On August 30, 2022 the New Zealand Minister of Revenue introduced the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill into Parliament.

The Bill contains amongst others proposals to:

• set the annual income tax rates for the 2022/2023 tax year (Proposed is to have the same rates as in 2021/2022);
• implement the OECD’s information reporting and exchange framework for activities being facilitated by digital platforms in the sharing and gig economy;
• collect GST on accommodation and transportation services provided through electronic marketplaces;
• subject services supplied by managers and investment managers to managed funds and retirement schemes to 15% GST;
• reform the GST apportionment and adjustment rules;
• clarify the GST treatment of legislative charges;
• modernise and clarify the rules for employers and payers in relation to cross-border workers
• ensure New Zealand companies affected by recent changes to Australia’s corporate residency tax rules have uninterrupted access to New Zealand’s loss grouping, consolidation and imputation credit regimes;
• address integrity issues with the application of the domestic dividend exemption and corporate migration rules to dual resident companies;
• introduce a fringe benefit tax exemption for public transport; and
• introduce an exemption from the interest limitation rules for build-to-rent assets.

Implementing an information reporting and exchange framework developed by the Organisation for Economic Co-operation and Development on digital platforms

The Bill proposes to implement rules designed by the Organisation for Economic Co-operation and Development (OECD) that were developed in response to the rapid growth of the digital economy and calls for a global reporting framework for activities being facilitated by digital platforms in the sharing and gig economy.

The rules were developed because activities facilitated by digital platforms may not always be visible to tax authorities or self-reported by taxpayers. The rules also recognise that the platform economy permits increased access to information by tax administrations globally, as it brings activities previously carried out in the informal cash economy onto digital platforms. The rules are supported by a range of multinational digital platforms that have been involved in their development.

The rules would require digital platform operators that are based in New Zealand to provide the Commissioner of Inland Revenue with information about people who earn income on that platform if the income is earned from providing accommodation, personal services, vehicle rentals, or the sale of goods. To the extent to which the information relates to a non-resident taxpayer, the Commissioner is required to exchange this information with the non-resident taxpayer’s tax authority, provided these rules have been implemented in that jurisdiction. The Commissioner of Inland Revenue would also receive information about New Zealand tax resident sellers on offshore digital platforms from other tax authorities where the OECD’s rules are in force.

The information collected and exchanged could be used by Inland Revenue and other tax authorities to support persons who earn income through digital platforms in complying with their tax obligations.

To support the implementation of these rules, the Bill proposes new civil penalties that could apply to operators of digital platforms with reporting obligations in New Zealand, and taxpayers who earn income on these digital platforms. The Bill also proposes that further changes made to the OECD rules in the future would be automatically incorporated and could be subject to exclusion by way of a proposed Order in Council process.

Dual resident companies

The Bill proposes amendments relating to companies that are both tax resident in New Zealand and another jurisdiction (dual resident companies). The first series of amendments seek to resolve uncertainty created by Australia’s recent changes to the application of its corporate residency tax rules, which may result in more New Zealand companies being tax resident in Australia. The proposed amendments would ensure affected New Zealand companies have uninterrupted access to New Zealand’s loss grouping, consolidation and imputation credit regimes. The second series of amendments seek to resolve integrity issues with the application of the domestic dividend exemption and corporate migration rules to dual resident companies. The proposed amendments to the domestic dividend exemption and the corporate migration rules are targeted towards arrangements that have a tax integrity risk, while limiting potential overreach and compliance costs.

Build-to-rent exemption from interest limitation

The Bill proposes that build-to-rent (BTR) assets be exempt from the interest limitation rules in perpetuity. This would allow investors to continue to deduct interest on loans relating to BTR assets for as long as they meet the asset class definition. To qualify for the exemption, the Chief Executive of Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development would have to be satisfied that the development meets the definition of build-to-rent land. This exemption would ensure the interest limitation rules do not disincentivise investment in BTR developments so that such developments continue to contribute to quality rental supply in Aotearoa New Zealand.

The Bill was withdrawn on September 1, 2022 and replaced by a new Bill that was introduced into Parliament on September 8, 2022. The new Bill is the same as the Bill introduced on August 30, 2022, but without the proposal to standardise the application of GST to fees and services of managed fund providers.

Links to the new Bill as introduced, the Departmental disclosure statement, the Regulatory impact assessments and Commentary on the Bill you can find on this page of the New Zealand Inland Revenue.

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