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Technical tax area
Te wahi mo te take hangarau
Standard practice statements: General statements

SPS 13/01: Retention of business records in electronic format, application to store records offshore and application to keep records in Māori

This Standard Practice Statement also appears in Tax Information Bulletin Vol 25, No 3 (April 2013).

Introduction

  1. This Standard Practice Statement ("SPS") provides guidelines on the retention of business records in electronic format and sets out the Commissioner of Inland Revenue’s ("the Commissioner") practice when considering an application to store business records offshore.
  2. Also included in this SPS is the Commissioner’s practice when considering an application to keep records in Māori.

Application

  1. This SPS applies from 11 March 2013. It applies to taxpayers who are required to keep business and other records under the Inland Revenue Acts and other third parties that hold business records for taxpayers offshore.
  2. This SPS replaces SPS GNL-430 Retention of business records by electronic means (December 2003) and SPS INV-470 Applications to keep records in Māori (May 1998).
  3. Unless otherwise specified, the legislative references in this SPS are to the Tax Administration Act 1994.

Summary

  1. The Tax Administration Act 1994 ("TAA") and the Goods and Services Tax Act 1985 ("GSTA") require taxpayers to keep business and GST records in New Zealand and in the English language. The Commissioner has the discretion to authorise the offshore storage of records or to authorise records being kept in another language. Recent changes to the TAA allow applications to be made by a third party data storage provider, such as a cloud service provider, to store records offshore for their clients.
  2. Records stored electronically, both inside and outside of New Zealand, and either on the taxpayer’s own electronic storage system or on an outsourced system, must meet the requirements of the Electronic Transactions Act 2002 ("ETA") that:
    • the integrity of the information contained in the records is to be maintained, and
    • the information is readily accessible so as to be usable for subsequent reference.
  3. Further conditions for legal requirements to retain records under the Inland Revenue Acts are provided in schedule 1, clause 4 of the Electronic Transactions Regulations 2003 ("ETR").
  4. It is the Commissioner’s view that the requirements in the ETA and the conditions in the ETR are met if the practices in paragraphs 41 to 51 of this SPS are followed.
  5. The Commissioner may authorise a taxpayer to store records offshore or a third party to hold records offshore for multiple taxpayers, if the storage of those records offshore does not impede the Commissioner’s compliance activities. In particular, the records stored offshore remain accessible by the Commissioner. An applicant may be required to demonstrate that the manner in which the records are to be stored offshore will meet the requirements of the ETA and the ETR. Each application will be considered on a case by case basis having regard to the merits of the case, including the compliance history of the applicant.
  6. For a third-party application, the Commissioner will also consider whether the third party carries on business in, or through, an establishment in New Zealand; and the procedure that the third party has for dealing with client data should the third party no longer hold records for the client.
  7. The Commissioner may impose conditions on an authorisation to store records offshore. The need to impose such conditions is determined on a case by case basis.
  8. The Commissioner may withdraw an authorisation, either upon request by the party to which the authorisation applies or by giving reasonable notice of the withdrawal.
  9. An authorisation given to a third party does not replace a taxpayer’s responsibility to meet the record keeping requirements as per the Inland Revenue Acts. The authorisation merely enables a taxpayer to store records offshore without being in breach of their obligations.
  10. The Commissioner can request information from any person, including a third party, pursuant to section 17. Generally, the records of a specific taxpayer will be obtained from that individual taxpayer in the first instance. The Commissioner may request this information from a third party if it is necessary in the particular circumstances of the case.
  11. The Commissioner will follow the standard practice for protecting taxpayers’ rights to non-disclosure of tax advice documents and documents that are legally privileged when requesting information. Refer to SPS 05/07 Non-disclosure right for tax advice documents.
  12. The Commissioner may authorise records to be kept in a language other than English. The Commissioner recognises that Māori is an official language of New Zealand and those persons who wish to keep their records in Māori may apply to the Commissioner, in writing, to do so. The Commissioner will generally approve applications to keep records in Māori provided that the taxpayer uses certain English phrases specifically required by the GSTA and that numbers are recorded using Arabic numerals.
  13. Applications to keep records in other languages may be approved only in limited circumstances where there are compelling reasons to do so. These applications will be considered on the facts of each case.

