Tax Watch: Edition 6, December 2018

Recent tax cases, reminder of tax rules for Christmas entertainment expenditure and more

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As we reach the end of 2018, we provide a round-up of recent tax cases – including a rare win for the taxpayer in a tax avoidance case. We also explain the findings of a recent EY Global report on transfer pricing issues and provide a reminder on the tax treatment of entertainment expenditure in the lead up to Christmas.

Recent cases see some taxpayer wins

Frucor wins tax avoidance case

The case of Frucor Suntory New Zealand Ltd v CIR1 saw the first taxpayer win in a tax avoidance case over the past eight years. The judgment contains strong criticisms of Inland Revenue’s arguments and general approach to the application of the general anti-avoidance rule.

Merchant mariner found to be tax resident in New Zealand

Van Uden v CIR2 involved a taxpayer who spent more than eight months each year working overseas before returning to the house owned by his wife’s family trust. The Court of Appeal held he had a permanent place of abode (“PPOA”) in New Zealand. This case can be contrasted with CIR v Diamond3, the Court of Appeal’s last decision on individual tax residency under the PPOA test.

Canadian case on transfer pricing may serve as warning to Inland Revenue

Inland Revenue’s controversial new power to reconstruct transfer pricing arrangements is yet to be tested in New Zealand. Cameco4 involved the first attempted use of a similar power in Canada – with the Court ruling in favour of the taxpayer.

Report on global transfer pricing issues – how does New Zealand measure up?

Despite the taxpayer win in the Canadian Cameco case, the increasing transfer pricing risk for multinationals in tax authority reviews cannot be ignored. This risk is highlighted in EY Global’s first report in a series of eight entitled Eight for 2018 and beyond. The first article in the series focuses on intangibles and intellectual property. We summarise the key findings and suggest some practical steps you can take to avoid an adjustment in the event of an audit.

Time to consider the tax treatment of Christmas entertainment expenditure

For employers, the Christmas period can be a time to treat your staff. But how should these perks be treated for tax purposes?

Get in touch with us today if you would like more information on any of the tax cases or issues covered in this edition.

1 [2018] NZHC 2860
2 [2018] NZCA 487
3 [2015] NZCA 613
4 Cameco Corporation v The Queen, 2018 TCC 195