Treatment of non-residents

Issue: Application of income tax rules to non-residents

Submission

(35 – PricewaterhouseCoopers)

Specific rules should be included to ensure that a non-resident which does not have a permanent establishment in New Zealand is not subject to income tax on the sale of emissions units in New Zealand.

Comment

The standard treatment of non-residents is that they are taxable on New Zealand-sourced income. It is not clear to us why a special exemption to this rule should be created for non-residents when it applies to, for example, non-residents who trade in New Zealand shares or debt instruments. Variations to the taxation of non-residents should be considered in the context of a review of the international tax rules, not on an isolated basis.

Recommendation

That the submission be declined.

Issue: Requirement for non-residents to register for GST

Submission

(35 – PricewaterhouseCoopers)

Non-residents should not be required to register for GST in New Zealand solely because they have trades in emission units on the New Zealand register. However, they should have an option to register voluntarily for GST.

Comment

The sale of emission units on the New Zealand register by non-residents does not automatically create an obligation to register for GST. Generally, the sale of intangible property by a non-resident who is outside New Zealand at the time of supply is treated as outside the scope of the GST Act.

It is possible, however, that sales of emission units by non-residents to New Zealand residents may be treated for GST purposes as imported services. If the supply is treated as imported services, the recipient may need to consider the application of the “reverse charge”, which imposes GST on certain imported services. This outcome does not require the non-resident to register for GST.

In the event that the non-resident is present in New Zealand when selling emission units, the supply may continue to be treated as supplied outside New Zealand if the recipient of the supply is a registered person, unless the parties agree otherwise.

Officials note that the current rules allow non-residents that carry on a taxable activity to voluntary register for GST in New Zealand if they choose.

Recommendation

That the submission be declined.