Background

  1. The TAA requires persons who carry on a business or other income-earning activities to keep, in New Zealand and in English, sufficient records to enable the Commissioner to readily ascertain the amounts of tax payable by that person.
  2. The Commissioner has the discretion to allow a person to keep their records offshore and also the discretion to allow a person to keep records in a language other than English.
  3. Technological advances have seen records now being transferred to electronic form or originating in electronic form. The ETA provides a framework to support people who elect to conduct their business electronically. They will also have the option to use technology to store information from source-paper documents or other non-electronic records. The ETA also removes the requirement to retain the source-paper or non-electronic records where anyone who uses technology to store business records can ensure the integrity of the information transferred from source-paper or other non-electronic records.
  4. A growing number of taxpayers are using new technologies for their businesses, such as cloud-based computing technology. Cloud computing technology utilises the internet to deliver IT products or services to businesses, such as computer operating systems, networks and applications. While IT products and services are accessed from devices such as a computer or a smartphone in New Zealand, any data or documents generated from them are not stored on the device but in data centres operated by a cloud service provider. Many cloud service providers operate data centres that are located outside of New Zealand. This means the data of the clients of a cloud service provider, which may include the business records of a New Zealand taxpayer, could be stored offshore.
  5. As well as authorising a person to store their own business records offshore, the Commissioner now has the discretion to authorise a third party, such as a cloud service provider, to hold multiple taxpayers’ business records offshore for the taxpayers.
  6. There is a wide variety of cloud computing services on offer, ranging from online accounting packages to a full IT infrastructure of a business. Not all cloud computing services use offshore data centres and not all taxpayers who are using a third-party provider will need authorisation. It depends on the service provider, the service that the taxpayer is using and also the taxpayer’s own record keeping practice.
  7. A taxpayer has the responsibility to ensure that their business records are retained in New Zealand or agreement has been sought from the Commissioner to hold the records offshore. The taxpayer has the ultimate obligation to keep the documents as required to be kept by tax law.
  8. It is an offence against the TAA if a person does not keep the documents required to be kept or does not provide information when requested by an authorised Inland Revenue officer.
  9. While it is a requirement that records must be kept in English, the Commissioner has the discretion to allow a person to keep records in another language. Inland Revenue recognises that Māori is an official language of New Zealand and that it is reasonable for a person whose business dealings are conducted in Māori to be able to hold their business records in Māori. However, the implications for other parties who may receive invoices, receipts and the like also need to be considered. Appendix A to this SPS sets out the factors that the Commissioner will consider when a person applies to keep their records in Māori.
  10. Taxpayers who wish to keep their records in a language other than English or Māori may apply to the Commissioner to keep their records in that other language. However, the Commissioner would only agree to such a request in limited circumstances where there are compelling reasons for the taxpayer to do so. The Commissioner will also need to take into account the resources required to translate records kept in another language.

Standard practice

Taxpayer obligation to keep business and other records

  1. Section 22 requires a person who carries on a business in New Zealand (including those who do business via the Internet) to keep sufficient business records to enable the Commissioner to readily ascertain the amount of tax payable by the business and all other tax matters relating to that business.
  2. "Records" include, but are not limited to:
    • books of accounts that record receipts or payments or income or expenditure;
    • vouchers, bank statements, invoices, receipts, and other documents to verify entries in the books of accounts;
    • other accounts and documents specifically required to be maintained and kept.
  3. Section 22(1) requires that the records to be kept in relation to a business must contain certain information. This includes:
    • a record of the assets and liabilities of the business; and
    • a record of all entries from day to day of all sums of money received and expended in relation to the business; and
    • all records and invoices relating to trading stock or the provision of services, depending on the type of business; and
    • charts and codes of accounts, the accounting instruction manuals, and the system and programme documentation which describes the accounting system used in each income year.
  4. Business records must be retained in English and at a place in New Zealand (unless the Commissioner has approved otherwise), and they must be retained for the full retention period required by the TAA, currently 7 years unless extended to 10 years by the Commissioner for specific case situations.
  5. Similar record keeping requirements are contained in section 75 of the GSTA for the retention of records specified in that section for GST purposes.
  6. Records may be kept in paper form or electronic form. There must be sufficient detail to ensure a complete audit trail that allows tracing the retained records to and from accounting records and to tax returns.
  7. Section 25 of the ETA provides the option of using technology to store source paper documents by electronic means. The legal requirement to retain a document that is in paper form, is met by retaining an electronic form of the information if:
    • the electronic form provides a reliable means of assuring the maintenance of the integrity of the information; and
    • the information is readily accessible so as to be usable for subsequent reference.
  8. Subject to section 27 of the ETA, section 26 of the same Act sets the standard for retaining information in electronic form. The legal requirement to retain information that is in electronic form is met by retaining the information:
    • the electronic form provides a reliable means of assuring the maintenance of the integrity of the information; and
    • the information is readily accessible so as to be usable for subsequent reference.
  9. Section 27 of the ETA provides for extra conditions for electronic communications. If a person is required to retain information that is contained in an electronic communication, the person must also retain information that can identify the origin, destination, and the time when the electronic communication was sent. This information must be readily accessible and usable for subsequent reference.
  10. Schedule 1, clause 4 of the ETR provides conditions for legal requirements to retain records under the Inland Revenue Acts:
    • A record that is initially in paper or other non-electronic form may be retained in electronic form if the record is readily able to be produced in paper form and that the paper form is a duplicate image of the original paper or other non-electronic form.
    • If annotations, indexing references or other additional information are included in the electronic form of the record, they must not obscure any of the original information contained in the record and must be distinguishable as additions to the original record.
    • A record that is generated in electronic form and is provided to another person in paper or other non-electronic form may be retained in its electronic form only.
    • If a record is received from a person in both non-electronic form and electronic form, the record may be retained in its electronic form only.

Retention of records in electronic form

  1. The main requirements for keeping records in electronic form under the ETA, whether the records were originally in paper form or in electronic form, are that:
    • the integrity of the information contained in the records is to be maintained; and
    • the information is readily accessible so as to be usable for subsequent reference.
  2. The Commissioner considers that the information will meet the requirements of the ETA and the ETR if the practices in paragraphs 41 to 51 are followed. The same standards of record keeping practice applies to records stored both inside and outside of New Zealand, and either on the taxpayer’s own electronic storage system or on an outsourced system.

