A Week in Review

OECD report on VAT/GST collection

Further to the 2015 Final Report on BEPS Action 1 – addressing the tax challenges of the digital economy, the OECD has released new implementation guidance to promote the effective collection of consumption taxes on cross-border trade.
The focus of the guidance is on dealing with suppliers of services and intangibles who are not resident in the jurisdiction of taxation, providing affected Revenue authorities with a set of internationally agreed standards, which is aimed to promote consistent and coherent implementation of collection regimes across jurisdictions, thereby facilitating international administrative co-operation.
The report comprises three main components, providing chapters on key policy decisions and design issues, implementation of “registration-based collection regimes” (VAT/GST collection regimes based on requirement of foreign suppliers to register and remit tax in jurisdiction of taxation) and guidance on the design and practical operation of a “simplified registration and compliance regime”.
You can obtain a full copy of the report from the OECD’s website – www.oecd.org.

AIM determinations issued
With the new method for calculating provisional tax (Accounting Income Method) having application to the 2018-19 and later income years, IR has now issued various technical determinations which detail the tax adjustments required under AIM and IR’s information requirements in this regard.
The introduction of AIM will provide taxpayers with four potential calculation methods to use when determining yearly provisional tax payment obligations, the latest method utilising upgraded software (an AIM-capable accounting system) to compute provisional tax based on current year accounting information.
While the technical determinations are essentially being issued by IR for use by software developers (as they detail the minimum tax adjustments required within the software), they will also act as a guide for taxpayers and their agents – each determination including examples as interpretation aids.
Presently there have been ten determinations issued, covering adjustments for private expenditure, trading stock, accounts receivable/payable, losses, livestock and depreciation.
All of the determinations will be included in the November 2017 TIB, although naturally they can be obtained directly from IR’s website – www.ird.govt.nz.

Draft QWBA’s
Two draft QWBA’s (questions we’ve been asked) have recently been released by IR for comment.
PUB00306 considers the question of whether a GST registered person can issue a combined tax invoice and credit note. IR’s proposed answer – yes, provided the two components relate to separate supplies. Should only one supply be involved however, then a single document cannot be used for the joint purpose, and this is on the basis that a credit note is only permitted to be issued after a tax invoice has been issued in respect of the relevant supply – not contemporaneously with the issue of the relevant tax invoice therefore.
The deadline for comment in respect of PUB00306 is 8th December 2017.
PUB00318 examines binding rulings and the effect of the Commissioner changing her mind with respect to the application of s.BG 1. It considers whether the Commissioner can apply a new interpretation of the anti-avoidance provision when a ruling period expires in relation to an ongoing arrangement. IR’s proposed answer is yes, provided that the application of the new interpretation does not have the effect of reversing the tax outcomes in the period covered by the ruling.
The deadline for comment is 20th December 2017.

Review of the PRA – dealing with trusts
While not of a pure taxation flavour, I thought the issue would still be very topical to the majority of you.
The Law Commission has released an issues paper – Dividing Relationship Property – Time for Change? One big question is whether the legislation should be amended to deal with assets in trusts (which are usually not subject to PRA rules of division), structuring which is often seen to undermine the policy of just division and the principle that all property central to a relationship ought to be divided equally. Consequently the issues paper seeks feedback on whether rules should be amended so that there is a single, accessible and comprehensive statute that will regulate the division of property at the end of a relationship. This could also see the repeal of section 182 of the Family Proceedings Act 1980, which is also often used as a strategic weapon to attack nuptial settlements where the PRA is of little use to the claimant due to the jurisdictional issues surrounding trust structures.
The submission deadline is 7th February 2018

Reinstatement of Tax Bill
With the new Parliament recently opening its doors for business, the 8th November saw the reinstatement of the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill. This was the Bill introduced on 6 April 2017, which contained measures relating to collecting employment and investment income information, reforms to the taxation of employee share schemes and was to set the annual tax rates for 2017–18.
Interestingly, the Income-Sharing Tax Credit Bill (one permitting taxation on the basis of family income as opposed to as separate individuals), introduced in August 2010, was not reinstated.
OECD Transfer Pricing Update
The OECD has updated its transfer pricing country profiles (TPCP) recently. The TPCP reflects the current transfer pricing legislation and practices of 31 participating countries (including NZ), based on information provided by those countries (to ensure accuracy of information).

Users of the information will be able to see domestic application of transfer pricing rules including the jurisdictions practices with respect to the arm’s length principle, various transfer pricing methods, documentation requirements and administrative approaches to resolving disputes, as well as other key aspects relating to transfer pricing.

The information contained in the TPCP is intended to clearly reflect the current stage of countries’ legislation and to indicate to what extent their rules follow the OECD Transfer Pricing Guidelines. Full details can be found on the OECD website – www.oecd.org.

Richard Ashby BBus, CA, CPA PARTNER
Em: [email protected] Ph: +64 9 365 5532 Fx: +64 9 309 5260 Mb: +64 21 823 464