RESIDENT AGENTS TO BE INTRODUCED
On 13 October 2011 the Government introduced the Companies and Limited Partnerships Amendment Bill. The purpose of the Bill is to stamp out the use of New Zealand registered shell companies and limited partnerships to undertake criminal activity.
The key requirement under the Bill is that each company and limited partnership registered in New Zealand will be required to have a resident agent if there is no director living in New Zealand or in an approved enforcement jurisdiction. The resident agent will be responsible for ensuring that the company complies with all of its requirements under the Companies Act 1993, or in the case of a limited partnership, the Limited Partnerships Act 2008.
At this stage, no enforcement countries are set out in the Bill. An enforcement country is one that can enforce New Zealand judgements, and impose regulatory regime criminal fines, including those arising under the Companies Act. Countries which qualify as enforcement countries will be named in regulations to be released once the legislation has been passed.
Transitional provisions will apply relating to the appointment of a resident agent, whereby companies will have six months from the commencement of the legislation to appoint a resident agent. Any company failing to do that may be removed from the Register. Further, the resident agent will have the power to obtain any information that it considers necessary from directors and employees of a company that the resident agent thinks necessary for the performance of the resident agent’s functions.
The Bill also provides the Registrar of Companies with greater powers to investigate and deal with non-compliance with the Companies Act including the power to remove companies from the Register for persistently failing to comply with the Act and for the provision of inaccurate information. Directors of those companies would be subject to a ban from the management of any company for up to five years. Additional criminal offences will be introduced for directors - these will include situations where the directors carry on business in a way that risks serious loss to the creditors of a company.
How it affects you
Companies with no New Zealand resident directors could be subject to additional compliance costs if a resident agent is required under the proposals. For directors, it is clear that the enforcement of their existing obligations under the Companies Act will intensify.
CAN I DEPRECIATE MY COMMERCIAL BUILDING FIT OUT?
With the removal of depreciation on all buildings for income years starting on or after 1 April 2011, a transitional concession was introduced for commercial buildings whereby a pool of depreciable fit out can be created by including as the pool item, 15% of the depreciated value of the building.
This allows for taxpayers who have in the past not chosen to separate out the building fit out from the rest of the building a one off concession now that it is no longer possible to depreciate the building.
The fit out pool can be depreciated at 2% per annum. New fit out will not form part of the pool, but can be claimed separately.
Unfortunately, it is not as simple as taking the closing adjusted tax value of a building and applying the 15% concession to that amount. The taxpayer must also deduct the closing fit out adjusted tax value.
The fit out adjusted tax value applies to commercial fit out which relates to the building if the fit out was acquired after the building was originally acquired and a deduction has been taken for depreciation loss for that fit out.
Thus, where a building was purchased containing fit out and no adjustment was made upon purchase to split fit out from the
building but significant amounts of fit out have been acquired since purchase and have been separately depreciated, it is possible that little or no amount may arise when determining the future commercial fit out pool.
It is also important to note that the concession only applies where a person has never claimed an amount of depreciation loss for commercial fit out as a separate item of depreciable property that is which was acquired at the same time as the building and relates to the building. Thus, even if only one item of fit out was separated from the building at purchase and was separately depreciated, the concession will not apply to that building. Knowledge of purchase dates may become particularly important as a result.
How it affects you
Whilst for some taxpayers a concession will be available to form a depreciable pool of commercial fit out now that buildings can no longer be depreciated, the availability of the concession is not automatic and the quantum of the concession may be considerably lower than simply calculating 15% of the buildings adjusted tax value. We suggest you contact your advisor to determine what depreciation, if any, will be allowed under the building fit out concession.
POINTS OF INTEREST…
The Financial Markets Conduct Bill was introduced into Parliament on 12 October 2011. The Bill is a response to the collapse of many New Zealand and overseas financial institutions and aims to promote confidence and informed decision making in the financial markets. The Bill will make consequential amendments to the Income Tax, GST and Estate and Gift Duties Acts.
The IRD have issued a new Revenue Alert, RA 11/03, which deals with the issue of New Zealand tax residents accessing income held in an offshore bank account using an offshore credit or debit card.
TO THE POINT…
“Design is a funny word. Some people think design means how it looks. But of course, if you dig deeper, it’s really how it works”.
- Steve Jons