Fee waivers for binding rulings and GST on non-resident applications

2010 Bill amends the rulings fee waiver provision, reduces the fee for zero-rated supplies and clarifies the GST position on fees for non-resident applications.

The bill introduces a more flexible fee waiver provision and a reduction of the tax fraction for zero-rated supplies of binding rulings by amending the Tax Administration (Binding Rulings) Regulations 1999. The amendments allow such factors as the nature of the issue and the skill and experience applied by Inland Revenue staff in providing the rulings to be taken into account in charging for binding rulings. They also clarify the GST position on fees for non-resident applications.

Background

Private, product and status binding rulings all incur fees that are based on recovering the cost of providing the ruling. Previously, Inland Revenue could, in exceptional circumstances and at the Commissioner's discretion, waive all or part of any fee payable by an applicant. More flexibility was required for the exercise of the waiver. The waiver will now be based on what is fair and reasonable having regard to such factors as the nature of the issue and the skill and experience applied by Inland Revenue staff.

Key features

The Tax Administration (Binding Rulings) Regulations 1999 have been amended to provide for a more flexible fee-waiver provision based on what the Commissioner considers is fair and reasonable.

The fees for zero-rated supplies of binding rulings have been reduced by the tax fraction of the fee. Previously, the fee charged assumed a GST rate of 12.5% and did not take into account the fact that binding rulings issued to non-residents outside New Zealand could have been zero-rated under the Goods and Services Tax Act 1985. Therefore, any binding ruling issued to a New Zealand resident was in general cheaper than if that same ruling had been supplied to a non-resident. This was because the New Zealand resident, if registered for GST, could generally claim an input tax credit for the GST portion of the cost of acquiring the binding ruling. The non-resident, on the other hand, was unlikely to meet the requirements for registration or input tax credit entitlement.

Application date

The amendments will apply to new rulings made from the day of Royal assent, being 7 September 2010.