The Inland Revenue Department (IRD) has just released its Offshore Tax Transparency guide that will help tax agents to comply with international rules. According to IRD spokesperson John Nash, New Zealand’s tax residents are obligated to pay tax on their worldwide income. This applies even where withholding tax has been deducted overseas or if the income has yet to be repatriated to New Zealand.
The guidance document notes that there is an extensive exchange of information taking place between intelligence resources that will be used to help track down those that are not paying their fair share of taxes.
The IRD has found that Kiwis continue to grow their overseas investments which can include commercial real estate, offshore bank accounts and portfolios of overseas shares. It was found that most taxpayers were voluntarily meeting their offshore tax obligations but some were seeking to avoid or evade payment.
Nash confirmed that the IRD would exploit new tools and tap into its wide network of tax treaty partners. He said that with the improved intelligence capability, only those taxpayers deserving of further inquiry and intervention would be affected. He added that with the increased complexity of global investment, brought on by challenges like crypto assets and the gig or sharing economy, there was a need for the IRD to continually participate in international solutions.
The IRD approach is to ensure compliance that makes it easy for taxpayers to do the right thing, makes it hard for them to get it wrong, and makes it costly for those that opt to avoid their obligations. The tax authority intends to keep running compliance campaigns that will help to verify and facilitate compliance by taxpayers in returning their offshore incomes. An ongoing monitoring programme will help ensure these incomes are returned, with data records from treaty partners being checked against.
Meanwhile, the IRD is expected to keep sending out tax assessments until mid-July, with some taxpayers none too pleased to be informed that they owed money from the last financial year. Those that may have received extra pay during the financial year are being warned that this may mean they underpaid their taxes. Other reasons some taxpayers may receive a tax bill rather than a refund include income tax being taxed incorrectly due to errors like the use of the wrong tax code, misinterpretation of the Holidays Act, and employer share scheme income that did not have taxes deducted.
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