Date posted: 10/09/2020

Submission on ED0223: Non-resident employers’ obligations to deduct PAYE, FBT and ESCT in cross-border employment situations

Chartered Accountants Australia and New Zealand recently provided Inland Revenue with feedback on their draft operational statement ED0223: Non-resident employers’ obligations to deduct PAYE, FBT and ESCT in cross-border employment situations

Chartered Accountants Australia and New Zealand recently provided Inland Revenue with feedback on their draft operational statement ED0223: Non-resident employers’ obligations to deduct PAYE, FBT and ESCT in cross-border employment situations. The purpose of the  item  was to clarify Inland Revenue’s approach regarding a non-resident employer’s obligation to deduct PAYE, FBT and ESCT in cross-border employment situations. 

In CA ANZ’s view, the position adopted in the statement is currently not consistently applied.   Further support for the position should be provided prior to the statement being finalised. There is a risk that the application of the territoriality principle is not in the best public interest and may lead to the ability to circumvent New Zealand tax. 

If the statement is to be published, we recommended that it is amended to: 

  • Include analysis and discussion on how the conclusion was reached
  • Provide guidance on when an employee’s presence in New Zealand will bring the employer into the rules
  • Explicitly discuss the employee’s obligation if the non-resident employer does not have or meet its PAYE obligations, and
  • Address the application of section RD 23 of the Income Tax Act 2007.

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