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Snapshot of recent developments

October 2024 - Tax Alert

Tax legislation and policy announcements
 

Information release: Budget 2024

On 12 September 2024, Inland Revenue released the Budget 2024 tax policy documents.

Information release: Tax Administration (GST Adjustment Rules) Modification Order 2024

On 17 September 2024, Inland Revenue published documents relating to the Tax Administration (GST Adjustment Rules) Modification Order 2024.

Refunds of FamilyBoost tax credits

The Tax Administration (Direct Credit of FamilyBoost Tax Credit) Order 2024 came into force on 1 October 2024. The Order specifies 1 October 2024 as the due date on and from which a FamilyBoost tax credit may be refunded by direct credit under section 184A of the Tax Administration Act 1994 to a bank account nominated by the taxpayer entitled to the refund.


Inland Revenue statements and guidance

Case Summary: High Court finds remediation work on rental property capital in nature

On 27 August 2024, Inland Revenue published a case summary of Lawrence v Commissioner 2024 NZHC 905. The High Court found in favour of the Commissioner of Inland Revenue who disallowed deductions claimed for remediation work on a rental property because the payments were capital in nature.

Draft Interpretation Statement: Income Tax and GST – forestry activities registered in the Emissions Trading Scheme

On 28 August 2024, Inland Revenue issued PUB00452: Income Tax and GST – forestry activities registered in the Emissions Trading Scheme and an accompanying fact sheet. The draft considers the tax consequences of receiving, selling and surrendering emissions units (NZUs), as well as the tax treatment of specific transactions involving NZUs.

Submissions close on 8 October 2024.

Commissioner’s Statement: Withholding obligations arising in relation to transfer pricing arrangements

On 30 August 2024, Inland Revenue issued CS 24/02: Withholding obligations arising in relation to transfer pricing arrangements. The Statement sets out the Commissioner of Inland Revenue’s position and operational approach on the withholding obligations that may arise in relation to transfer pricing arrangements. The position and operational approach remains unchanged from current practice.

This Statement also confirms how the transfer pricing rules in subpart GC of the Income Tax Act 2007 interact with the dividend rules in subpart CD when determining the withholding obligations that arise under part R for payments made under a transfer pricing arrangement.

Draft Questions We’ve Been Asked: Income tax – Short-stay accommodation

On 2 September 2024, Inland Revenue issued PUB00487: Income tax – short-stay accommodation which includes five pieces of updated draft guidance on income tax and short-stay accommodation (including a reading guide which covers what changes have been made and why).

The updates are mainly to reflect legislative changes, including the new online marketplace rules. However, there has been a change in the Commissioner of Inland Revenue’s view concerning the depreciation of mixed-use chattels. The relevant formula no longer overrides the general permission, meaning further apportionment may be required to account for private use.

PUB00487a: Income tax – Which rules apply if I rent out my home, part of my home, or a separate dwelling on my property as short-stay accommodation?

PUB00487b: Income tax – Which rules apply if I have dwelling I sometimes rent out as short-stay accommodation and also sometimes use privately?

PUB00487c: Income tax – How do the mixed-use asset rules apply if I provide short-stay accommodation?

PUB00487d: Income tax – How do the standard tax rules apply if I provide short-stay accommodation?

PUB00487e: Income tax – If property held in a trust is rented out for short-stay accommodation, who declares the income and what deductions can be claimed?

Submissions close on 25 October 2024.

2024-25 Tax Counsel Office Public Guidance Work Programme

On 2 September 2024, Inland Revenue issued the 2024-25 Public Guidance Work Programme.

Tax Information Bulletin: Vol 36 No 8 September 2024

On 2 September 2024, Inland Revenue published TIB Vol 36, No 8, September 2024 which includes:

New legislation

  • SL 2024/154– Order in Council Double Tax Agreements (Slovak Republic) Order 2024
  • SL 2024/153 – Order in Council Double Taxation Relief (Austria) Amendment Order 2024

Legislation and determinations

  • DET 24/03: Determination under section RD 11(3) of the Income Tax Act 2007 of the amount of tax for a payment of a main benefit

Interpretation statements

  • IS 24/05: Employer obligations for employee share scheme benefits paid in cash
  • IS 24/06: PAYE – How an employer funds the tax cost on an employee share scheme benefit

Commissioner’s statement

  • CS 24/01: Determining the “market value” of shares that an employee receives under an employee share scheme

Standard practice statements

  • SPS 24/01: Requests to change a balance date
  • SPS 24/02: Extension of time applications from customers without tax agents

Technical decision summaries

  • TDS 24/15: GST – payment for participation in religious practice
  • TDS 24/16: Look-through company election

Inland Revenue: Credit transfers

On 3 September 2024, Inland Revenue announced they have reviewed credit transfer requests after receiving a high volume of web messages. They remind customers:

  • Inland Revenue will transfer the credit after they have processed the return. Inland Revenue does not require a web message asking for the same transfer.
  • If an amended return has been filed, the transfer will happen after the amendment has been proposed.
  • If the available credit is more than the amount requested to be transferred, Inland Revenue need a current bank account to refund the remaining balance to.

