A Week In Review

BEPS Update

The OECD, as part of its continued work on the Base Erosion Profit Shifting project, has released its latest discussion draft. The item deals with Action 2 of the BEPS action plan and discusses ways to neutralise the effects of hybrid mismatch arrangements. This occurs where a branch in one jurisdiction enters into an arrangement with a branch in another jurisdiction, which creates mismatches in tax outcomes, a common example being a deduction for the paying entity with no corresponding assessable income for the receiving entity. Responses to the draft are due by 19th September.

Hawkes Bay assistance a fizzer

In last week’s update I mentioned the Government’s plan to assist Hawkes Bay taxpayers affected by the recent gastro bug outbreak with relief from UOMI charges. The final details have now been released however at first glance appear very limited in scope, only applying to those taxpayers who have been physically prevented from making their tax payments on time due to their staff or tax agents having been ill. I suspect the Government is keen to not open the floodgates and would also consider cashflow issues should never prevent a taxpayer from paying PAYE due to the “trust monies” concept (fine in theory but difficult in practice for many small businesses who were already financially stressed due to it being their quiet season).

 

“Live in NZ” requirement for directors

A recent High Court decision provided some clarity surrounding the meaning of the term “live in NZ” contained in section 10(d)(1) of the Companies Act 1993 (“CA”). By 1st October 2015, all NZ companies were required to have at least one director who either lived in NZ, or lived in an enforcement country and was a director of a company registered in that enforcement country (presently only Australia). As there was no accompanying definition of the term “live in NZ” in the CA, the Registrar of the NZ Companies Office had been applying the 183 day presence tax residency test in most cases to determine whether the criteria was satisfied. The director in this case had only been present in NZ for only 69 days but had significant other connections to NZ including two residences (his partner living most of the year in one), a NZ drivers licence, NZ bank accounts & credit cards, memberships of organisations and his primary care doctor was in NZ. While the Registrar provided an opportunity to a director who failed the 183 day test to establish by other factors that they live in NZ, there were seemingly no guidelines in place for assessing this yet and so the Registrar determined the criteria were not satisfied, to which the director appealed. The Court stated that while physical presence was obviously relevant, the paramount driver to the legislative change was the capacity for the Registrar to enforce obligations. Consequently greater weight should be given to the ties the director had to NZ and the regularity with which significant amounts of time are spent in NZ. The 183 day test applied by the Registrar was simply a sifting mechanism providing a criterion by which directors could automatically satisfy the test, however while it definitively includes it does not automatically exclude. The Court found the director in this case was a clear example of the type of arrangement that could satisfy the test without being present for 183 days and allowed the appeal.

 

Richard Ashby BBus, CA, CPA
PARTNER
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