New Zealand bank accounts

(Clauses 9 and 10)

Summary of proposed amendments

The proposed amendments require an “offshore person” to have a New Zealand “bank account number” as a prerequisite to being issued an IRD number. If a person (other than an individual) becomes an “offshore person” after they have an IRD number, the obligation to provide a bank account number arises at the time they become an offshore person.

The intent of this particular requirement is that it will provide Inland Revenue with more confidence that it knows who it is dealing with by first ensuring that a person has satisfied a financial institution’s anti-money laundering verification of identity requirements.

Application date

The amendments will come into force on 1 October 2015.

Key features

Proposed section 24BA(1) of the Tax Administration Act 1994 provides that the Commissioner must not allocate a tax file number (commonly known as an IRD number) to an offshore person unless she first receives a bank account number for that person.

The main features of the rule are:

• the definition of “offshore person”; and
• the definition of “bank account number”.

Offshore person

The definition of “offshore person” applies both to individuals and non-individuals (for example, trusts and companies).

For individuals, a New Zealand citizen or person that holds a residence-class visa granted under the Immigration Act 2009 will generally not be classed as an offshore person unless:

• in the case of citizens, they have not been in New Zealand for the last three years; and
• in the case of residents, they have not been in New Zealand for the last year.

A non-individual will be an “offshore person” if they would be an overseas person under section 7(2)(b) to (e) of the Overseas Investment Act 2005 (modified to include the test for individuals described above). This test looks through structures that are New Zealand-tax resident and looks at their underlying ownership or control. The test is necessary to prevent offshore individuals avoiding the rule by interposing a New Zealand-resident structure.

Generally speaking this means a non-individual will be treated as being “offshore” if:

• It is a body corporate (such as a company) and:
  • it is incorporated outside New Zealand; or
  • ­25 percent or more of its shares are owned by a body corporate incorporated outside New Zealand; or
  • ­an offshore person(s) has 25 percent or more of:
    • any class of securities;
    • the power to control the composition of its governing body; or
    • the right to exercise or control the voting power.
• It is a partnership or other unincorporated body of persons (other than a trust) and:
  • ­ 25 percent or more of its partners or members are offshore persons;
  • ­an offshore person(s) has a beneficial interest in or entitlement to 25 percent or more of the profits or assets (including on winding up); or
  • ­an offshore person(s) has the right to exercise or control the exercise of 25 percent or more of the voting power at a meeting.
• It is a trust and an offshore person(s):
  • ­ constitute 25 percent or more of its governing body; or
  • has a beneficial interest in or entitlement to 25 percent or more of the trust property; or
  • ­are 25 percent or more of those that have the right to amend or control the amendment of the trust deed; or
  • ­are 25 percent or more of those having the right to control the composition of the trust’s governing body.
• It is a unit trust and an offshore person(s):
  • ­ are the manager or trustee, or both; or
  • ­has a beneficial interest in, or entitlement to, 25 percent or more of the trust property.

Bank account number

A “bank account number” is an identifying number of an account at either a “registered bank”, as defined in the Reserve Bank of New Zealand Act 1989,[1] or a “licenced non-bank deposit taker”, as defined in the Non-bank Deposit Takers Act 2013. The Reserve Bank publishes lists of both types of entity on its website.

The account number submitted to the Commissioner must be an account held by the IRD number applicant.

Becoming an offshore person

Proposed section 24BA(2) is intended to prevent the bank account requirement being circumvented by, for example, a New Zealand company being established, obtaining an IRD number and then being sold to an offshore person. The proposed section requires a person to give their bank account number to the Commissioner immediately upon becoming an “offshore person”. However, this requirement to provide a bank account number at this later time only applies to non-individuals. This means that, for example, a New Zealand citizen that emigrates will not be obliged to provide a bank account number after being away for three years.

Penalties for non-compliance

No new penalties are proposed as part of these amendments. If an offshore person does not provide a bank account number they will not be issued an IRD number. For instances, such as the requirement to provide a bank account number upon becoming an offshore person, existing penalties are in place – failing to provide information to the Commissioner when required to do so by a tax law is already an offence under sections 143 and 143A of the Tax Administration Act 1994.

1 This definition is already contained in section YA 1 of the Income Tax Act 2007, and so is incorporated in the Tax Administration Act through the operation of section 3(2) of that Act.