Chapter 8 - Disclosure and Administration
Taxpayers will be required to disclose their interests in non-resident companies and trusts and to provide all information necessary to compute foreign income in accordance with these measures. Taxpayers with interests in such entities will be required to file a separate schedule for each entity with their annual income tax return. Penalties will apply for failure to disclose the necessary information. To assist in the efficient and fair administration of the new measures, a special unit of the Inland Revenue Department will be established.
Each income year taxpayers will be required to disclose whether they:
- had an interest, as defined in section 4.2.1 of this document, in a non-resident company;
- had an interest, as defined in section 4.3.1 of this document, in a non-resident trust;
- received a dividend from a non-resident company; and
- received a distribution from a non-resident trust or whether income in such a trust became vested indefeasibly in them.
A separate schedule for each non-resident company or non-resident trust in which the taxpayer has an interest must be filed with the annual income tax return. Individuals will not be required to complete such schedules where the total value of all interests in non-resident companies does not exceed $10,000 at all times in the income year or where the total value of all contributions to non-resident trusts does not exceed $500 at all times in the income year.
The information to be disclosed on the schedule will include:
- the name, address and other basic details of the entity;
- the taxpayer's percentage interest in the entity;
- a return of income computed on either a branch-equivalent or comparative-value basis;
- the computation of New Zealand tax liability on dividends or distributions;
- recomputed tax liability where the post facto adjustment is triggered; and
- any change in the balance date of the entity during the income year.
A taxpayer reporting income on a branch-equivalent basis will be required to include with the return the annual balance sheet and profit and loss statement for the non-resident trust or company. In addition, the taxpayer must have available in New Zealand, for inspection by Inland Revenue Department on request, a copy of the entity's financial accounts (audited if available) and of its tax return filed with the foreign tax authorities.
A taxpayer reporting income on the comparative-value basis must provide sufficient information to support the basis of valuation used and the change in value reported. Where relevant, this will include such details as the name of the exchange on which the interest is traded, the dates on which traded prices have been used to value the interest, and the volume of shares traded.
All information required to be disclosed by taxpayers under these measures must be in English or be accompanied by an English translation.
Substantial penalties will apply for non-disclosure or inadequate disclosure.
Taxpayers will continue to file their income tax returns at IRD district offices. The processing of disclosure returns will be centralised in a special unit of the Department. The unit will be staffed by personnel specialising in the monitoring of income earned by residents under this regime.
Such centralisation will facilitate investigation and the cross-checking of returns and hence their consistent treatment. Comprehensive auditing will also be possible.
The Government will ensure that the necessary resources are committed to enable the international tax regime to be effectively monitored and enforced.