Originally in paper form

  1. Paper records transferred to electronic form must be copied completely and accurately, for example, the use of imaging to provide information in a format identical in all respects to the source-paper document. A black and white scan of a coloured document is acceptable, unless the colours in the original document are material to understanding the information. The addition of information such as index referencing is also acceptable, provided the additional information does not obscure the original information and the additional information must be distinguishable as additions to the original record.
  2. The electronic copy must be readily accessible and capable of being retrieved on legible hard copy (printouts) or supplied in an electronic form able to be read by Inland Revenue staff.
  3. Source-paper documents or other non-electronic records from which the complete information is transferred and stored in electronic form, may be destroyed after transfer to the electronic form.
  4. As an example, where a taxpayer electronically transmits to the Commissioner information contained in any return in a prescribed form, section 36 requires the taxpayer to retain a hard-copy transcript of their information, and for a period of 7 years as required under section 23. The Commissioner considers that the requirement to keep the hard-copy transcript is met if the practices in paragraphs 41 and 42 are followed.

Originally in electronic form

  1. Internal controls must be adequate to ensure that all business transactions executed electronically, including those executed through the Internet, are completely and accurately captured.
  2. People should be able to demonstrate that their electronic records systems are secure from both unauthorised access and data alterations. This usually involves developing and documenting a security program that:
    • establishes controls to ensure that only authorised personnel have access to electronic records;
    • provides for backup and recovery of records;
    • ensures that personnel are trained to safeguard sensitive or classified electronic records; and
    • minimise the risk of unauthorised alteration, addition or erasure.
  3. The charts and codes of accounts, the accounting instruction manuals, and the system and programme documentation which describes the accounting system used, must be retained and produced (if required) to an Inland Revenue officer.
  4. Those who engage in the electronic transfer of tax invoices, credit notes or debit notes must retain electronic records that have an adequate level of detail to meet the requirements of the GSTA. This may require the taxpayer to keep other records such as the underlying contracts, price lists, price changes, product code descriptions.

Emails

  1. An e-mail that contains information required to be kept by the Inland Revenue Acts may be regarded as a record. Where e-mails are considered to be records, section 27 of the ETA requires the origin, destination and time of electronic communications to be retained and accessible so it can be used for subsequent references.

Backup

  1. Backup and recovery procedures must be sufficient to ensure the availability of electronic records for the required record retention period.

Hardware/software changes

  1. In the event of hardware/software changes:
    • facilities for retrieving electronic records that have been stored on the former system must be retained; or
    • the electronic records must be converted to a compatible system and both sets of files retained complete with documentation showing the method of transfer and controls in place to ensure the transfer was complete and accurate.

The Commissioner’s discretion to authorise offshore record keeping

  1. Section 22(2BA)(b) requires a taxpayer to keep their business records in New Zealand, unless the Commissioner has authorised under section 22(8) that the records may be kept offshore. This applies to business records in both paper form and electronic form.
  2. Authorisation may be given to an individual taxpayer to hold their own records offshore or to a person (a third party) to hold records for multiple taxpayers offshore.
  3. An individual taxpayer who wants to store their business records offshore should apply to the Commissioner for authorisation to do so before sending their records outside of New Zealand. However, if either a backup of the business records is retained in New Zealand, or if the records to be stored offshore are merely a backup of the records held in New Zealand, the Commissioner considers that the requirement to store the records in New Zealand is satisfied and an authorisation is not necessary.
  4. A third party may include a cloud service provider or other data storage providers that hold records for multiple taxpayers.
  5. It may be necessary for a tax agent to make a third party application if that tax agent is storing their clients’ records for their clients outside New Zealand, ie, where the clients of the tax agent have outsourced the storage of records to the tax agent and the clients are not holding their own records.
  6. If an authorisation is granted to a third party, the individual taxpayers for whom the third party holds records for would not need a separate authorisation from the Commissioner.
  7. An application to store records offshore must be made in writing. Third-party applications should be sent to the Customer Services Manager, Large Enterprises at:

    Inland Revenue
    5 Osterley Way
    Manukau
    PO Box 5542
    Auckland 1141

    Individual applications may be sent to your local Inland Revenue office.

