Tax tips - Case studies - Issue 2
Employee share schemes – new regulations could save dollars
With new law in relation to employee share schemes (ESS) effective from the 29th of September, we have had many clients ask us what this means for their ESS and organisation. We are working with many clients to review their current ESS, and advise how they can ensure employee value is maximised under the new legislation, without significant additional cost to the employer.
A client recently asked us to review their current ESS with the new laws in mind, and advise on potential alternatives. The PwC Executive Remuneration Services (ERS) team undertook cost / benefit modelling of various alternative approaches under the new regulations. In this instance, the client ended up changing to an alternative scheme, which meant their executives in fact received enhanced post tax benefits under the new law relative to the current scheme under “old law”, at a reduced cash cost to the company.
Together with PwC Legal, our ERS team then provided full implementation assistance to the client, including advice on structure, grant levels, tax and accounting advice, valuation of the instruments for accounting purposes, and company secretarial matters – effectively a complete and seamless service.
If you think your employee share scheme may need to be reviewed, contact Chris Place.
A ‘one stop shop’ to support investors who are new to New Zealand
Forbes’ Best Country for Business List in 2017 ranked New Zealand as #1 for investor protection and lack of red tape. Even so, overseas investors often find themselves concerned about managing multiple advisers when they consider the New Zealand market.
We recently supported a client, new to New Zealand, by effectively project managing their adviser help around real estate, tax requirements, investor background information and legal support. The client commented that they found our team approach easy to understand, and they didn’t have to worry about anything ‘falling through the cracks’.
We worked with the client from a very early stage (before they had even identified the specific investment) so they could understand the New Zealand business environment, what we would need to do on their behalf and why. We also assisted the client to manage information for their overseas parent company and keep them informed throughout the process.
In this instance, the PwC teamwork made the client feel that they only had to brief and manage one adviser and that their entry into the New Zealand market was less risky.
If you are considering migrating to or investing in New Zealand, please email Anand Reddy or Tom Logan. Find out more by requesting the PwC ‘Doing business in New Zealand – a guide for investors and migrants’ brochure via our website.
PwC working in with independent legal and accounting advisers
We often work side by side with independent lawyers and accountants in order to provide specialist skills and support clients.
Recently, we were introduced to a new client by a sole partner legal firm who was assisting the owner with a significant tax dispute with Inland Revenue. The solicitor and owner had been frustrated by the lack of quality financial information that their local accounting provider was able to deliver. This was impacting on the owner by slowing down resolution of the Inland Revenue dispute and also hampering the owner's ability to raise bank funding for expansion. The client had good relationships with their local advisers and didn’t want to spend time briefing a new organisation.
Working closely with the client’s solicitor and local accountant, PwC was able to complete a finance review and identify where we could help to improve ongoing financial reporting and processes. Ultimately, we were also able to successfully resolve the Inland Revenue dispute and allow the client to leverage new reports to access funds for further investment.
If you think your current legal or accounting adviser might need extra support to work through some challenges, get in touch with Jason Kearns.
NZ importers preparing for the new Customs and Excise Act 2018
Our importer clients have been getting ready for the new Customs and Excise Act 2018, which came into effect on 1 October 2018. A significant change under the new law is that NZ Customs will now charge importers "compensatory interest" if they haven't paid enough duty and/or GST when goods enter New Zealand.
A common problem for many of our importer clients is that often they cannot conclusively determine the "customs value" of their goods until some time after the goods have entered New Zealand. So, they will be exposed to compensatory interest if their goods are undervalued at import. This is mainly an issue for importers who make transfer pricing adjustments, pay royalties, or pay commissions that relate to their imported goods.
We have been helping many of our clients get to grips with the new provisional values (PV) scheme. The PV scheme will protect them from compensatory interest until they declare the final value of their goods.
One of our large multinational clients imports electronic goods into New Zealand purchased from related parties, but does not have a transfer pricing advance pricing agreement (APA). Without an APA, they did not automatically qualify to use PVs. We have helped them obtain NZ Customs’ permission to use the PV scheme, and they will now be protected from compensatory interest. Another large importer pays royalties for importing branded goods. We successfully helped them to notify NZ Customs that they automatically qualify to use the PV scheme.
If you need help in this area, you can connect with Eugen Trombitas or Catherine Francis.
US tax reform – restructuring for doing business in the US
Clients are asking us what, if any, effect do US tax law changes have on New Zealand companies doing business in the US. While the US corporate tax rate is now 21%, there are many other changes that are likely to mean that the effective tax rate is significantly higher than the headline rate.
We have provided support to a client who is a New Zealand company with business interests in the US. The key strategic considerations for this client have been their operating structure, location of IP, and funding their US operations. As a result, they are now considering changes to their operations in the US.
If you do business in the US, please get in touch with Briar Williams to understand how the changing US tax landscape may impact your organisation.
Equally, we are also supporting US subsidiaries operating in New Zealand to understand the impact, advice from their parent and any action they need to take locally.
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