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Technical tax area: Interpretation guidelines and interpretation statements
Interpretation guidelines discuss the Commissioner's approach to the interpretation of a general area of law where there are also taxation implications. For example, IG009: Employee or independent contractor? assists taxpayers to determine their employment status for tax purposes.
- Interpretation statements set out the Commissioner's view of the taxation laws in relation to a particular set of circumstances in cases when a binding public ruling cannot be issued or is considered to be inappropriate.
The table below lists interpretation guidelines and interpretation statements issued in 2015, other interpretations are sorted by the year in which they were issued.
IS 16/06 - Income tax – timing – when is income from professional services derived?
This Interpretation Statement discusses general principles about when professionals can account for their income on a cash accounting basis (ie, when payment is received) and when they must use the accrual accounting basis (ie, when the income is “earned”). It also explains what it means for income to be “earned”, which may potentially be earlier than when a payment is received. The Interpretation Statement addresses the specific fact situations of doctors, directors and barristers, and when it may be acceptable to return income on a cash basis. It also explains how to change between the accounting bases (for example if the person has been using the wrong accounting basis).
Date of issue: 20 December 2016
IS 16/06 - PDF format (308kb | 17 pages)
IS 16/05 - Income tax – foreign tax credits – how to claim a foreign tax credit where the foreign tax paid is covered by a Double Tax Agreement
This interpretation statement explains how to claim a foreign tax credit when a foreign tax is covered by a Double Tax Agreement. The item includes a flowchart, which gives an overview of the foreign tax credit rules and the potential outcomes for taxpayers when a foreign tax is covered by a Double Tax Agreement, and when it is not.
The interpretation statement is accompanied by a fact sheet.
Date of issue: 31 October 2016
IS 16/05 - PDF format (913kb | 49 pages)
IS 16/05 fact sheet - Income tax – foreign tax credits – how to claim a foreign tax credit where the foreign tax paid is covered by a Double Tax Agreement
This fact sheet accompanies IS 16/05: Income tax – foreign tax credits – how to claim a foreign tax credit where the foreign tax paid is covered by a Double Tax Agreement.
Date of issue: 31 October 2016
IS 16/05 fact sheet - PDF format (164kb | 3 pages)
IS 16/04 - Income tax - treatment of the receipt of lump sum settlement payments
This item considers the Income Tax treatment of lump sum payments received to settle claims that are both capital and revenue in nature. In particular, the item considers when apportionment will be required.
Date of issue: 25 October 2016
IS 16/04 - PDF format (258kb | 11 pages)
IS 16/02 - Income tax - Unit trusts - when a trust can have a single unit holder
This interpretation statement sets out the Commissioner's position on whether and when a unit trust can have a single unit holder for income tax purposes.
The Commissioner’s operational position sets out the transitional operational approach that the Commissioner will apply to taxpayers affected by the change in view (see Operational positions in the left hand menu).
Date of issue: 29 July 2016
IS 16/02 - PDF format (335kb | 21 pages)
IS 16/03 - Tax residence
This Interpretation Statement updates and replaces IS 14/01 – Tax Residence (Tax Information Bulletin Vol 26, No 3, April 2014), as a result of the Court of Appeal decision in CIR v Diamond  NZCA 613. It sets out the Commissioner’s view on the tax residence rules for individuals, companies and trusts. The updated part deals with one of the tax residence tests for individuals – the “permanent place of abode” test in s YD 1(2). The tax residence rules determine whether a person is liable for tax on worldwide income or only on New Zealand-sourced income. New Zealand residents are assessable on worldwide income, and non-residents are assessable only on New Zealand-sourced income.
If you have reached a view on your tax residence under the approach in IS 14/01 and are unsure how IS 16/03 might affect you, the Commissioner's operational position will help (see Operational positions in the left hand menu).
Date of issue: 20 September 2016
IS 16/03 - PDF format (1.2mb | 84 pages)
IS 16/01 - Income tax - computer software acquired for use in a taxpayer’s business
This item covers the income tax treatment for taxpayers who purchase, lease, licence, subscribe for, develop, or commission computer software for use in their business. It updates and replaces the 1993 Policy Statement on computer software published in an Appendix to Tax Information Bulletin Vol 4, No 10 (May 1993) - except for the parts that deal with taxpayers carrying on a software development business which will be dealt with separately.
The item contains reference to the interpretation statement IS 08/02: “Deductibility of Feasibility Expenditure” (Tax Information Bulletin Vol 20, No. 6 (July 2008)). Comments in the recent Court of Appeal decision CIR v Trustpower Ltd  NZCA 253 have questioned some aspects of that statement. This item reflects that until that litigation is finally resolved, the Commissioner will continue to apply the position set out in the IS 08/02.
Date of issue: 26 May 2016
IS 16/01 - PDF format (390kb | 30 pages)
IG 16/01 - Determining employment status for tax purposes (employee or independent contractor?)
This Interpretation Guideline will help taxpayers determine their employment status for tax purposes. It updates and replaces Interpretation Guideline IG 11/01, “Income tax: Goods and services tax – Determining employment status for tax purposes (employee or independent contractor?)”, Tax Information Bulletin Vol 24, No 5 (June 2012): 3. The summary to IG 11/01 incorrectly stated the control test (although the test was stated correctly elsewhere in the item). This Interpretation Guideline corrects this error. It also updates legislative references and case law and has been revised in places for clarity. The Commissioner’s approach to determining employment status for tax purposes remains unchanged.
Date of issue: 8 March 2016
IG 16/01 - PDF format (436kb | 26 pages)