FATCA

Many New Zealand businesses and trusts must complete registration and understand their reporting obligations.

With the United States Foreign Account Tax Compliance Act (FATCA) regime now in effect, it’s important that all New Zealand entities ensure they are aware of their obligations.

FATCA came into effect in New Zealand on 1 July 2014 – with little fanfare at the time. From 1 April 2017, however, the compliance obligations of the FATCA regime are now live. The FATCA regime classifies all entities (companies, trusts, associations and partnerships) as either a ‘financial institution’, an ‘active non-financial foreign entity’ (active NFFE) or a ‘passive non-financial foreign entity’ (passive NFFE).

The reason for FATCA

The ultimate goal of the FATCA regime is to find US offshore persons or entities who have been avoiding their US tax obligations. This is done by gathering information on any US persons or entities controlled by US persons holding accounts outside of the US.

Continue reading “FATCA”

Budget 2017 – An overview

The pundits were right. The Minister of Finance, the Hon Steven Joyce, presented his first Budget on Thursday 25 May and it was definitely a ‘steady as she goes affair’ with few surprises.
The Minister said the outlook for New Zealand’s economy is positive and the Crown’s books are steadily improving. We highlight some of the Budget’s key points below.

Tax cuts

From 1 April 2018, there will be tax cuts for every working New Zealander with particular emphasis on lower to middle income earners.

Income that can be earned at the lowest tax rate of 10.5% will rise from $14,000 to $22,000 which means $11 more a week. The 17.5% income tax rate will be raised from $48,000 to $52,000 giving an increase of $20 a week.

Continue reading “Budget 2017 – An overview”

Tax changes, smoke alarms and insulation…

Proposed business tax changes

In April, the government announced a package of proposals to simplify business tax, many of which will benefit small and medium-sized businesses. Some of the key tax proposals include:

  • A new pay-as-you-go option for paying provisional tax for small businesses with less than $5 million annual turnover. This will give small businesses an alternative to the current system which requires three annual provisional tax payments. To take advantage of the proposal, businesses will need to use a cloud-based accounting system, such as Xero, linked to the Inland Revenue.
  • Changes to the ‘use-of-money interest’ rules that govern the interest paid to taxpayers for overpayment of tax and interest charged for underpayment. The practical effect is that the changes will eliminate or reduce use-of-money interest for most taxpayers.
  • Contractors will be able to elect their own withholding tax rate to better reflect their circumstances and reduce the impact of provisional tax.
  • Certain penalties will be removed, including the current 1% monthly penalty for new debt. However, immediate penalties and interest charges for late payments will still apply.

taxchanges

Continue reading “Tax changes, smoke alarms and insulation…”

Quick Quiz – who has a crocodile logo on the clothes they make? Check the answer here…

BUSINESS BRIEFS: The tail of two crocodiles, Business tax proposals announced, Attempt to structure around the Overseas Investment Act proves costly.

The ‘tail’ of two crocodiles

Lacoste recently successfully defended its rights in the Court of Appeal (1) to its trade mark which depicts both a crocodile and the word ‘crocodile’ (mark 70068) despite it never actually having used the mark.

lacoste

Crocodile International Pte Limited had applied to have Lacoste’s mark revoked on the ground of non-use under 66(1)(a) of the Trade Marks Act 2002. Lacoste argued that its use of its other, more familiar mark, constituted use of mark 70068 under the Act’s extended definition of ‘use’ which includes ‘use in a form differing in elements that do not alter the distinctive character of the trademark in the form in which it was registered.’

Continue reading “Quick Quiz – who has a crocodile logo on the clothes they make? Check the answer here…”

‘Tis the season to be giving…or is it?

ConfusedFollowing the abolition of gift duty on 1 October, we publish a special edition of Fineprint here.

You may be considering whether to complete your gifting programme in one fell swoop – or perhaps not.

Everyone has their own reasons for establishing a trust, and your own individual situation will be unique to you and your family. Completing your gifting programme in its entirety may not be the best step for you.

Do get in touch with us so we can talk about the best path forward for you and your particular circumstances.

The taxing issue of family trusts and companies

The Supreme Court has just released its judgment in the ‘Penny Hooper’ case. This case involved two doctors that worked in their own private practices. They then formed companies for which their family trusts were shareholders. Rather than the doctors receiving the full income they generated – they were paid a salary. The IRD said the salary was significantly below market value (i.e. one doctor went from $650,000 income one year to a salary of around $100,000).

The Supreme Court has said that having a salary set at a low rate to avoid paying tax is tax avoidance. However, if the salary is at a low rate for a legitimate reason (e.g. saving income for the purchase of a capital item) then this is not tax avoidance.

A more detailed summary of the decision follows and you can read the full decision here.

Continue reading “The taxing issue of family trusts and companies”