Snapshot of recent developments

Tax legislation and Policy Announcements

NZ and Singapore Sign Pact Implementing Arbitration Process Under Tax Treaty

On 18 and 21 November 2024, the Competent Authorities of Singapore and NZ signed a Competent Authority Arrangement (CAA) to establish the mode of application of the arbitration proceedings provided for in Part VI (Arbitration) of the Multi-Lateral Instrument (MLI). The arbitration provisions allow taxpayers to request for issues arising from a Mutual Agreement Procedure (MAP) case which remained unresolved after a two-year time period to be submitted to an arbitration panel for resolution.

The full text of the CAA is published as Annex B to the Singapore-New Zealand DTA which is available here.

Income Tax (Clean Transport FBT Exclusion) Amendment Bill defeated

On 20 November 2024, Hon Julie Anne Genter’s Income Tax (Clean Transport FBT Exclusion) Amendment Member’s Bill was read and terminated at the first reading. The bill proposed to remove FBT from elective vehicles and clarify that for FBT, a double cab ute must be treated as a car.

Excise and Excise-equivalent duty rates for tobacco products adjusted

On 21 November 2024, the Excise and Excise-equivalent Duties Table (Tobacco Products Indexation and Reduction) Amendment Order 2024 was notified in the New Zealand Gazette and came into force on 1 January 2025. The Order amends the Excise and Excise-equivalent Duties Table to permanently reduce by 50% the excise and excise-equivalent duty rates on products used to heat tobacco without combustion (products for use with tobacco heating systems). The Order also adjusts the excise and excise-equivalent duty rates on tobacco products to reflect the movement in the Consumers Price Index, less credit services subgroup, over the 12-month period ending on 30 September 2024. These adjustments have also been applied to the permanently reduced excise and excise-equivalent duty rates on heated tobacco products.

Submissions on the scope of Inland Revenue’s long-term insights briefing

On 26 November 2024, Inland Revenue published the submissions and a summary of the submissions they received during the consultation on the scope of its next long-term insights briefing. Inland Revenue confirmed the scope of the topic.

FamilyBoost tax credit – extension of time to file certain returns of tax income

On 26 November 2024, the Tax Administration (FamilyBoost Tax credit – Extension of Dates to File Returns of Income) Order 2024 was notified in the New Zealand Gazette. It came into force on 27 November 2024, and applies to a person applying for a refund of a FamilyBoost tax credit for the quarter ending on 30 September 2024 under section 41C of the Tax Administration Act 1994, and to their partner if applicable.

If a person to whom this order applies filed their last return of income after the date required, and that date was before this order came into force, the date is extended to 31 March 2025 for the purpose of the application for a refund. In practical terms, this order applies to:

• Returns of income for the 2023-2024 tax year that were filed late
• Returns of income for the 2022-2023 tax year that were filed late (if the person’s 2023-2024 return has not been filed and is not late for filing).

Tax changes for Charities confirmed for Budget 2025

On 3 December 2024, Minister of Finance Hon. Nicola Willis confirmed that “tweaks to the charities tax regime” can be expected to be announced at Budget 2025.

NZ and Slovenia sign Double Tax Agreement

On 3 December 2024, Minister of Revenue Hon. Simon Watts and Slovenian Ambassador Marko Ham signed the Double Tax Agreement between NZ and Slovenia. This is the first tax treaty between the two countries. It will enter into force after the exchange of ratification instruments.

Information release - Order in Council for the Double Tax Agreement with the Slovak Republic and Amending Protocol with Austria

On 9 December 2024, Inland Revenue released documents relating to the Order in Council for the Double Tax Agreement with the Slovak Republic and Amending Protocol with Austria. 

2024 ACC levy consultation results

On 12 December 2024, the results of the latest ACC levy consultation were released and Cabinet approved the 2025 – 2028 levy rates.

Information release - Tax Administration (FamilyBoost Tax Credit – Extension of Dates to File Return of Income) Order 2024

On 16 December 2024, Inland Revenue released documents relating to Tax Administration (FamilyBoost Tax Credit – Extension of Dates to File Return of Income) Order 2024.

