Tax Policy Bulletin is a regular round-up of recent tax headline news. If you'd like any further detail on the items reported in the update, please reach out to your usual PwC tax advisor.
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Recent Inland Revenue publications
QB 24/04 - When is a subdivision project a taxable activity for GST purposes. This statement sets out updated guidance (based on recent case law) on when a subdivision constitutes a taxable activity for GST purposes.
Special Report on Budget Measures This report seeks to provide more detailed information on the following changes introduced through the May 2024 Budget:
Changes to personal income tax thresholds and the independent earner tax credit
Changes to the Working for Families tax credits
A remedial amendment to the research and development tax incentive (RDTI) rules
Inland Revenue has issued foreign investment fund determination FDR 2024/02. The determination provides that any investment by a New Zealand resident investor in shares in the Colchester Global Green Bond Enhanced Currency Fund — NZD Hedged Accumulation Class Z shares to which none of the exemptions in ss EX 29 to EX 43 of the Income Tax Act 2007 apply, is a type of attributing interest for which the investor may not use the fair dividend rate method to calculate foreign investment fund income for the interest.
Open consultations
PUB00474 - Do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules? The draft statement considers whether various plants constitute an interest in “land” for the purposes of the compulsory zero-rating of land rules. This includes seeds, grains, and vegetables which produce an annual crop (fructus industriales) and forestry trees, fruit trees, and vines (fructus naturales). Consultation closes 19 July 2024.
ED0256 - Extension of time applications from customers without tax agents. This draft statement provides guidance on certain practices that the commissioner will apply when considering applications for an extension of time to file an income tax return from customers who are not represented by a tax agent. Consultation closes 22 July 2024.
PUB00480 - Income tax - Overdrawn shareholder loan account balances. This statement considers the implications of arrangements where companies provide benefits to shareholders who access overdrawn shareholder loan accounts. Concerns arise relating to FBT, the tax treatment of interest, withholding and information reporting obligations, and where the shareholder is relieved of the obligation to repay the balance. Consultation closes 2 August 2024.
Recently closed:
ED0257 - Authority to act for tax agents. This draft statement provides guidance on how a tax agent or representative can obtain authority to act on behalf of their clients, and the manner in which a person may nominate a person to act on their behalf with Inland Revenue. Closed 28 June 2024.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Case law update
TDS 24/14 - Interest free loan and dividends. Considered whether an intercompany interest-free loan gave rise to a dividend and if the repayment of the interest free loan was subject to withholding. In this case, it was found that the loan did not give rise to a dividend nor was there a requirement to withhold.
Chief Executive of New Zealand Customs Service v Country Road Clothing (NZ) Limited [2024] NZHC 1696. The High Court considered whether royalties paid by Country Road NZ for IP relating to how goods are sold (including shop layout, design, and shop marketing), should be treated as part of the customs value of the goods imported by Country Road. On appeal from the Customs Appeals Authority (which found for Country Road), the High Court considered that the royalties should form part of the customs value of the goods.
Tax news from around the world
Moore v United States - The United States Supreme Court considered whether the US mandatory repatriation tax was constitutional under the Sixteenth Amendment, arguing that taxing income on an unrealised basis was constitutional. This decision was widely anticipated due to the potential policy implications of a decision regarding the constitutional status of taxing unrealised gains (e.g. whether a potential wealth tax would be constitutional). Ultimately, the case was decided narrowly (i.e. the Supreme Court did not rule either way on whether realisation is a constitutional requirement).
- Denmark - Tax on Livestock - Denmark has introduced a tax on livestock farmers for the greenhouse gases emitted by their cows, sheep, and pigs. This tax will come into effect from 2030 with a planned increase in 2035. In New Zealand, the previous Labour government had proposed to bring agricultural emissions into the emissions trading scheme (ETS) - this has since been reversed by the current government.
- PepsiCo, Inc. v Commissioner of Taxation [2024] FCAFC 86 - The Full Federal Court (FCAFC) of Australia decided in favour of PepsiCo, reversing the previous decision of the Federal Court of Australia in 2023 (which decided in favour of the Commissioner). The FCAFC held that payments made by an Australian bottler to the US companies for the supply of concentrate did not include any element for the licence to use the trade marks or other intellectual property associated with the beverages, and therefore were not royalties within the meaning of the Income Tax Assessment Act 1936 (Cth).