The Commissioner’s consideration

  1. The Commissioner may agree to a taxpayer storing their business records offshore if the Commissioner is satisfied that the offshore storage would not impede Inland Revenue’s compliance activities. In particular, the information stored offshore remains accessible by the Commissioner.
  2. There are inherent risks to accessing information stored offshore as New Zealand laws may not apply to information that is physically stored in another jurisdiction (electronically or otherwise). The Commissioner must rely on the cooperation of taxpayers or third parties to access information stored offshore. Furthermore, the Commissioner’s access could be jeopardised if the third party who is providing the storage services has no presence in New Zealand.
  3. Therefore, in order to ensure the records held offshore by a third party remain accessible by the Commissioner, the Commissioner will have regard to the following when considering an application by a third party:
    • whether the third party has a place of business in New Zealand or carries on its business through an establishment in New Zealand; and
    • how the clients’ data will be dealt with should the third party no longer hold records for clients or for a particular client (for example, the contractual relationship ends between a client and the third party or the third party ceases to exist).
  4. Each application will be considered on the merits of the case and may include the compliance history of the applicant.
  5. In terms of an authorisation to a third party, section 22(8)(b) provides that in addition to the Commissioner authorising the third party to hold records for taxpayers outside New Zealand, the Commissioner also has the discretion to require the records to be kept in a particular form and to be accessible by the Commissioner in a way approved by the Commissioner. The need to impose such terms on an authorisation to a third party will depend on the circumstances of the third party and will be considered on a case by case basis.
  6. An application to store records offshore should address the above factors. If the storage of records offshore is by electronic means, the applicant may be required to provide information that demonstrates the manner in which the records are to be stored will meet the requirements of the ETA and ETR as discussed in paragraphs 39 to 51 above. The information supplied in support of the application may include the following:
    • documentation that describes the operation of the systems in which the records are stored;
    • explanation as to how the records are stored offshore and how they can be accessed by the Commissioner should it be required;
    • standard terms and conditions for services of data storage provided by the third party to their customers;
    • any Code of Practice disclosure statements applicable to a third party. For example, the New Zealand code of practice for cloud computing which a New Zealand-based cloud provider can voluntarily adhere to. Certain information about the cloud provider and its services are disclosed under the code of practice.

Conditions of an authorisation

  1. The Commissioner may impose conditions on an authorisation to store records offshore, as provided for in section 22(9).
  2. All authorisations to store records offshore would be subject to the taxpayer or third party providing an undertaking that the records would be provided to Inland Revenue on request, in a usable format, and at no cost to Inland Revenue in obtaining the information.
  3. In order to ensure the information stored offshore continues to be accessible, the Commissioner may impose additional conditions that are considered necessary and reasonable in the circumstances of the case. As an example, to ensure that the Commissioner’s access to information is not compromised where the relationship between the taxpayer and a third party ends, a reasonable condition imposed by the Commissioner on a third party could be that at the end of the service agreement between the taxpayer and the third party, the third party will return the data to the taxpayer in a format that is meaningful to the taxpayer or in a format can be readily exported into a meaningful format that the taxpayer can understand and can be used for subsequent reference.
  4. Conditions may be varied as circumstances of the taxpayer or the third party applicant change.

Withdrawal of an authorisation

  1. No period of validity would be prescribed on an authorisation. However, the Commissioner may withdraw an authorisation, either upon request by the taxpayer or the third party to which the authorisation applies or by giving reasonable notice of the withdrawal. Circumstances where an authorisation may be withdrawn include:
    • non-compliance to the conditions of an authorisation or to an information request;
    • the taxpayer or third party no longer keeps records offshore.

Public notice of an authorisation or withdrawal

  1. A public notice of an authorisation given to a third party or the withdrawal of that authorisation will be published on Inland Revenue’s website.

See the list of third party providers approved by the Commissioner to store taxpayer electronic records off-shore

Taxpayer has ultimate obligation

  1. An authorisation given to a third party does not replace a taxpayer’s responsibility to meet the record keeping requirements as per the Inland Revenue Acts. The authorisation merely enables a taxpayer to store records offshore without being in breach of their obligations. A taxpayer still has the responsibility to ensure that the records being kept offshore are sufficient to satisfy the record keeping requirements.
  2. Furthermore, an authorisation to a third party should not be relied upon as an approval of the third party as a service provider in general. The individual taxpayer should carry out their own assessment of the third party to ensure that they are satisfied that services offered by the third party meet the taxpayer’s business needs. The authorisation provided by the Commissioner merely relates to the offshore storage of records.

Providing information to Inland Revenue

  1. The Commissioner can request information from any person pursuant to section 17. Any person, when required under section 17, must produce for inspection any documents that the Commissioner considers necessary or relevant for a purpose under an Inland Revenue Act. The failure to produce information that is in the person’s knowledge, possession or control when requested, is an offence under the TAA.
  2. A third party may be required to provide information that is in their possession when requested under section 17. The request may include any logs of entries, alterations and deletions of transactions that a third party may keep.
  3. Generally, a section 17 request will be made to the taxpayer in the first instance. On occasion, the Commissioner may request this information from a third party. Factors that may influence the Commissioner’s decision to request information from a third party include whether the documents required may be at risk, and where there has been non-compliance or co-operation with previous requests for information.
  4. Section 17 notices (including those issued to a third party other than the taxpayer) will be issued following the practice set out in SPS 05/08 Section 17 notices (or any subsequent replacements of that SPS). Also refer to SPS 10/02 Imaging electronic storage media for the Commissioner’s standard practice for imaging electronic information when exercising the information gathering powers under section 16.
  5. Inland Revenue’s Compliance Technology and Audit Unit specialises in downloading electronically stored information. The preferred media for receiving electronic information is on CD, DVD or USB drive. However, other mutually agreeable transfer methods may be negotiated as required.
  6. Electronic information supplied to Inland Revenue should be in a tab or comma delimited or fixed record length format, in EBCDIC or ASCII. It should be encrypted or password protected with the password/passphrase or any other information required to access the information supplied to Inland Revenue separately. The electronic information should be copied to media, not a proprietary back up. Documentation should be supplied with the media showing the record layout, record length, and number of records.