Public Remedials Log launched

On 16 December 2024, Inland Revenue launched the Public Remedials Log. The log provides updates on tax remedial legislative issues that Inland Revenue has considered. It also tracks the progress of each item through the legislative amendment process. Certain issues have been redacted because they contain sensitive information. There are currently 181 items on the log.

The December and January editions have been released. The log will be updated on the Government Tax and Social Policy Work Programme webpage.

Customs (Levies and Other Matters) Amendment Bill introduced

On 18 December 2024, the Customs (Levies and Other Matters) Amendment Bill was introduced to Parliament. The Bill is an omnibus Bill that contains amendments to legislation administered by Customs, Inland Revenue, and the Ministry for the Environment.

Treasury paper: How the tax and transfer system affects financial incentives to work

On 23 January 2025, Treasury published a new Analytical Note — The Cost of Working More: Understanding Effective Marginal Tax Rates in New Zealand's Tax and Transfer System. It examines how NZ’s tax and transfer system affects financial incentives to work, using Effective Marginal Tax Rates (EMTRs) as the main measure.

Information release - Minimum Family Tax Credit Threshold – Holding the Rate this Year

On 24 January 2025, Inland Revenue released documents relating to the Minimum Family Tax Credit Threshold – Holding the Rate this Year.

Inland Revenue Statements and Guidance

Product ruling: Kiwibank Limited

On 18 October 2024, Inland Revenue issued BR Prd 24/04: Kiwibank Limited.

The Arrangement is the issue by Kiwibank Limited of perpetual preference shares (PPS) of up to $275 million in 2024. The PPS will be issued directly to investors through a public offer, such that they are recognised as Additional Tier 1 capital per the relevant requirements of the Reserve Bank’s BPR110 Capital Definitions.

The Taxation Laws apply to the Arrangement as follows:

(a) Section GB 35(2) and (3) will not apply to the Arrangement.

(b) Section BG 1 will not apply to the Arrangement.

This Ruling will apply for the period beginning on 18 October 2024 and ending on 30 April 2030.

Product Ruling: Air New Zealand – Airpoint Dollars not income for members

On 6 November 2024, Inland Revenue issued BR Prd 24/05: Air New Zealand Limited.

The Arrangement is the receipt of Airpoints Dollars by members of the Airpoints programme in respect of work-related travel paid for, or the expenditure for which is reimbursed, by the employers of members and the redemption of the Airpoints Dollars by the members for air travel and other rewards. This Ruling does not rule on any other aspect of the Airpoints programme that employees and employers may engage with.

Subject in all respects to any conditions stated above, the Taxation Laws apply to the Arrangement as follows:

(a) Members do not have income under any of ss CE 1, CB 1, CB 3, CB 4, CB 5, or CA 1(2) when they receive Airpoints Dollars or rewards, on the redemption of Airpoints Dollars, arising from work-related travel paid for, or reimbursed, by their employers.

(b) The receipt by members of Airport Dollars and rewards under the Airpoints Programme from work related travel paid for, or reimbursed, by their employers is not a fringe benefit as defined in s CX 2(1) and employers of members are not liable to pay fringe benefit tax under s RD 26.

The Ruling does not rule on:

• Sharepoints Accounts
• Business owners
• Airpoints for Business Programme

The ruling applies from 1 October 2024 to 30 September 2028.

Inland Revenue: Prescribed withholding rate

On 20 November 2024, Inland Revenue announced they had identified non-compliance within the horticulture industry, particularly with contractors not meeting all their tax obligations. There may be an increase in the Commissioner of Inland Revenue’s use of prescribed withholding rates for contractors operating in the horticulture sector.

Inland Revenue: Withdrawal Notice

On 29 November 2024, Inland Revenue published a withdrawal notice removing the remaining parts of the Commissioner’s 1993 Policy Statement on computer software in an Appendix to TIB Vol 4, No 10 (May 1993). The notice notes there has been considerable change in the last 30 years since the Tax Information Bulletin was published, and it has already been partially replaced by IS 16/01: Income tax – Computer software acquired for use in a tax taxpayer’s business.

The Notice recommends that taxpayers who believe their tax affairs have been adversely affected by the withdrawal should contact the Commissioner of Inland Revenue.