Inland Revenue: Labour weekend shutdown for system updates

On 4 September 2024, Inland Revenue announced they have scheduled a system update over Labour weekend. This means myIR, Inland Revenue phone services including self-service options, and gateway services will not be available between 5pm on Friday 25 October 2024 and 8am on Tuesday 29 October 2024 (possibly earlier; Inland Revenue will advise if so).

Product Rulings: WorkRide Limited

On 9 September 2024, Inland Revenue published BR Prd 24/02 and BR Prd 24/03. The Arrangement is WorkRide’s provision of self-powered commuting vehicles (Equipment) to the employees of WorkRide’s customers, where the employees agree to a temporary reduction in salary in return for the temporary lease of Equipment and the opportunity to own the Equipment at the end of the lease period.

The Arrangement allows for an optional instalment-based payment structure for certain employers (Employers). BR Prd 24/02 covers arrangements where the WorkRide Salary Sacrifice Agreement is used. BR Prd 24/03 covers arrangements when the Employer’s own Salary Sacrifice Agreement is used.

The rulings cover the period 27 June 2024 until 26 June 2027.

Inland Revenue: 2025 Individual income tax – early returns

On 17 September 2024, Inland Revenue removed the processing hold on early IR3s, IR3NRs and automatic assessments for the 2025 tax year.

Customs: Consultation on fees and levies for goods

Customs and MPI are undertaking public consultation on proposed changes to fees charged to clear goods at the border. Proposals being consulted on include:

  • moving from per document to per consignment charging for low-value goods (valued $1,000 or less)
  • introducing differential charges for high-value air and sea consignments (valued over $1,000)
  • discontinuing one export-related fee
  • introducing a commercial vessel charge to recover the cost of managing commercial vessels
  • bringing transhipped goods and empty containers within the scope of the charging regime
  • moving to full cost recovery for clearing low value air cargo
  • recovering the cost of clearing low value goods arriving by international mail, and
  • adjusting fee levels so that Customs’ goods management activities are financially sustainable.

Consultation is open until 31 October 2024. Feedback can be provided by email.


International Tax Updates
 

New Zealand and South Korea Agree to Update Tax Treaty

On 4 September 2024, the South Korean Ministry of Foreign Affairs published a joint statement that New Zealand and South Korea have agreed to update their countries’ income tax treaty.

Filing of Tax Returns in India for Non-Residents

India’s income tax law requires disclosure of income for the year ending 31 March 2024 to be returned on 31 October/30 November.

Recently, India’s tax rate on royalty and fees for technical services income for non-resident taxpayers (those without a permanent establishment in India) has been raised from 10% to 20%. With the 10% rate increase, positions for non-residents have been impacted. Further, an obligation of filing tax returns for non-residents is triggered in other situations such as:

  • Claiming treaty benefits on income earned from India
  • Earning business income from India
  • Dividends and Interest from Indian companies, etc.

If you have operations in India or are otherwise affected by this change, we recommend getting in touch with your usual Deloitte advisor.


OECD updates
 

Determining the Price of Minerals: A Transfer Pricing Framework for Lithium

On 12 August 2024, the OECD published a report which applies the mineral pricing framework to identify the primary economic factors that influence the price of lithium and ensure that developing countries are able to tax lithium exports appropriately.

Inclusive Framework members make further progress in addressing harmful tax practices

On 27 August 2024, the OECD announced that as part of the Forum on Harmful Tax Practices (FHTP) of preferential tax regimes, conclusions on six regimes have been reached as part of the implementation of the BEPS Action 5 minimum standard on harmful tax practices.

Country-by-Country Reporting – Compilation of 2024 Peer Review Reports

On 16 September 2024, the OECD published a compilation of six years of annual Country-by-Country peer reviews.

Pillar Two Subject to Tax Rule signed

On 19 September 2024, the OECD announced that the Pillar Two Subject to Tax Rule (STTR) was agreed on a consensus basis by members of the OECD/G20 Inclusive Framework on BEPS, who also adopted an elective Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI) to enable swift implementation of the rule.

The STTR ensures a minimum level of taxation on relevant cross-border payments and is designed to prevent circumstances where income is either taxed at very low rates or not taxed at all due to differences in tax regimes between countries.

Members of the Inclusive Framework that apply nominal corporate income tax rates below 9% to income covered by the STTR have committed to incorporate the STTR into bilateral tax agreements with members of the Inclusive Framework that are developing countries when requested to do so.

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

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