Assistance to Inland Revenue officers

  1. Where necessary, adequate viewing and printing facilities should be made available free of charge to Inland Revenue officers. If requested, persons must locate selected records that have been stored and print any items selected, free of charge to Inland Revenue officers.
  2. Someone must be available to explain the operation of their computer system to Inland Revenue officers. This is the case whether the system is owned and operated by the person or outsourced to a third party.

Non-disclosure of tax advice document and legal privilege

  1. Sections 20 to 20G provide taxpayers with the right to non-disclosure of documents that are tax advice documents or documents that are legally privileged. The Commissioner will follow the standard practice for protecting these taxpayer rights when requesting information.
  2. There is a possibility that information relating to a particular taxpayer obtained from a third party may contain documents that may be subject to these non-disclosure rights. Where a request for information is made to a person other than the taxpayer pursuant to section 17, the recipient of the request may contact the taxpayer to confirm whether the taxpayer wishes to claim non-disclosure right for tax advice documents or legal privilege over documents required to be disclosed. This is outlined in SPS 05/08 Section 17 notices.
  3. The Commissioner will attempt to deal with the claim of legal privilege or tax advice status of information with the person making the claim. If the claim of legal privilege or the non-disclosure of tax advice documents cannot be resolved between the Commissioner and the person making the claim, the Commissioner may apply to a District Court Judge for orders under 20(5) as to whether the claim for legal privilege is valid or under section 20G as to whether the document is a tax advice document.
  4. Refer to SPS 05/07 Non-disclosure right for tax advice documents (or any subsequent replacements of that SPS) for more information on what constitutes tax advice documents and the process for claiming non-disclosure right for these documents.

This Standard Practice Statement is signed on 11 March 2103.

Rob Falk
LTS Manager, Technical Standards (Acting)


Appendix A - Applications to keep records in Māori

Background

Sections 22, 26 (records to be kept for resident withholding tax purposes) and 32 (records of specified charitable, benevolent, philanthropic, or cultural bodies) and section 75 of the GSTA require taxpayers to keep sufficient records in the English language to enable the Commissioner to readily ascertain the taxpayer’s liability to tax.

The reason for the requirement to keep records in English is administrative convenience. It allows the Commissioner to readily ascertain a taxpayer's liability. However, Inland Revenue recognises that Māori is an official language of New Zealand and that the choice of language for business dealings is not a matter for the Commissioner to determine. It is reasonable for a person whose business is conducted in Māori to expect that Inland Revenue will be able to accommodate their language preference.

Each of sections 22, 26 and 32 and section 75 of the GSTA provides discretion to the Commissioner to allow records to be kept in an alternative language, following a written application. Therefore, those taxpayers who wish to keep their records in Māori may apply to the Commissioner to do so.

The tax law obligations of other parties, such as the recipient of a tax invoice, must also be considered. When base records, such as invoices and receipts, are maintained in Māori there may be some inconvenience to other persons. GST tax invoices and debit and credit notes raise a specific issue. They are necessary for ascertaining the tax liability of the issuer and of that other party. They are, therefore, records covered by section 75(3) of the GSTA that must be maintained in English, unless the Commissioner gives permission to use another language.

There are explicit requirements under sections 24, 24BA and 25 of the GSTA for specific English phrases to be used in a GST tax invoice or debit and credit notes. These phrases are:

  • "tax invoice";
  • "copy only" - on copy of lost tax invoice, credit or debit note;
  • "buyer created tax invoice - IRD approved";
  • "modified tax invoice - IRD approved"; and
  • "credit note" or "debit note" - on credit or debit notes.

There is no discretion to allow the use of expressions in Māori (or any other language) to satisfy the requirements imposed in sections 24, 24BA and 25 of the GSTA.

Standard practice

Applications

A person may apply in writing to keep records (eg, invoices, receipts, cash books, and journals) in Māori for tax purposes. The application should specify which records the taxpayer wishes to keep in Māori.

A taxpayer may seek approval to keep only some of their records in Māori. In addition, where approval to keep certain records in Māori has been obtained, there is nothing to stop a person continuing to keep all or some of those records in English. This would extend to having an individual document completed partly in Māori and partly in English.

The Commissioner’s consideration

The Commissioner will generally approve applications to keep records in Māori, provided that:

  • the taxpayer complies with the requirements of sections 24, 24BA and 25 of the GSTA; and
  • numbers are recorded using Arabic numerals (ie, 0, 1, 2, 3, 4, 5, 6, 7, 8, and 9) in order to accommodate the needs of other parties.

In any case, the taxpayer’s records must be sufficient to allow the Commissioner to readily ascertain the taxpayer’s tax liabilities.

The approval is not a relaxation in the standard of record keeping as required by the Inland Revenue Acts. Nor does the approval necessarily mean Inland Revenue will communicate with taxpayers in Māori.

Impact on other parties

A recipient of a record that has been completed in Māori, such as an invoice or receipt that will be used by that other party to ascertain their tax liability, need not also apply for approval to keep records in Māori.

The balance of commercial convenience between buyers and sellers will determine what language is used in any particular case. Over time, the usual Māori expressions will become known within the community. Interpretation will, therefore, become less difficult.

