Tax Updates: 19 June 2023

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at

Directors fees and GST

Earlier this year, you may recall that Inland Revenue (IR) issued three public rulings related to the GST treatment of directors’ fees and board members’ fees.

One of those rulings concluded that a professional director or board member (a person holding multiple directorships or board memberships) without any other associated taxable activity (such as a legal or accounting or consulting practice) does not carry on a taxable activity just by virtue of holding multiple offices, as each office is excluded from the definition of “taxable activity” by either section 6(3)(b) or section 6(3)(c)(iii).

Subsequent to that ruling being issued, a further question has been raised – what if a director provides their services through a personal services company (“PSC”) – will the PSC be able to register for GST when the director would not be able to register if they were providing their services in their capacity as a natural person?

IR has issued draft PUB00424 to answer the question – it’s a six-page QWBA, so just a short read over your morning coffee.

The Commissioners’ stated draft view is that sections 6(3)(b) and 6(3)(c)(iii) do not operate to restrict the PSC from registering for GST, because where a PSC contracts with a company requiring a director and supplies the services of the director under that contract, the supply of directorship services is distinct from the supply of personally being a director. As long as the PSC’s level of activity is sufficient to be a taxable activity (as defined in section 6(1)), the PSC will be able to register for GST.

The draft QWBA also explores a slight variation of the first scenario, where the director contracts directly with the company to be a director but in circumstances where the director is obliged to account for the directorship fees to the PSC because the PSC is the employer of the director. Post some commentary to explain that this scenario has a less certain outcome, particularly if the PSC has no other activity, ultimately the section 6(4) deeming provision (the accounting of fees to the employer is treated as consideration for a supply of services by the employer to the Company that made the payment to the director) will provide the PSC with the same outcome – an entitlement to register for GST.

The closing date for submissions on PUB00424 is 6th July 2023.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.

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