Snapshot of recent developments

Tax legislation and policy announcements

Appeals to Taxation and Charities Review Authority

Changes to the Charities Act 2005, made via the Charities Amendment Act 2023 (No 34 of 2024), received Royal assent on 5 July 2023. The Amendment Act expanded the existing Taxation Review Authority to hear appeals under the Charities Act 2005 and become the Taxation and Charities Review Authority (the Authority). The new appeals provisions in the Charities Act commenced on 5 July 2024.

The Charities (Taxation and Charities Review Authorities — Appeals Process) Regulations 2024 (SL 2024/131) came into force on 5 July 2024. They set out procedural requirements in relation to appeals to the Authority under the Charities Act 2005.

DTA with Austria amended

On 1 August 2024, the Double Taxation Relief (Austria) Amendment Order 2024 (SL 2024/153) was notified in the NZ Gazette. The Order came into force on 29 August 2024 and amends the Double Taxation Relief (Austria) Order 2007 by adding a protocol agreed by the Governments of New Zealand and Austria on 12 September 2023.

The protocol amends the Agreement between New Zealand and the Republic of Austria with respect to taxes on income and on capital. The protocol is set out in new Schedule 2 of the principal Order.

DTA with Slovak Republic notified

On 1 August 2024, the Double Tax Agreements (Slovak Republic) Order 2024 (SL 2024/154) was notified in the NZ Gazette. The Order came into force on 29 August 2024 and gives effect to the agreement between New Zealand and the Slovak Republic for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance and protocol to the agreement.

Decrease in Petroleum or Engine Fuel Monitoring Levy

The Petroleum or Engine Fuel Monitoring Levy decreased on 1 July 2024 to 0.69 cents per litre from the existing rate of 0.72 cents per litre. The new levy rate applies from 1 July 2024 to 30 June 2025.

Tax and Welfare Analysis (TAWA) Model Methodology report

On 6 August 2024, Treasury published the Tax and Welfare Analysis (TAWA) Model Methodology report. TAWA is the Treasury’s microsimulation model of the New Zealand personal tax and transfer system. It applies potential policy changes to individuals in its input data, and then scales up and aggregates the results so that they are representative of the New Zealand population. It is used extensively within Treasury and in external work related to tax and welfare policy analysis.

Companies Act 1993 to be reviewed

On 15 August 2024, the Minister for Commerce and Consumer Affairs proposed new rules in the Companies Act 1993 and related corporate governance legislation, including:

• Modernisation, simplification and digitisation

• Increase NZ Business Number use, function and uptake

• Insolvency law improvements

• Identifying directors and general partners
  

The changes will be done over two phases, phase one is the corporate governance reforms and phase two is a Law Commission review of director’s duties and related issues of liability, penalties and offences, and enforcement.

Treasury: Joint Report Tax Policy Scorecard OIA release

On 15 August 2024, Treasury released the February Joint Report Tax Policy Scorecard Update as part of an Official Information Act release. The Tax Policy Scorecard (Scorecard) is a memorandum account that allows the fiscal impacts of tax policy changes to be offset against one another, rather than being managed through Budget allowances or the between-Budget contingency. The Scorecard’s balance as of 29 February 2024 is $27.232 million. This decreased from the October 2023 balance of $52.232 million. This reduction has been caused by this year’s changes to the 39% tax rate and the introduction of new rules for disposals of trading stock at below market value.
 

Inland Revenue statements and guidance

Inland Revenue: enhanced tool to help with property tax rules

On 23 July 2024, Inland Revenue encouraged people to check the updated property tax decision tool. The tool helps to determine whether a property sale is taxable under any of the land taxing rules, including the bright-line test. It can be found on Inland Revenue’s website at buying and selling property and takes approximately 7 minutes to complete.

Inland Revenue said its next focus in the property area is speculators, those who frequently buy and sell property, to ensure they comply with the tax rules.

Inland Revenue: income tax extension of time

On 23 July 2024, Inland Revenue provided an update on the enhancement to allow individuals and non-individuals to apply for an extension of time (EoT) through myIR. It is for taxpayers applying for an individual EoT, and not those eligible for an EoT as a client of a tax agent.