Returns completed in Māori

The law is silent on the language to be used in completing any returns that a person may be required to provide to the Commissioner. The Commissioner will accept returns in the prescribed format, completed in the Māori language with numbers entered using Arabic numerals.


Appendix B - Legislation

Tax Administration Act 1994

Section 22 Keeping of business and other records

22(1) Without limiting the generality of subsection (7), the records required to be kept and retained under subsection (2) in respect of any business carried on during any income year by any person, shall contain -

(a) a record of the assets and liabilities of the person (in relation to that business); and
(b) a record of all entries from day to day of all sums of money received and expended by the person (in relation to that business) and the matters in respect of which the receipt and expenditure takes place; and
(c) where that business involves dealing in goods-
  1. a record of all goods purchased, and of all goods sold in the carrying on of that business (except those sold in the course of cash retail trading customarily conducted in a business of the kind of which that business is one) showing the goods, and the sellers and buyers or, as the case may be, the agents of the sellers and buyers in sufficient detail to enable the goods, and the sellers and buyers, and those agents, to be readily identified by the Commissioner; and all invoices relating to the goods; and
  2. statements (including quantities and values) of trading stock held by the person at the end of each such tax year, and all records of stocktakings from which any such statement of trading stock has been, or is to be, prepared; and
  3. a taxpayer, other than a low-turnover trader, must retain all accounting records relating to the calculation of the value of closing stock (as defined in section YA 1 of the Income Tax Act 2007); and
  4. a low-turnover trader (as defined in section YA 1 of the Income Tax Act 2007) must retain records of the valuation methods and their application in calculating the value of closing stock, except if the methods and their application are not materially different from the previous income year; and
  5. the taxpayer must comply with section EB 22(4) of the Income Tax Act 2007; and
(d) where that business involves the provision of services, records of the services provided and all invoices relating to them; and
(e) the charts and codes of accounts, the accounting instruction manuals, and the system and programme documentation which describes the accounting system used in each income year in the carrying on of that business.

22(2) Subject to subsections (2BA), (2B), (3), (4), and (6), every person who-

(a) carries on any business in New Zealand:
(b) carries on any other activity (not being the carrying on of employment as an employee) in New Zealand for the purpose of deriving assessable income:
(c) is a person to whom the ESCT rules apply and who makes an employer’s superannuation cash contribution to a superannuation fund:
(cb) is a person to whom the RSCT rules apply and who makes a retirement scheme contribution to a retirement savings scheme:
(d) makes, holds, or disposes of, for the purpose of deriving assessable income, any investment:
(e) is an employer to whom the FBT rules apply or is a person who provides any fringe benefit to any person who, in relation to any employer to whom the FBT rules apply, is an employee:
(eb) has a tax credit under section LH 2 of the Income Tax Act 2007:
(ec) is a listed research provider under section LH 15 of that Act:
(ed) is an employer to whom section RD 13B of that Act applies in relation to the treatment of a tax credit for a payroll donation:
(f) is a company that is an ICA company, a FDPA company, a BETA person, a PCA company, or a PCA person:
(fb) is a resident foreign trustee of a foreign trust in any income year,-

shall keep sufficient records to enable the ascertainment readily by the Commissioner, or any officer authorised by the Commissioner in that behalf, of-

(g) the assessable income derived by that person from the carrying on of that business, or the carrying on of that other activity, or the making or holding or disposing of that investment; and
(h) the deductions of that person in the carrying on of that business, or the carrying on of that other activity, or the making or holding or disposing of that investment; and
(i) every fringe benefit, and the taxable value of every fringe benefit, provided by the person to any person in relation to whom the person is an employer, and every fringe benefit provided by the person to any person who in relation to another person is an employee, those records to include (without limiting the generality of the preceding provisions of this paragraph) details of the recipient of the fringe benefit, the occasion of the providing of it, and the amount (if any) paid or payable by the employee for the receipt or enjoyment of it; and
(j) (Repealed)
(k) every credit and debit to the person’s memorandum accounts (other than an ASC account), and the amount of a credit attached to a dividend or distribution paid by the person:
(kb) (Repealed)
(kc) the amount of the person's tax credit under section LH 2 of the Income Tax Act 2007; and
(kd) the person's compliance with section LH 15(1) of that Act, if the person is a listed research provider under section LH 15 of that Act, to show-
  1. they meet the start-up requirements and the other continuing requirements; and
  2. the amounts derived and incurred by them in performing the research and development activities on behalf of other persons; and
(ke) the transfer under section 24Q of an amount of an employee's payroll donation to the recipient of the donation; and
(l) every employer’s superannuation cash contribution, and the taxable value of that contribution, made by the person to any superannuation fund, those records to include (without limiting the generality of the preceding provisions of this paragraph) details of the recipient of the employer’s superannuation cash contribution, the occasion of making it, and any related tax credit under section MK 1(2) of the Income Tax Act 2007; and
(lb) every retirement scheme contribution, and the taxable value of that contribution, made by the person to any retirement savings scheme, those records to include, without limiting the generality of the preceding provisions of this paragraph, details of the recipient of the retirement scheme contribution and the occasion of making it; and
(m) the financial position of the foreign trust,-

and shall retain all such records for a period of at least 7 years after the end of the income year, or (for paragraph (k)) the tax or income year (as applicable), to which they relate:

22(2BA) A taxpayer required by subsection (2) to keep and retain a record must keep and retain the record-

  1. in English, or in a language in which the Commissioner authorises the taxpayer under subsection (8) to keep the record or the type of record; and
  2. at a place in New Zealand, or at a place outside New Zealand where-
    1. the Commissioner authorises the taxpayer under subsection (8) to keep the record or the type of record:
    2. the record is kept by a person authorised by the Commissioner under subsection (8) to keep records for taxpayers that include the taxpayer.

