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Questions we've been asked: General issues
QB 08/03: Application for a private ruling or product ruling on an issue dealt with in a mutual agreement made under a Double Tax Agreement - Tax Administration Act 1994, sections 91E(4)(D)(ii) and 91F(4)(D)
- We have been asked to clarify the process that the Commissioner will follow when an application for a private ruling or product ruling is sought in relation to a matter that has been dealt with in a mutual agreement between competent authorities under a Double Tax Agreement (DTA).
- The Commissioner has no authority to give a ruling on the interpretation or application of a mutual agreement and the Commissioner will not give a ruling on an issue if the issue is within the scope of an existing mutual agreement.
- The Commissioner, or his authorised representative, is the New Zealand competent authority under New Zealand's DTAs. The competent authority of the other party to a DTA is a person who holds the equivalent position in the other Contracting State. (Each of the parties to a DTA is a Contracting State.)
- All New Zealand's DTAs contain a provision that is substantially the same as Article 25 of the OECD Model Double Tax Convention.
- Under Article 25(1) of the Model Double Tax Convention, people who consider that the actions of one or both of the Contracting States will result in taxation "not in accordance with the provisions of the Convention" may present their cases to the competent authority of the Contracting State of which they are a resident or, if the case comes under Article 24(1) (the non-discrimination article), to the competent authority of the Contracting State of which they are a national. The competent authority must endeavour (if the competent authority considers that the objection is justified and the competent authority is not able to arrive at a satisfactory solution) to resolve the case by mutual agreement with the competent authority of the other Contracting State: Article 25(2). Article 25(3) requires the competent authorities of the Contracting States to endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention: Article 25(3) first sentence. Article 25(3) also provides that the competent authorities may consult together "for the elimination of double taxation in cases not provided for in the Convention": Article 25(3) second sentence.
- Article 25(4) provides that the competent authorities may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, for the purpose of reaching an agreement in terms of Article 25.
- Agreements made under the procedures outlined in Article 25 are usually referred to as "mutual agreements".
- The Commissioner is authorised to make binding rulings on how a taxation law applies or would apply: sections 91D(1), 91E(1) and 91F(1) of the Tax Administration Act 1994 (TAA). A mutual agreement is not a "taxation law" as defined in section 91B of the TAA, as it is not a provision in any of the statutes specified in section 91C(1) of the TAA. Therefore, the Commissioner does not have the power to make a binding ruling on the interpretation or application of a mutual agreement.
- Sections 91E(4)(d)(ii) and 91F(4)(d) of the TAA prevent the making of a private or product ruling in respect of a matter that is being dealt with, or in the Commissioner's opinion should be dealt with, by one or both competent authorities of the parties to a DTA. Therefore, in considering an application for a binding ruling, the Commissioner must determine whether an issue relating to the interpretation of a DTA is being dealt with or should be dealt with by the competent authority, rather than in a ruling. Sections 91E(4)(d)(ii) and 91F(4)(d) contemplate that in some circumstances the interpretation of a DTA should be dealt with by the competent authority.
- A matter "is being dealt with" by the competent authority where the taxpayer applying for the ruling has also presented a case for consideration by the competent authority under the mutual agreement procedure provisions in a DTA or where, at the time a binding ruling is sought, the competent authority is in the process of negotiating a more general mutual agreement on the matter. Consistent with the purpose underlying the legislation, if the application for a binding ruling relates to a matter that is within the scope of a mutual agreement already entered into by the Commissioner acting as the competent authority, it is considered that the matter should continue to be dealt with by the competent authority and not in the context of a binding ruling application.
- Therefore, the Commissioner will not give a binding ruling if a mutual agreement exists and the issue in respect of which a binding ruling is sought is within the scope of the mutual agreement.
Other pages in: General issues
- QB 12/11: Income tax - look-through companies, rental properties and avoidance
- QB 12/10: Do the historic depreciation rates continue to apply to grandparented structures acquired before 1 April 2005?
- QB 12/09: Income tax - look-through companies: interest deductibility where funds are borrowed to make a payment to shareholders to reflect an asset revaluation
- QB 12/08: Income tax - look-through companies: interest deductibility on funds borrowed to repay shareholder current accounts
- QB 12/04: Income tax - deductibility of expenditure on widening or metalling a farm acess road or track
- QB 12/03: Income tax - deductibility of expenditure on cattle stops
- QB 12/05: Income tax - deductibility of expenditure on stock yards
- QB 12/02: Income tax - Treatment of quad bikes for depreciation purposes
- QB 12/01: Income tax - deductibility of expenditure on replacing and extending an inlet race to a dairy shed
- QB 11/03: Income tax - look through companies and interest deductibility
- QB 11/02: Deductibility of expenditure incurred by bloodstock breeders in respect of horses that they race
- QB 11/01: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
- QB 09/06: GST - Apportionment of the cost of bare land for the purposes of a change-in-use adjustment
- QB 10/06: Elections for qualifying company status
- QB 10/01: Reimbursing shareholder-employees for motor vehicle expenses and the use of the Commissioner's mileage rate
- Are tax sparing disclosures still required?
- QB 09/05: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
- QB 09/03: Decisions on application of CA 1(2) - common law interest and income under ordinary concepts
- QB 09/02: Holiday houses - income tax treatment
- QB 09/01: Payments made in addition to financial redress under Treaty of Waitangi settlements - income tax treatment
- QB 08/04: Income Tax Act 2007: research and development credits (subpart LH) - tax avoidance (section BG1)
- Kiwisaver - creditable membership
- QB 08/02: Commissioner's power to issue a replacement ruling that operates retrospectively
- QB 08/01: Tax Administration Act 1994 - Section 91E(4)(f) and self-assessment
- QB 07/05 - Ability to rule where the Commissioner is auditing or investigating - whether the Commissioner has a discretion to rule or is prohibited
- QB 07/02 - Whether The Minor Beneficiary Rule Exemption In Section HH 3B Applies On A $1,000 "Per Beneficiary" Or On A $1,000 "Per Beneficiary Per Trust" Basis.
- Tax treatment of wooden scaffolding planks
- Exemption from gift duty for dispositions of property made by or under an order of the Court: section 75(A) Estate and Gift Duties Act 1968
- Private and product binding rulings - to whom do they apply?
- Bankrupt's ability to carry forward accumulated losses
- Records for controlled foreign companies or foreign investment funds to be available in English
- Website expenditure - deductibility
- Qualifying foreign private annuity exemption from the Foreign Investment Fund regime
- Tourism service providers' payments made to tour guides or drivers - the income tax liability of those parties and the tour operator employing the guide or driver
- Managing communications associated with a dispute referred to the Adjudication Unit
- When does derivation occur in relation to land sales with a deferred settlement, by business taxpayers who provide vendor finance?
- Section 108 Tax Administration Act 1994 (TAA) - commencement of four year statutory period (November 2002)