Inland Revenue: newsletter subscription service

On 24 July 2024, Inland Revenue announced that starting in August it would email subscribers to Inland Revenue’s newsletters and important updates to confirm their desire to continue receiving them.

Standard Practice Statement: requests to change a balance date

On 30 July 2024, Inland Revenue issued SPS 24/01: Requests to change a balance date. This Standard Practice Statement explains how to apply for a change of balance date and how the Commissioner of Inland Revenue will use their discretion under section 38 of the Tax Administration Act 1994 to approve a change of balance date. It replaces SPS 18/02.

Paragraph [12] sets out situations where the Commissioner of Inland Revenue will agree to a change in balance date. Paragraph [16] sets out situations where the Commissioner of Inland Revenue will not agree to change a balance date.

Inland Revenue: processing 2025 individual income tax early returns will resume by the end of 2024

On 30 July 2024, Inland Revenue provided an update on early IR3, IR3NR, and early automatic assessments which Inland Revenue have paused processing for the 2025 tax year (due to the new income tax thresholds). Inland Revenue will calculate the 2025 income tax returns using the annual composite tax rates for the 2025 income tax year.

Early returns can still be filed. But these will be held and processed by the end of the calendar year. Inland Revenue will notify when they start processing these early returns.

Interpretation statement: employer obligations for employee share scheme benefits paid in cash

On 30 July 2024, Inland Revenue issued IS 24/05: employer obligations for employee share scheme benefits paid in cash and an accompanying fact sheet. The Interpretation Statement explains an employer’s PAYE, student loan and KiwiSaver obligations when an employee receives a benefit under an employee share scheme (ESS) that is paid in cash.

The Interpretation Statement sets out to answer two questions that arise when an employee receives a cash-settled ESS benefit:

1. Is the employer required to withhold tax (and student loan, if any) from the benefit (on the basis that a cash benefit is an ordinary extra pay) or does the employer have the choice to withhold as they do if the benefit is provided in shares?
2. Does an employer have to withhold ACC earners’ levy or have KiwiSaver obligations?
   

Interpretation statement: PAYE – How an employer funds the tax cost on an employee share scheme benefit

On 30 July 2024, Inland Revenue issued IS 24/06: PAYE – how an employer funds the tax cost on an employee share scheme benefit. The Interpretation Statement explains an employer’s withholding and reporting obligations related to PAYE, student loans and KiwiSaver if an employer wants to fund the cost of tax (and student loan, if applicable) on an employee share scheme (ESS) benefit provided in shares.

Commissioner's Statement of Inland Revenue Statement: Determining the “market value” of shares that an employee receives under an employee share scheme

On 31 July 2024, Inland Revenue issued CS 24/01: determining the “market value” of shares that an employee receives under an employee share scheme (ESS). The statement provides guidance on working out the market value of a share benefit that employees receive under an ESS. It updates and replaces the Commissioner's Statement CS 17/01. 

Foreign investment funds: deemed rate of return for 2023-24 income year

On 7 August 2024, Inland Revenue set the deemed rate of return for taxing interests in FIFs at 8.63% for the 2023-24 year. This is up from the previous year’s rate of 8.15%.

Standard practice statement: extension of time applications from customers without tax agents

On 8 August 2024, Inland Revenue published SPS 24/02: Extension of time applications from customers without tax agents. The Standard Practice Statement sets out how the Commissioner of Inland Revenue will exercise a statutory discretion or deal with practical issues arising out of the administration of the Inland Revenue Acts. This replaces SPS 09/03.

Draft interpretation statement: look-through companies and disposal of residential land under the bright-line tests

On 12 August 2024, Inland Revenue published the draft Interpretation Statement PUB00455: look-through companies and disposal of residential land under the bright-line test and accompanying fact sheet which includes a summary table. The Interpretation Statement explains how the bright-line rules (including main home exclusion and rollover relief) apply in various situations involving residential land and transfers involving look through companies. This interpretation statement applies only to transfers on or after 1 July 2024.

Submissions close on 23 September 2024.

Question we’ve been asked: do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules?

On 15 August 2024, Inland Revenue issued QB 24/05: do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules? The Question we’ve been asked provides further guidance on the meaning of “land” for the purposes of the compulsory zero-rating rules. It supplements an earlier Question we’ve been asked, QB 20/04, and interpretation statement 17/08.

