such taxpayers is a significant element of IRD's return of $8 per $1 spent in it investigation efforts.