Tax Updates: 20 March 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 richard@gilshep.co.nz.

The only way is up!

If you’ve been around the track as long as I have and can recall these words in a popular 80’s song, they are certainly reflective of the tune of Inland Revenue’s (IR) interest rates lately.

Having just updated you on the further increase to the Fridge Benefit Tax (FBT) prescribed rate of interest, the same can now be said in relation to the general use of money interest rates.

The Taxation (Use of Money Interest Rates) Amendment Regulations 2023 (SL 2023/28) come into force on 9 May 2023, to amend the Taxation (Use of Money Interest Rates) Regulations 1998, increasing the taxpayer’s paying rate of interest on unpaid tax from 9.21% to 10.39% per annum, and IR’s paying rate of interest on overpaid tax from 2.31% to 3.53% per annum. Note, in case you’d overlooked it, that the previous rates themselves had only just taken effect from 17th January 2023.

Rulings re-issued

IR has re-issued a couple of sets of rulings.

The first relate to the potential tax issues for a NZ investor, who invests in a US limited liability company (LLC). There are five separate draft rulings, which are basically a re-issue of the previous version (conclusions remain unchanged), but with modification, including expansion, to some of the prior commentary. The current rulings are due to expire on 25th June 2023, with the proposal that the draft rulings once finalised will apply for the period 26th June 2023 to 25th June 2028.

The five draft rulings are:

• BR Pub 23/AA: Income tax — Dividends derived by NZ resident investor in a US LLC that is a foreign investment fund (FIF), where the total cost of all the investor’s attributing interests is $50,000 or less.
  
• BR Pub 23/BB: Income tax — FIF income and dividends derived by a NZ resident investor in a US LLC.
  
• BR Pub 23/CC: Income tax — Attributed FIF income and dividends derived by a NZ resident investor in a US LLC.
  
• BR Pub 23/DD: Income tax — Attributed controlled foreign company (CFC) income and dividends derived by a NZ resident investor in a US LLC.
  
• BR Pub 23/EE: Income tax — Dividends derived by a NZ resident investor in a US LLC that is either a non-attributing active FIF or a non-attributing active CFC.

The closing date for submissions on the drafts is 26th April 2023.
The second set of draft rulings are a re-issue of those related to the tax treatment of cryptoassets when paid as remuneration to employees.

All the previous rulings have now actually expired. The present draft rulings are effectively the same as the earlier versions, in both conclusions and text. However, it is proposed that this time around the ruling will apply indefinitely.

The four draft rulings are:

• PUB00447 1 – Income tax – salary and wages paid in cryptoassets.
• PUB00447 2 – Income tax – bonuses paid in cryptoassets.
• PUB00447 3 – Income tax – employer issued cryptoassets provided to an employee.
• PUB00447 4 – Income tax – application of the employee share scheme rules to employer issued cryptoassets provided to an employee.

The closing date for any submissions on the drafts to be received is 20th April 2023.

If you wish to find the rulings, both sets can be located within IR’s tax technical section here.

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.