Tax Information Bulletin: Volume 36, No 11 (December 2024)

On 2 December 2024, Inland Revenue published TIB Vol 36, No 11 (December 2024), which covers:

Interpretation statement

• IS 24/09: Income tax – Overdrawn shareholder loan account balances

Technical decision summaries

• TDS 24/19: Income tax and GST deductions
• TDS 24/20: Permanent establishment

Inland Revenue: Registering for and filing donation tax credit claims

On 5 December 2024, Inland Revenue announced they are aware many tax agents and intermediaries are having trouble registering their clients for donation tax credits (DTCs) and provided information about how to do it.

Draft QWBA: Can section CB 3 apply to amounts derived from the disposal of land?

On 6 December 2024, Inland Revenue published PUB00519: Can s CB 3 apply to amounts derived from the disposal of land?

Question

Can s CB 3 apply to amounts derived from the disposal of land?

Answer

Section CB 3 can apply to amounts derived from the disposal of land as part of a profit-making undertaking or scheme. Section CB 3 does not, however, apply to any amount derived from an undertaking or scheme involving the development of land or division of land into lots.

Submissions close 14 February 2025.

Draft OS: Cash collateral is “money lent”

On 9 December 2024, Inland Revenue published ED0263, a draft Operational Statement outlining a change in view by the Commissioner of Inland Revenue whether cash collateral provided as part of security lending and derivative transactions is “money lent” and the resident and non-resident withholding tax obligations on interest payable on the cash collateral.

The Commissioner now considers payments of amounts of money in the form of cash to act as security to cover the exposures of a party from obligations under security lending or derivative transactions using market standard documented agreements (cash collateral) to be a loan. This means that the payer of interest on the cash collateral, unless they have Resident Withholding Tax (RWT)-exempt status, must withhold RWT or non-Resident Withholding Tax (NRWT).

The statement does not cover interest that might be said to be a component of the pricing of other elements of the broader arrangement such as derivatives or shares.

The statement applies from the date of issue prospectively. It is proposed that the Commissioner will allow taxpayers to make the required changes to their systems and any alternative arrangements in order comply with the new view when taking tax positions from 1 April 2025 (proposed date only). The Commissioner will not be devoting resources to identifying incorrect compliance with the RWT or NRWT regimes for previous periods.

Inland Revenue: Public Guidance work programme (December update)

On 10 December 2024, Inland Revenue updated the public guidance work programme 2024-25.

Inland Revenue: Compliance work update

On 10 December 2024, Tony Morris, Segment Lead Significant Enterprises at Inland Revenue spoke at a recent conference and gave an overview of the first three months of its increased compliance work.

Inland Revenue: Tax agents survey

On 10 December 2024, Inland Revenue announced an independent research provider is reaching out to tax agents as part of the voice of the customer surveys. The surveys help Inland Revenue understands tax agent’s experiences when interacting with Inland Revenue and identifying areas for improvements. The survey results are reported quarterly, and in 2025 Inland Revenue are going to start sharing some of the key findings.

Inland Revenue: Standout yearlings at Karaka or Christchurch 2025

On 11 December 2024, Inland Revenue announced new investors in standout yearlings (thoroughbred and standardbred), acquired with the intention to breed in the future for profit, will be able to claim income tax deductions as if they had an existing bloodstock breeding business. Investors will also be taxed if the standout yearling is subsequently sold.

Inland Revenue also outlined the types of information required when notifying about an intention to breed for horses and when there is a change of intention.

Inland Revenue: Auckland man imprisoned for tax evasion

On 15 December 2024, Inland Revenue provided details about a man sentenced to 2 years and 1 month in prison for tax evasion. The man had plead guilty to 16 charges of tax evasion and 84 charges of taking PAYE from his workers’ wages but not passing it on to Inland Revenue.

Inland Revenue: Companies removed from the Companies register

On 16 December 2024, Inland Revenue announced it is currently reviewing its records to identify companies that are still active in its system but have already been removed from the Companies Register. It will begin to close the accounts of these companies in its system from January 2025 onwards.

