Certainty for larger companies (2023)

Because tax laws are sometimes hard to understand and apply, our Tax Counsel Office produces resources to help customers get assurance that what they’re doing is consistent with Te Tari Taaki Inland Revenue’s view of the law. 

Some advice covers topics that touch most New Zealanders such as recent property law changes. This year, the Tax Counsel Office provided guidance about areas such as the new interest limitation rules for rental properties and exclusion of the main home from the bright-line test.

Tax advisors look after the tax affairs of many of our customers so we work to ensure our guidance provides the clarity they need. 

This year, customers received guidance on topics such as schools and early childcare centres charging GST to parents, tax on crypto-assets being used as employee payments and GST issues for companies when payments are made to directors or board members.

Tax Counsel Office

Te Tari Tohutohu Tāke, our Tax Counsel Office, issues guidance and rulings interpreting and applying tax law. They’re a team of 67 located across New Zealand, made up of solicitors and accountants who specialise in tax law. Their public advice and guidance work programme for the year ahead is selected by considering the importance of a range of issues, level of uncertainty involved, number of taxpayers affected and potential revenue implications.

The Tax Counsel Office also provides an adjudication service as part of the disputes process for when a customer disagrees with our organisation's position. It also has an internal escalations process to decide on how we will interpret the law when our staff are not sure that Te Tari Taake Inland Revenue's current approach is correct.  

Te Tari Taake Inland Revenue also provides taxpayer rulings that give certainty about how we will interpret tax laws in specific customer circumstances. These include financing arrangements, reorganisations and property transactions. This year, we issued rulings on arrangements worth $11.2 billion with associated tax of more than $3 billion.  

“Certain transactions cannot progress without tax rulings—in these cases rulings are not just useful, they are critical. Even where rulings are not required, they are still very helpful in obtaining certainty for clients in relation to important decisions and investments. I think tax rulings are a critical part of our tax system.”
Customer feedback from an August 2023 survey on our rulings service.

The tax community watched the outcome of a long-running litigation case that began when the Commissioner disallowed interest deductions claimed in 2006–07 by a predecessor company to Frucor Suntory New Zealand Limited (Frucor). This related to a structured finance transaction by Frucor that Te Tari Taake Inland Revenue argued amounted to tax avoidance.

Following various appeals, the case reached a conclusion in September 2022 with the Supreme Court finding there was tax avoidance by Frucor and that shortfall penalties applied.

In February 2023, following extensive consultation with the tax community we issued an Interpretation Statement on the general anti-avoidance provision to provide guidance and clarity for tax advisors and their clients on how Te Tari Taake Inland Revenue interprets and applies this law. 

Our focus on providing certainty is valued by our larger corporate customers—significant enterprises—when we carry out regular compliance work. These are customers with more than 50 employees or with turnover greater than $30 million. 

We aim to help customers understand their positions and associated risks, and avoid mistakes that can result in significant penalties and interest.

This group of customers has generally maintained their tax obligations despite economic conditions and this year's weather events.

65% of significant enterprise customers are multi-nationals. This group is monitored closely, via a range of sources that include an annual international questionnaire and intelligence from domestic and international agencies. 

We now hold 9 years of information on multi-nationals that helps us ensure they are complying with their tax obligations. The data also helps us design tailored approaches as we consider implementing major international initiatives in New Zealand. 

The most recent information on multi-nationals is from our annual questionnaire, completed by 755 enterprises, on the 2021 tax year. This was the first full year reflecting the impacts of COVID-19 on these customers. 

Despite some significant losses reported by tourism and hospitality enterprises, most of the group reported steady profits.

Information from the questionnaire has also shown that recent measures taken here to reduce instances of companies shifting profits overseas have been working well. 

This year, we've has assisted some significant enterprise customers that have had high error rates when processing their returns. We also worked to complete annual tax reviews of companies more quickly, which frees up our capacity to address compliance issues such as restructuring risks and governance.

Good tax governance by significant enterprises not only involves setting the right ‘tone from the top’, but also effective management of operational tax risks through a robust set of controls that are followed closely in practice. 

This year, we've ran our second campaign on tax governance. To date, we have engaged with nearly 300 significant enterprises. Taking a strong focus in this area has led to company boards and senior management in significant enterprises giving considerable attention to governance. This is resulting in fit-for-purpose policies, procedures and controls, coupled with much improved documentation.

Our work with significant enterprises

We provide an account management service for approximately 200 companies and Crown entities.

This year, we reviewed detailed annual compliance information from 1,210 companies.

92 customers had an active advance pricing agreement with us at 30 June 2023. The agreements represent tax assured of approximately $440 million a year.