GST Registrations – winding back the clock
I remember in the ‘old’ days, when you used to be able to file your application for GST registration, with IR accepting any effective date requested, although they would sometimes get a little touchy if the date was more than six months old.
Those memories are fast disappearing however, particularly since the 2018 release of SPS 18/03, and the common practice nowadays, that regardless of what effective date you request, IR uses the date the application is filed, and it is like trying to pull teeth to get a backdated approval.
A recent case I had, an overseas client should have registered in October 2019, as their invoices from day one, reflected GST being charged on the services supplied. The application was referred to the customer compliance team, and I was informed in no uncertain terms, that unless I could produce evidence of the obligation for the client to be registered some 12 months ago, my request for backdating would be denied. Luckily this time around, proving the requisite obligation was simple, as I already had access to the client’s Xero file, so I could provide the Revenue with copies of the first tax invoices issued, reflecting the GST charged.
Much harder scenarios to overcome however, are those related to property developments, particularly where an existing residential dwelling is acquired, with plans to demolish and put four houses on the same footprint. Clearly the sale of any one title within the coming 12 months would exceed the compulsory registration threshold and consequently dictate the obligation to register for GST now (plus the client wants their second-hand goods claim yesterday).
Once again, reminiscing on the days of old, a statement of the client’s intentions to develop the land and sell within 12 months, was sufficient to have the Revenue sign off on a backdated registration date. These days however, you need to provide fully detailed business plans, plus the kitchen sink at a minimum, to prove that your client had an obligation to register on the date requested, and that it is not a voluntary registration scenario – which the Revenue’s SPS 18/03 stresses will see the date of the registration application being used, unless there are ‘exceptional circumstances’ as to why your client is late in registering.
To remind taxpayers of the SPS 18/03 commentary, IR updated their website on the 23rd November, to confirm that ‘The start date of a GST registration is usually the date the application is made.’ So if you have a client come to you, requesting a backdated registration date to enable them to recover some costs already incurred, it would be prudent to put them on notice of IR’s present stance, and that they may just have to wear the GST charged on those initial costs (or perhaps recover them more slowly via the annual adjustment period claims process).
QWBA on negative interest rates
One of the many consequences of Covid-19, is the potential for banks and other financial institutions to have a scenario where negative interest rates apply to an advance of money or a loan – the bank or financial institution will actually pay you interest in return for you borrowing from them.
Gearing up for this potential unprecedented event, questions have been asked as to whether the payer of the negative interest will have either RWT or NRWT withholding obligations at the time of making the interest payments to the borrower.
IR has responded with draft ADV000097 – Whether ‘negative interest’ payments are subject to withholding taxes.
The draft QWBA suggests that the correct answer to the question is no – the payments will not be subject to withholding taxes. This is because the RWT and NRWT rules only apply to payments made by a person to another person in respect to money lent. However with a negative interest rate scenario, it cannot truly be said that the interest is paid for money lent – if it was paid for money lent, then it would be in return for the money lent, and paying interest to the person who has received the loan funds, is not a return to the lender on the loan funds advanced.
If you wish to have your say on ADV000097, the deadline for comment is 15th January 2021.
Countdown’s Onecard ruling
Countdown has recently applied for a product ruling from IR, with respect to its Onecard donate to charity programme.
For those of you who shop at Countdown and use your Onecard each time you make a purchase, you will appreciate that you accumulate Onecard points based on your dollar spend, and every now and then you’re receive a message that your points total has now crossed the threshold to generate an e-voucher, which if you’re like me, you immediately use to offset against your current shopping tally.
Well apparently, rather than spending this e-voucher on yourself, you can also request that Countdown donate your e-voucher monetary value to one of a number of charities who participate in the programme.
The product ruling has been sought, to clarify whether the Onecard holder is then entitled to claim a donation rebate, which respect to the value of the e-voucher donated to the participating charity.
In a nutshell, provided the six conditions stipulated by the Commissioner are satisfied (nothing earth-shattering or unexpected), a Onecard holder’s donation of $5 or more, will be deemed for the purpose of sections LD 1 and LD 3 to be ‘a charitable or other public benefit gift’.
Consequently, the Onecard holder will have under section LD 1(2), a tax credit, for the tax year in which the ‘charitable or other public benefit gift’ is paid, equal to the amount of the e-voucher donated multiplied by 33 & 1/3%.
The Ruling applies for the period 25th November 2020 to 31st December 2023.