Tax Updates: 20 February 2024

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 richard@gilshep.co.nz.

Employee share scheme guidance

Inland Revenue (IR) has just released several draft interpretation statements, which individually cover certain aspects surrounding the taxation of employee share schemes:

• PUB00364/A – covering what an employee share scheme is, the taxing date and apportionment, with guidance on whether a particular arrangement falls within the definition of an employee share scheme, when the share scheme taxing date arises, the circumstances in which the share scheme taxing date could be deferred, and apportionment when a non-resident employee is involved;
   
• PUB00364/B – covering the deductions for parties to employee share schemes, with the primary focus being on the deduction available to an employer under s DV 27(6) of the ITA07, which allows an employer a deduction calculated by reference to the employee’s share scheme benefit;
   
• PUB00364/C – covering a trustee of employee share scheme trust, and how the trustee is treated as a nominee, with a focus on some of the interpretive issues surrounding the application of s CE 6 of the ITA07, which provides for the trustee to be treated as nominee of the company whose shares are the subject of the scheme;
   
• PUB00364/D – covering what happens when an employee share scheme benefit is paid in cash – the consequent PAYE and KiwiSaver obligations, with a focus on obligations when an employee receives a benefit that is paid in cash instead of shares;
   
• PUB00364/E – covering the scenario where an employer funds the tax cost on an employee share scheme benefit, and the resulting tax consequences that arise for the employer including PAYE, ACC, KiwiSaver and Student Loan obligations; and,
   
• PUB00364/F – covering FBT issues in relation to employee share loans and associates, with a specific focus on a scenario where a family trust that is associated with an employee, is provided a loan to acquire shares under an employee share scheme.

And if all of that wasn’t enough for you to get your teeth into, also released is a reading guide (basically a four-page expansion on my narrative above, so you can decide which of the six IS’s might be the most appropriate to read for your scenario) and fact sheet.

Finally, if you would like to make a submission with respect to any of the drafts, the closing date is April 26th.

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.