A Week in Review at Gilligan Sheppard
| International Tax Disclosure Exemption issued |
| For those of you who have clients with control or income interests in a foreign company or an attributing interest in a FIF at any time during a particular income year, section 61(1) of the Tax Administration Act would usually require a disclosure of that interest to IR. However in the interest of mitigating compliance costs, section 61(2) permits the Commissioner to exempt any person or class of persons from those disclosure requirements. To facilitate the use of this legislative discretion, IR issues what is known as the International Tax Disclosure Exemption, and the latest version in respect of the 2021 income year has just been released – ‘International Tax Disclosure Exemption ITR32 (the 2021 disclosure exemption’. The scope of the 2021 exemption, identical in vein to its 2020 predecessor, removes the requirement of a resident to disclose: · An interest in a foreign company if the resident has an income interest of less than 10% in that company and either that income interest is not an attributing interest in a FIF or it falls within the $50,000 de minimis exemption. · If the resident is not a widely held entity, an attributing interest in a FIF that is a direct income interest of less than 10%, if the foreign entity is incorporated (in the case of a company) or otherwise tax resident in a treaty country or territory, and the fair dividend rate or comparative value method of calculation is used. · If the resident is a widely-held entity, an attributing interest in a FIF that is a direct income interest of less than 10% (or a direct income interest in a foreign PIE equivalent) if the fair dividend rate or comparative value method is used for the interest. The resident is instead required to disclose the end-of-year New Zealand dollar market value of all such investments split by the jurisdiction in which the attributing interest in a FIF is held or listed. The 2021 disclosure exemption also removes the requirement for a non-resident or transitional resident to disclose interests held in foreign companies and FIFs. You can find more detailed commentary surrounding each of the above categories, as well as a list of the DTA countries covered and what income interests are considered to not be an attributing interest in a FIF, in the ‘determinations’ section of IR’s tax technical website. |