The New Zealand Law Society recommends that several changes are made to the provisions for residential land withholding tax in the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill to ensure there is better clarity.
In its submission to the Finance and Expenditure Committee on the bill, the Law Society also says it is regrettable that there are no details of the information the Commissioner of Inland Revenue intends to require vendors to give to their conveyancer in relation to residential land withholding tax (RLWT).
It says the select committee should be given a full list of the information the Commissioner intends to prescribe so it can fully understand the extent of the information to be collected and certified by all vendors of residential land, and reviewed by the potential paying agent.
The Law Society says providing this information would allow a full appreciation of the compliance costs that the RLWT measures will impose on all residential land transactions.
Among the changes recommended by the Law Society are clarification of the provisions affecting associated persons. It notes that while the definition of "associated persons" for the purpose of RLWT is presumably not to be limited to the same extent as it is for land provisions, this should be clarified.
The bill also needs to include a reference to "associated person" in the Income Tax Act's defined terms, the submission says.
There is also the possibility of confusion for conveyancers in differences between the definition of "offshore person" in the proposed RLWT provisions, and the land information tax measures introduced by the Taxation (Land Information and Offshore Persons Information) Bill.
Clarification of the penalties for which conveyancers could be liable if RLWT provisions are incorrectly applied is also needed, the Law Society says. It suggests an amendment to clarify that the paying agent has no liability for a penalty if it was reasonable, on the basis of the certified information provided by the vendor, for the paying agent to consider that RLWT was not payable.
While the bill does not expressly state that agents may be liable for criminal penalties, as currently drafted it makes that an option. The commentary refers only to "general penalties".
"The Law Society recommends that the penalties that the paying agent may be liable for are clearly stated, and that they should not include criminal sanctions," it says.