Interpretation statement: deductions for parties to employee share schemes

On 22 August 2024, Inland Revenue published IS 24/07: deductions for parties to employee share schemes. The interpretation statement considers what deductions employers can claim for income tax in relation to employee share schemes (ESSs). It explains the need to satisfy the general permission and when the capital limitation might apply.

Consultation: commissioner of Inland Revenue’s search and information gathering powers

On 26 August 2024, Inland Revenue published two new draft operational statements for the Commissioner of Inland Revenue’s powers under section 17 of the Tax Administration Act 1994. The closing date for each consultation item is 18 October 2024.

ED0258: the Commissioner of Inland Revenue’s search powers

This draft sets out the Commissioner of Inland Revenue’s view of the law and procedures the Commissioner of Inland Revenue will generally follow when exercising the Commissioner of Inland Revenue’s search powers under sections 17, 17C and 17D of the Tax Administration Act 1994 and the Search and Surveillance Act 2012 (the SSA). This will replace OS 13/01 and is supplemented by SPS 10/02 imaging of electronic storage media.

ED0260: section 17B notices

The draft outlines the procedures the Commissioner of Inland Revenue will generally follow when issuing notices under s 17B of the Tax Administration Act 1994. This operating statement replaces OS 13/02. Section 17B empowers the Commissioner of Inland Revenue to require any person to provide any information and produce any documents considered necessary or relevant for any purpose relating to the administration or enforcement of an Inland Revenue Act or a function lawfully confirmed on the Commissioner of Inland Revenue. Section 17B allows the Commissioner of Inland Revenue to require information directly from taxpayers or third parties.

Technical decision summary: GST – payment for participation in religious practice (adjudication)

On 30 July 2024, Inland Revenue issued TDS 24/15: GST – payment for participation in religious practice. The TCO decided that payments received in religious practices were consideration for the supply of services (being participation in the religious practice) and therefore liable for GST under section 8 of the GST Act 1985.

Technical decision summary: look-through company election (private ruling)

On 8 August 2024, Inland Revenue issued TDS 24/16: Look-through company election. It relates to a company electing to be a look-through company and the liquidation of a wholly owned subsidiary. Amongst other issues, the TCO determined there were three look-through counted owners and that income distributions provided to a beneficiary company and a charity prior to the look-through election, and any further distributions made to that charity, would not prevent the applicant from satisfying the definition of “look-through company.”

Technical decision summary: deductibility of bonus payments (private ruling)

On 14 August 2024, TCO issued TDS 24/17: deductibility of bonus payments. The TCO concluded that bonuses issued to workers funded by issuing shares to shareholders were deductible and no limitation applied as the bonuses were made in respect of services directly related to the companies' income-earning process, were not made in connection with the cessation of a business, and were not related to establishing, acquiring or enlarging the permanent structure of the business.

Tax Information Bulletin Vol 36, No 7 (August 2024)

On 1 August 2024, Inland Revenue issued TIB Vol 36, No 7 (August 2024). It includes:

• Taxation (Budget Measures) Act 2024

• FDR 2024/02: a type of attributing interest in a foreign investment fund for which a person may not use the fair dividend rate method (Colchester Multi-Strategy Global Bond Fund PLC – The Colchester Global Green Bond Enhanced Currency Fund - NZD Hedged Accumulation Class Z Shares)

• DEP112: tax Depreciation Rate for metal (scrap) recovery plant

• IS 24/04: trustee of employee share scheme trust treated as nominee

• QB 24/03: fringe benefit tax - employee share loans and associates

• QB 24/04: when is a subdivision project a taxable activity for GST purposes?

• TDS 24/13: GST - supply of accommodation

• TDS 24/14: interest free loan and dividends
   

Deloitte Global Perspectives

India Budget 2024: amendments impact non-residents and dispute resolution scheme

In July, the Indian Budget was released. Notable changes affecting non-residents include:

• Corporate tax rate on foreign companies reduced from 40% to 35% to attract foreign direct investment. This will likely benefit non-residents undertaking business in India through a permanent establishment / branch office / project office.

