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.
Recent publications
The Government’s Tax and Social Policy Work Programme (TSPWP) was published on 13 November. The TSPWP sets out the Government’s priorities for the rest of the Parliamentary term, and includes the following items:
- Exploring compliance cost reductions, including improving tax compliance for small businesses.
- Fringe Benefit Tax review.
- Reviewing thin capitalisation settings for infrastructure.
- Reviewing the Foreign Investment Fund tax rules.
- Supporting the transition to digital tax administration for intermediaries.
- Reviewing the GST rules for joint ventures.
- Simplifying tax compliance for Māori authorities.
- Work to find a multilateral solution to the challenges the digital economy poses to international taxation (OECD Pillar 1 and Pillar 2 work).
- Reviewing the income tax exempt status of the New Zealand Superannuation Fund.
- Reviewing the Commissioner’s power to collect information for policy purposes.
- Donee status for overseas focused organisations (schedule 32).
- Remedial work programme.
- Trust disclosures post-implementation review.
- Policy options to support wider Inland Revenue compliance work and reduce tax debt.
- Reviewing elements of charities and not-for-profits.
- Clarifying the income tax treatment of software development expenditure.
- Simplifying the tax rules for non-resident contractors.
- Double tax agreement negotiations.
Inland Revenue has released the following publications:
- TDS 24/20: Permanent establishment. The Tax Counsel Office (TCO) found that an arrangement whereby an overseas resident company had engaged a New Zealand resident company to undertake work in New Zealand did not result in the overseas resident company having a permanent establishment in New Zealand. The arrangement specifically involved some of the overseas resident company’s employees taking a leave of absence, moving to New Zealand temporarily, and being employed directly by the New Zealand company on a fixed term basis.
- IS 24/09: Income tax – Overdrawn shareholder loan account balances. Considers common tax issues associated with overdrawn shareholder loan accounts held in New Zealand resident close companies. The statement provides general information on common tax issues relating to overdrawn shareholder loan accounts that are owed to close companies that are resident in New Zealand under New Zealand tax law, and owed by shareholders who are natural persons and resident in New Zealand under New Zealand tax law.
PwC publications
Take a look at our recent Tax Tips article which discusses the impact of New Zealand’s tax settings on infrastructure development, what tax levers we have seen in application worldwide, and some of the potential movements in New Zealand.
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Open consultations
- PUB00483 - Tax residence. This draft interpretation statement will update and replace IS 16/03: Tax residence, to reflect various legislative and other changes that have been made since 2016. Accompanying the draft statement are three draft fact sheets – one each in respect of tax residence and individuals, companies, and trusts. There is also a reading guide to help readers understand, at a high level, the changes that have been made. Consultation closes 11 December 2024.
- PUB00495 - Tax residence – government service rule. This draft interpretation statement explains the government service rule whereby an individual is considered a New Zealand tax resident if they are personally absent from New Zealand in the service of the New Zealand Government. The discussion has also been expanded to touch on the articles of double tax agreements that may need to be considered if the government service rule applies. Consultation closes 11 December 2024.
- PUB00458 - Income tax – Using the cost method to determine foreign investment fund (FIF) income. This draft statement explains when a New Zealand resident investor can choose to apply the cost method to calculate their foreign investment fund (FIF) income on shares held in foreign companies. It includes some examples of when an independent valuation may be required to apply the cost method and how the cost method can be applied. Extension granted to 13 December 2024.
- PUB00482 - Income tax – implications of a residential property moving between the standard tax rules and the mixed-use asset rules. This draft interpretation statement considers situations where a person’s use of their residential property has changed so the property moves from being under one set of income tax deduction rules to another. It explains how a person determines which income tax deduction rules apply and the consequences of moving between the standard tax rules and the mixed-use asset rules. Accompanying the draft interpretation statement are two draft fact sheets. Consultation closes 13 December 2024.
- PUB00462 - What is the income tax treatment of gift cards and products provided as trade rebates or promotions? This draft Question We’ve Been Asked (QWBA) explains the income tax treatment of gift cards and products provided by trade suppliers to trade customers (business to business) as trade rebates, promotions, or rewards for trade customers buying goods or services from trade suppliers. Consultation closes 18 December 2024.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
- PUB00461 - Income tax - arrangements involving tax losses carried forward under the business continuity rules. This draft statement clarifies CIR’s view on the potential application of anti-avoidance provisions contained in ss. GB3BA, GB 3BAB and GB 3BAC when a company carries forward a tax loss under the business continuity rules. Consultation closed 1 November 2024.
- PUB00457 - INC - Company amalgamation rules. This consultation includes a trifecta of statements providing guidance and practical examples on the tax treatment of company amalgamations and pre-amalgamation tax losses, as well as specific guidance on how to calculate the amalgamated company’s available subscribed capital. Consultation closed 1 November 2024.
- PUB00453 - Income tax and FBT - deducting costs of travel by motor vehicle between home and work. This consultation includes two draft items to refresh IS3448 which consider who can claim deductions for expenditure incurred on travel between home and work and under what circumstances, as well as when employer provided transport is a fringe benefit. Consultation closed 6 November 2024.
- PUB00489 - How do the bright-line rollover relief provisions apply to transfers of residential land between associated persons? This draft QWBA clarifies the application of the rollover relief provisions in light of the new bright line rules. Consultation closed 8 November 2024.
- PUB00486 - GST treatment of fees paid in relation to managed funds. This draft statement considers the GST treatment of fees received by a manager of a managed fund and fees received by third-party suppliers (including investment managers) for supplies made to the manager of a managed fund. For further discussion, please refer to our recent Tax Tips article. Consultation closed 11 November 2024.
- ED0245 - Deduction notices. This draft statement sets out the CIR’s power to issue a deduction notice to recover outstanding amounts of tax and provides guidance on how the CIR will use such notices. Consultation closed 15 November 2024.
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