Inland Revenue: Canterbury earthquake relief measures

On 17 December 2024, Inland Revenue announced that tax relief measures relating to the Canterbury earthquakes in 2010 and 2011 have expired. 2024 is the final income year the relevant provisions apply. This means that some taxpayers may have to account for any deferred amounts they did not include in past years in their 2024 income tax return. This may include insurance or compensation payments held to be attributed to a disposal or to repair costs, or suspended depreciation recovery income.

Inland Revenue: Changes to the account manager service

On 18 December, Inland Revenue announced that from 1 January 2025, it is making some changes to the account manager service to prioritise efficiency and effectiveness.

Determination: Amortisation Rates for Listed Horticultural Plants

On 19 December 2024, Inland Revenue issued DET 24/04: Amortisation Rates for Listed Horticultural Plants. This supplementary determination acknowledges that mānuka, cultivated and managed as part of a farming activity primarily to promote the production of honey or another mānuka product (not being timber), is recognised by the Commissioner of Inland Revenue as a listed horticultural plant for tax purposes.

Inland Revenue: 'Income tax - more information' requests reminder

On 14 January 2025, Inland Revenue reminded agents that if clients have received an ‘Income tax – more information' request these need to be completed. The agent unfiled returns report will help determine which clients still have 'Income tax – more information' requests that need to be completed. Inland Revenue also reminds that before 31 March 2025, agents should confirm that their clients’ income is correct and add any additional income and expenses as well as ensuring bank account details are current so that any credits can be refunded directly to taxpayer’s accounts.

Interpretation Statement: Income tax - deducting costs of travel by motor vehicle between home and work and FBT – travel by motor vehicle between home and work

On 15 January 2025, Inland Revenue published IS 25/01: Income tax – deducting costs of travel by motor vehicle between home and work and IS 25/02: FBT – travel by motor vehicle between home and work as well as accompanying fact sheets, IS 25/01 FS: Income tax and IS 25/02 FS: FBT

Draft interpretation statement: Income tax and GST – industries other than forestry registered in the Emissions Trading Scheme

On 16 January 2025, Inland Revenue published PUB00493: Income tax and GST – industries other than forestry registered in the Emissions Trading Scheme. It applies to industries registered in the Emissions Trading Scheme (ETS), other than forestry (which is taxed differently). The draft interpretation statement outlines the conceptual framework for the income tax treatment of emission liabilities and emissions units (NZUs) in these sectors explains how to calculate deductions for emission liabilities, and it discusses the treatment of NZUs as income. There is a brief discussion of the GST treatment of NZUs.

The deadline for submissions is 27 February 2025.

Technical Decision Summary: Accommodation provided to an employee - PAYE/GST (Adjudication)

On 20 November 2024, Inland Revenue issued TDS 24/21: Accommodation provided to an employee. It related to the supply of accommodation to an employee. The Tax Counsel Office ruled that the taxpayer had provided accommodation to the employee, it was in relation to the employee’s employment, the value of the accommodation for income tax purposes was the market rental value, reduced to take account of the part used for work purposes and the value of the accommodation for GST purposes was the market rental value, reduced to take account of the part used for work purposes.

Technical Decision Summary: Transitional residency and cryptoassets (Private Ruling)

On 3 December 2024, Inland Revenue published TDS 24/22: Transitional residency and cryptoassets. It related to a transitional resident who held cryptoassets. The Tax Counsel Office ruled the taxpayer would qualify to be transitional resident and the amounts derived from the sale of cryptoassets did not have a source in New Zealand.

Technical Decision Summary: Depreciation loss on asset no longer used (Private Ruling)

On 5 December 2024, Inland Revenue published TDS 24/23: Depreciation loss on asset no longer used. It related to a company who no longer had use for an asset. The Tax Counsel Office ruled the Taxpayer had a depreciation loss for the income year equal to the adjusted tax value of the asset at the start of its income year.

Technical Decision Summary: Share Scheme Taxing date (Private Ruling)

On 18 December 2024, Inland Revenue issued TDS 24/24: Share Scheme taxing date (SSTD). It related to the issue of shares under an employee share scheme. The Tax Counsel Office ruled the SSTD arose on the date the shares vested to the member, provided the shares had not been forfeited prior to this date.

