Snapshot of recent developments

Tax legislation and policy announcements

Info release: Taxation (Annual Rates, Multinational Tax and Remedial Matters) Bill

On 10 May 2024, Inland Revenue published 197 pages of cabinet minutes, advice, reports, and briefing notes on the changes subsequently enacted in the 2023-24 Annual Rates Act.

Info release: Mini Budget 2023

On 10 May 2024, the Treasury released information on the Mini Budget announced in December 2023.
 

Inland Revenue statements and guidance
 

BR Prd 24/01: Electricity Ashburton Limited trading as EA Networks

On 22 March 2024, Inland Revenue issued BR PRD 24/01: Electricity Ashburton Limited trading as EA Networks. The product ruling applies to an arrangement where payment of consumer discounts under the Consumer Discount Policy by Electricity Ashburton Limited (EA networks) to electricity supply retailers (retailers) that contract with EA Networks to use its electricity distribution network to supply electricity to consumers (Users) and passing on these Consumer Discounts by Retailers to all eligible Users. A Consumer Discount paid under the Consumer Discount Policy by EA Networks to a User will not amount to a taxable dividend in the hands of the User under s CD 1. This ruling will apply for the period beginning 1 April 2024 and ending on 31 March 2029.

RWT exemption applications

On 22 April 2024, Inland Revenue announced that taxpayers and agents can now apply for an exemption from paying RWT in myIR.

Customers with overdue debt

On 24 April 2024, Inland Revenue announced that over the coming months, they will be visiting businesses with significant outstanding tax debt who have not engaged with Inland Revenue, despite receiving reminders and warning notices.

Inland Revenue strongly encourages taxpayers with overdue tax debt, not under an arrangement, to talk with Inland Revenue as soon as possible.

Tax Information Bulletin Volume 36 No 4 May 2024

On 2 May 2024, Inland Revenue released TIB Vol 36 No 4 May 2024. This TIB covers:

New legislation

• Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial
  Matters) Act 2024

Determinations

• DET 24/01: Amortisation rates for listed horticultural plants
• FDR 2024/01: A type of attributing interest in a foreign investment fund for which a person may not use the fair dividend rate method (Wellington Management Funds (Ireland) PLC - Wellington Global Impact Bond Fund NZD Class)
• DEP111: Tax Depreciation Rate for horticulture LED grow light systems
• CFC 2024/01: Non-attributing active insurance CFC status Tower Limited
• CFC 2024/02: Non-attributing active insurance CFC status Tower Limited
• CFC 2024/03: Non-attributing active insurance CFC status Tower Limited
• CFC 2024/04: Non-attributing active insurance CFC status Tower Limited
• CFC 2024/05: Non-attributing active insurance CFC status Tower Limited
• CFC 2024/06: Non-attributing active insurance CFC status Tower Limited

Interpretation statements

• IS 24/02: GST – Grouping for companies
• IS 24/03: GST – who can group register?

Case summary

• CSUM 24/02: Taxpayer challenge to timeliness of Commissioner’s Statement of Position (CSOP) dismissed by TRA

Technical decision summary

• TDS 24/04: Receipt of a one-off payment
• TDS 24/05: Sale of bare land when intended for a subdivision

ED0255: exemption from electronic filing

On 7 May 2024, Inland Revenue published the draft operational statement ED0255 Exemption from electronic filing. This sets out criteria for a person to be granted an exemption from the requirement to file returns/information electronically in relation to:

• to an employer who is included in the online group of employers;
• a GST-registered person who exceeds the statutory threshold for filing returns electronically; and
• a person who makes a payment of investment income.

The criteria the Commissioner will have regard to, per the legislation, which is discussed in ED0255, are:

• The nature and availability of digital services to the person, including the reliability of those services for the purposes of the person; and
• The capability of the person relating to the use of computers; and
• Whether the costs that would be incurred by the person in complying with the requirement of the legislation would be unreasonable.

The draft statement replaces OS 19/01, the operational position is unchanged but legislative references and the format of the statement have been updated. The deadline for comment is 28 May 2024.

Technical Decision Summary (Private Ruling) – TDS 24/09: transfer of property and whether income arises

On 13 May 2024, the Inland Revenue published a private ruling TDS 24/09.

Facts

• Non-resident Applicant is in business and proposed to transfer shares in company A to limited partnership B as a capital contribution (First Transfer).
• At the same time the Applicant will transfer a percentage of its interest in B to two limited partnerships (LPs) equally as a capital contribution (Second Transfer).
• Transfers are to be undertaken due to regulatory requirements of foreign jurisdiction.
• Applicant holds interest in A for long-term investment.

Issues

Whether the transfer of the interests in A by the Applicant to B gives rise to income. Whether the transfer of the interests in B by the Applicant to the LPs gives rise to income. Whether the arrangement constitutes tax avoidance.

Decisions

• Transfer of interests in A by the Applicant to B does not give rise to income of the Applicant. 
• Transfer of interests in B by the Applicant to the LPs gives rise to income to the Applicant equal to the value of the interests in A on the day of the transfer. 
• Applicant is allowed a deduction equal to the value of the interests in A on the day it acquires the interests in B.
• General limitations do not apply to deny the deduction.
• Deduction is allocated to the income year in which the Applicant disposes of the interests in A.
• Transfer of the interests in B by the Applicant to the LPs does not give rise to “net income” or “net loss” of the Applicant in the year of the transfer.
• Section BG 1 does not apply to the arrangement.

2024 Individual income tax assessment (IITA) – end-of-year process

On 13 May 2024, Inland Revenue provided an update on the IITA end-of-year process.

• From end of May – end of July Inland Revenue will issue automatic income tax assessments
• All individual clients of tax agents (except IR3 filers and those with no reportable income) will receive an “Income tax – more information request letter”.
  
  The information held by Inland Revenue and any additional income or expenses must be finalised:
  
  • Before 31 March 2025 if your client has an EOT 
  • Within 45 days if your client does not have an EOT

Public advice and guidance work programme 2024-25

On 16 May 2024, Inland Revenue announced they are looking for suggestions for the 2024-25 public guidance work programme. 
 

OECD updates
 

Taxing Wages 2024

On 25 April 2024, the OECD released Taxing Wages 2024. It revealed that a second consecutive year of high inflation pushed up labour taxes across OECD countries. The post-tax income of single workers earning the average wage declined in 21 out of 38 OECD countries.

Tax inspectors without budget releases annual report

On 29 April 2024, Tax Inspectors Without Borders, a joint tax initiative managed by the OECD and the United Nations Development Programme (UNDP) released its annual report. The report shows the initiative’s work over the past nine years has resulted in the generation of USD 2.30 billion in additional tax collections and USD 6.05 billion in additional tax assessments by developing countries worldwide. These efforts have significantly contributed to advancing the Sustainable Development Goals (SDGs) by increasing domestic resource mobilisation.

Surge in oil and gas revenue drove up tax receipts in Latin America and the Caribbean in 2022

On 7 May 2024, the OECD released Revenue Statistics in Latin America and the Caribbean 2024 which showed that tax revenue rose as a share of GDP on average across Latin America and the Caribbean countries between 2021 and 2022 due partly to a sharp increase in revenue from the oil and gas sector, according to a new report.

The average tax-to-GDP ratio in the LAC region rose by 0.3 percentage points in 2022 to 21.5%. 

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