22(2B) A taxpayer referred to in subsection (2)(e) who is required by subsection (2) to retain records is not required to retain those records for a period of more than 7 years after the end of the income year to which the records relate.

22(2C) If there are more than 1 resident foreign trustee of a foreign trust, the resident foreign trustees may appoint one of themselves as an agent for the purposes of keeping the records required by subsection (2).

22(3) A taxpayer who meets the requirements of section 33AA(1), or is issued an income statement or required to request or be issued an income statement, and who is required by subsection (2) to retain records of income of that taxpayer from which tax has been withheld or deducted at source need retain those records only until the expiry of 12 months after the end of the income year in which the income was received by the taxpayer.

22(4) This section shall not require the retention of any records-

  1. in respect of which the Commissioner has given notice that retention is not required:
  2. of a company which has been liquidated:
  3. by a partner of a partnership, if the partnership retains the records that the partner would be required to retain but for this paragraph.

22(5) The Commissioner may, by notice given before the expiry of the 7-year retention period specified in subsection (2) or (2B), require a taxpayer to retain all or any of the records specified in that subsection for a further period not exceeding 3 years following the expiry of the 7-year period where-

  1. the affairs of the taxpayer are or have been under audit or investigation by the Commissioner; or
  2. the Commissioner intends to conduct such an audit or investigation before the expiry of the retention period as so extended, or is actively considering any such audit or investigation.

22(6) The Commissioner may, by notice published in the Gazette, dispense any class of taxpayers from the need to retain the records, or any class of records, specified in subsection (2) or (2B), for more than 12 months following the end of the income year or tax year to which they relate where-

  1. the taxpayers are not provisional taxpayers; and
  2. the records relate to payments from which tax has been withheld or deducted at source.

22(7) In this section, records includes-

  1. books of account (whether contained in a manual, mechanical, or electronic format) recording receipts or payments or income or expenditure:
  2. vouchers, bank statements, invoices, receipts, and such other documents as are necessary to verify the entries in the books of account referred to in paragraph (a):
  3. accounts (whether contained in a manual, mechanical, or electronic format) to be maintained under the imputation rules, the FDP rules, or section OA 3 for accounts under subparts OE and OJ, of the Income Tax Act 2007, and any statement to be retained under section 31 or 71 of this Act:
  4. in the case of a foreign trust, other than for the period for which section 59B(3) applies,-
    1. documents that evidence the creation and constitution of the foreign trust; and
    2. particulars of settlements made on, and distributions made by, the foreign trust, including the date of the settlement or distribution, the name and address (if known) of the settlor of the settlement, the name and address (if known) of the recipient of the distribution; and
    3. a record of-
      1. the assets and liabilities of the foreign trust; and
      2. all entries from day to day of all sums of money received and expended by the trustee in relation to the foreign trust and the matters in respect of which the receipt and expenditure takes place; and
      3. if the trust carries on a business, the charts and codes of accounts, the accounting instruction manuals, and the system and programme documentation which describes the accounting system used in each income year in the administration of the trust:
  5. for the purposes of subsection (2)(kc), other documents evidencing research and development activities.

22(8) The Commissioner may, upon application in writing by the taxpayer or person, authorise for the purposes of subsection (2BA),-

  1. a taxpayer to keep and retain a record or type of record-
    1. in a language other than English:
    2. at a place outside New Zealand:
  2. a person to hold, for taxpayers, records-
    1. at places outside New Zealand; and
    2. in a form approved by the Commissioner; and
    3. accessible by the Commissioner in a way approved by the Commissioner.

22(9) The Commissioner may, for an authorisation under subsection (8) of a person,-

  1. impose reasonable conditions on the authorisation:
  2. reasonably vary the conditions on the authorisation:
  3. withdraw the authorisation, upon request by the person or after giving reasonable notice of the withdrawal:
  4. give public notice of an action under subsection (8)(b) or this subsection, in a publication chosen by the Commissioner.

Electronic Transactions Act 2002

Section 25 Legal requirement to retain document or information that is in paper or other non-electronic form

25(1) A legal requirement to retain information that is in paper or other non-electronic form is met by retaining an electronic form of the information if-

  1. the electronic form provides a reliable means of assuring the maintenance of the integrity of the information; and
  2. the information is readily accessible so as to be usable for subsequent reference.

25(2) Subsection (1) applies to information that is a public record within the meaning of the Public Records Act 2005 only if the Chief Archivist has approved the retention of that information in electronic form.

25(3) To avoid doubt, if information is retained in electronic form in accordance with subsection (1), the paper or other non-electronic form of that information need not be retained.