Technical Decision Summary: Sales of leasehold interests in residential and commercial units (Private Ruling)

On 23 January 2025, Inland Revenue issued TDS 25/01:  Sales of leasehold interests in residential and commercial units. It related to limited partner in limited partnership that was a multi-rate portfolio investment entity (PIE) that had an arrangement where units were sold to the members of the public by first granting itself a sublease of each unit and the assigning the sublease to the purchaser. The Tax Counsel Office ruled the investments were permitted investment types for a PIE and the income was also permitted.

Deloitte Global Perspectives

Deloitte related party customs value country guide (8th edition)

Deloitte Global Trade Advisory have unveiled “The Link Between Transfer Pricing and Customs Valuation—Eighth Edition Country Guide,” one of the most broad-based, authoritative, periodically updated guides of its kind for over the last 12 years. The guide compiles essential information regarding the customs-related valuation requirements and implications of related party pricing and retroactive transfer pricing adjustments in 59 jurisdictions around the world.

OECD Updates

Revenue Statistics 2024

On 21 November 2024, the OECD published its report Revenue Statistics 2024. The average tax-to-GDP ratio for OECD countries was 33.9% in 2023, 0.1% below its level in 2021 and 2022, but above its pre-pandemic level of 33.4% in 2019. New Zealand’s ratio for 2023 was 34%, increasing from 33.1% in 2022 but down from 34.5% in 2021.

Revenue Statistics 2024  also includes a special chapter on health taxes.

Consumption Tax Trends 2024

On 21 November 2024, the OECD published its Consumption Tax Trends 2024 report. At 9.9% of GDP, revenue from consumption taxes in OECD countries remained stable in 2022 compared to 2020 (9.9%) and 2021 (10.0%). The overall share of consumption taxes in total tax revenues has fallen slightly to 29.6% in 2022, compared to 30% in 2021 and 30.1% in 2020. This decline is mainly attributable to the decreasing revenue importance of taxes on specific goods and services (mainly tobacco, alcoholic beverages and fuel, as well as certain environment-related taxes) as a percentage of total tax revenues in OECD countries on average. VAT/GST generated 20.8% of total revenue in OECD countries on average in 2022. VAT/GST continues to be the largest category of consumption taxes, generating almost four times as much tax revenue as excise duties that form the bulk of taxes on specific goods and services, accounting for 5.6% of total tax revenue in 2022 on average.

New Zealand’s revenue from consumption taxes as a percentage of GDP in 2022 was 11.3%, down slightly from 11.6% in 2021.

Release of new tools for the implementation of Amount B relating to the simplification of transfer pricing rules

On 19 December 2024, the OECD released a pricing tool and fact sheets to facilitate the understanding and operation of the simplified and streamlined approach to transfer pricing.

OECD Publishes Updated Arbitration Profiles for New Zealand, Singapore

On 20 December 2024, the OECD published updated arbitration profiles under the Base Erosion and Profit Shifting Multilateral Instrument for New Zealand and Singapore. The updated New Zealand profile can be found here, replacing the one published on 10 November 2023.

Kenya deposits its instrument of ratification of the Multilateral Base Erosion and Profit Shifting Convention

On 8 January 2025, Kenya deposited its instrument of ratification of the Multilateral Base Erosion and Profit Shifting Convention.

Multinational enterprise business functions and corporate taxation

On 13 January 2025, the OECD published a working paper examining responses of large multinational enterprises to tax by studying the global allocation of their business functions such as manufacturing and sales or financial and holding functions and provides insights on the structure of multinational enterprise global value chains as well as the actual economic impacts of corporate taxation. 

Global minimum tax: Release of compilation of qualified legislation and information filing and exchange tools

On 15 January 2025, the Inclusive Framework released a compilation of qualified domestic rules together with other tools to streamline the co-ordinated administration of the global minimum tax. These include:

• Central record of legislation with transitional qualified status
• Administrative Guidance on Article 9.1 of the GloBE Model Rules
• Updated GloBE Information Return
• GIR Multilateral Competent Authority Agreement
• GIR XML Schema and User Guide

Technical Webinar on Amount B

The OECD is holding a technical webinar on 11 February 2025 on the latest developments relating to Amount B, including a demonstration of the Pricing Automation Tool.

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