• The rules and regulations for foreign direct investment will be simplified to facilitate / prioritise foreign direct investments.
  • The export duration for aircraft and vessels imported into India for maintenance, repair and overhauling has been extended from 6 months to 1 year, with an additional option of 1 year.
  • Further, the duty-free re-import period for goods exported from India under warranty has been extended from 3 to 5 years, with an option for a further 2-year extension.

• A non-resident with a liaison office in India must prepare and deliver a statement in respect of its activities in a financial year to the Assessing Officer within 60 days from the end of such financial year. Now, the period for filing such a statement shall be prescribed in rules.

• Changes to capital gain tax rates for certain areas. 

Another measure introduced in the Indian Budget is a Dispute Resolution Scheme (Vivid se Vishwas Scheme, 2024). The scheme provides taxpayers with a one-time option to close pending litigations by offering incentives such as waiver of interest and penalty.
 

OECD updates

G20 Ministerial Declaration on International Tax Co-operation

On 25-26 July 2024 the third G20 Finance Ministers and Central Bank Governors meeting was held, culminating in an agreed Communique and the G20 Ministerial Declaration on International Tax Co-operation.

It was the first time that G20 members have agreed a Tax Declaration, reflecting the achievements of international tax cooperation to date, acknowledging that the OECD/G20 Inclusive Framework on BEPS “has demonstrated the potential of international tax co-operation over the past decade” and recognising the Two-Pillar Solution as a “resounding success of international taxation co-operation”. The OECD Secretary-General commended the G20 members on this declaration.

OECD secretary-general tax report to G20 Finance Ministers and Central Bank Governors

On 25 July 2024, the OECD released the secretary-general’s tax report to G20 Finance Ministers and Central Bank Governors. The report describes some of the key developments in international tax reform since February 2024, including on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy and on the implementation of the base erosion and profit shifting (BEPS) minimum standards. It also covers progress made in tax transparency and on tax and development, tax administration and consumption taxes, as well as dedicated segments on tax and inequality and tax policy developments. This report was prepared by the OECD ahead of the third meeting of G20 Finance Ministers and Central Bank Governors held under the Brazilian G20 Presidency from 25-26 July 2024, in Rio de Janeiro.

Taxation and inequality: OECD report to G20 Finance Ministers and Central Bank Governors

On 25 July 2024, the OECD released its report on the role of tax systems in addressing inequality. It explores how tax systems can mitigate or exacerbate inequality with a focus on the distribution of income and wealth and identifies scope for potential reform. It zooms in on the specific tax policy and compliance challenges associated with taxing high-net-worth individuals (HNWIs), some of which have a cross-border dimension.

Strengthening international tax transparency on real estate – from concept to reality

On 25 July 2024, the OECD released its report setting out the building blocks to increase transparency on real estate. This follows a 2023 OECD report which made the case for enhanced tax transparency on real estate, and which set out a number of conceptual solutions to improve the existing architecture on a voluntary basis.

Bringing tax transparency to crypto-assets – an update

On 25 July 2024, the OECD released its update on the work to implement the recently agreed OECD/G20 Crypto-Asset Reporting Framework (CARF), which extends the automatic exchange of information for tax purposes to the crypto-asset sector. This includes an update on the work of the Global Forum’s recently established dedicated CARF Group to develop the Global Forum’s commitment process in time for its delivery this year, to ensure that all relevant jurisdictions implement the CARF according to agreed timelines to deliver an effective CARF based on a level playing field. In this regard it is noted that 58 Global Forum members have already announced their intention to commence exchanges under the CARF in 2027.

Beneficial ownership and tax transparency – implementation and remaining challenges

On 25 July 2024, the OECD released its report examining the critical role of beneficial ownership transparency in combating tax evasion and illicit financial flows. With reference to the G20 mandates in this area, the report delves into the progress made in implementing the beneficial ownership requirements set out in the standards on transparency and exchange of information for tax purposes. Offering a global perspective, the report assesses the current state of implementation across jurisdictions, analyses the peer review results on effective implementation for Exchange of Information on Request, together with best practices for strengthening beneficial ownership transparency in the global tax landscape. The report also highlights capacity building activities to assist jurisdictions in building robust beneficial ownership frameworks and concludes with possible future directions.

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