Section 26 Legal requirement to retain information that is in electronic form

Subject to section 27, a legal requirement to retain information that is in electronic form is met by retaining the information-

  1. in paper or other non-electronic form if the form provides a reliable means of assuring the maintenance of the integrity of the information; or
  2. in electronic form if-
    1. the electronic form provides a reliable means of assuring the maintenance of the integrity of the information; and
    2. the information is readily accessible so as to be usable for subsequent reference.

Section 27 Extra conditions for electronic communications

In addition to the conditions specified in section 26, if a person is required to retain information that is contained in an electronic communication,-

  1. the person must also retain such information obtained by that person as enables the identification of-
    1. the origin of the electronic communication; and
    2. the destination of the electronic communication; and
    3. the time when the electronic communication was sent and the time when it was received; and
  2. the information referred to in paragraph (a) must be readily accessible so as to be usable for subsequent reference.

Electronic Transactions Regulations 2003

Schedule 1, Clause 4 Conditions for legal requirements to retain records under Inland Revenue Acts

  1. A legal requirement under the Inland Revenue Acts to retain a record that is initially in paper or other non-electronic form may be met by retaining an electronic form of the record, only if-
    1. the record is readily able to be produced in paper form; and
    2. that paper form is a duplicate image of the original paper or other non-electronic form.
  2. For the purposes of subclause (1), it does not matter that annotations, indexing references, or other additional information are included in the record retained in electronic form, provided that they-
    1. do not obscure any of the original information contained in the record; and
    2. are distinguishable as additions to the original record.
  3. A legal requirement under the Inland Revenue Acts to retain a record that is generated in electronic form and is provided to another person in paper or other non-electronic form (for example, an invoice generated electronically and printed for sending to a customer) may be met by retaining the record in its electronic form only.
  4. Despite subclause (1), if a record is received from a person in both paper or other non-electronic form and in electronic form (for example, a bank statement sent by a bank in paper form, and also provided in electronic form), a legal requirement to retain the record may be met by retaining the record in its electronic form only.
  5. In this clause, Inland Revenue Acts has the same meaning as in section 3(1) of the Tax Administration Act 1994.

Goods and Services Tax Act 1985

Section 75 Keeping of records

75(1) For the purposes of this section, the term records includes books of account (whether contained in a manual, mechanical, or electronic format) recording receipts or payments or income or expenditure, and also includes vouchers, bank statements, invoices, tax invoices, credit notes, debit notes, receipts, and such other documents as are necessary to verify the entries in any such books of account.

75(2) Without limiting the generality of subsection (1), the records required to be kept and retained, pursuant to subsection (3), shall contain-

  1. a record of all goods and services supplied by or to that registered person showing the goods and services, and the suppliers or their agents, in sufficient detail to enable the goods and services, the suppliers, or the agents to be readily identified by the Commissioner, and all invoices, tax invoices, credit notes, and debit notes relating thereto; and
  2. the charts and codes of account, the accounting instruction manuals, and the system and programme documentation which describes the accounting system used in each taxable period in the supply of goods and services; and
  3. any list required to be prepared in accordance with section 19B(3) or section 78B(7).

75(3) Subject to subsections (4) and (5), every registered person who supplies in New Zealand goods and services shall keep in New Zealand copies of records issued by that registered person, and sufficient records in the English language to enable ready ascertainment by the Commissioner or any officer authorised by the Commissioner in that behalf, of that person's liability to tax and shall retain in New Zealand all such records for a period of at least 7 years after the end of the taxable period to which they relate:

provided that the Commissioner may, in the Commissioner's discretion, on application in writing being made to the Commissioner in that behalf, authorise any such registered person, by notification in writing, to keep and retain outside New Zealand or, as the case may be, in a language other than the English language, such of those records as the Commissioner determines.

75(3B) For the purposes of section 11(1)(mb), the supplier must maintain sufficient records to enable the following particulars in relation to the supply to be ascertained:

  1. the name and address of the recipient; and
  2. the registration number of the recipient; and
  3. a description of the land; and
  4. the consideration for the supply.

75(3C) Subsections (3D) and (3E) apply when a supply that wholly or partly consists of land is made to a person who is, for the purposes of the supply, an agent acting on behalf of an undisclosed principal.

75(3D) The requirements of subsection (3B)(a) and (b) are met if the supplier maintains sufficient records to enable the particulars of the name, and address, and registration number or tax file number as applicable of the agent to be ascertained.

75(3E) The agent must maintain sufficient records in relation to the undisclosed principal to enable the name, address, and, if the principal is a registered person or expects to be a registered person, the registration number of the principal to be ascertained.

75(4) This section shall not require the retention of any records-

  1. in respect of which the Commissioner has given notice in writing that retention is not required:
  2. of a company which has been liquidated.

75(5) The Commissioner may, by notice in writing given before the expiry of the 7-year retention period specified in subsection (3), require a registered person to retain the records specified in that subsection for a further period not exceeding 3 years following the expiry of the 7-year period where-

  1. the affairs of the registered person are or have been under audit or investigation by the Commissioner; or
  2. the Commissioner intends to conduct such an audit or investigation before the expiry of the retention period as so extended, or is actively considering any such audit or investigation.

 

 


Date published: 18 Mar 2013

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