Covid-19 remission rules on Use of Money Interest (UOMI) and How it is Taxed?
According to the recent publication from the IRD, the Covid-19 remission rules on Use of Money Interest (UOMI) applied to provisional tax instalments have been reiterated and clarified.
Remission Rules:
The remission applies to interest that arises from the late or short payment due to Covid-19.
It does not apply to the late or short payment due to any other reason.
Who is eligible:
For taxpayers who have RIT of less than $60,000 that satisfy the below criteria:
- Used the standard method for 2020 provisional tax; and
- Paid all instalments due before 14 February 2020 on time and in full; and
- Paid one or more instalments that fell due after 14 February 2020 late; and
- Incurred UOMI from 8 May 2020 up to 7 April 2020.
For eligible taxpayers, IRD will manually update the remissions. It would take some weeks to commence.
For taxpayers who have RIT of more than $60,000 may be eligible if they were not able to pay sufficient provisional tax because they could not correctly estimate the 2021 RIT due to the impact of Covid-19, or if qualified for relief as set out in SPS 18/04
For eligible taxpayers, apply to IRD directly or contact your tax agent.
Payment allocation rules for UOMI calculation:
Payments will be allocated to older unpaid instalments first.
P1 $10,000 due $10,000 paid 8 days late $504 LPPs imposed |
P2 $10,000 due $10,000 paid on time $504 applied to P1 $9,496 applied to P2 $25.40 LPPs imposed |
P3 $10,000 due $10,000 paid on time $529.40 applied to P2 $9,470.60 applied to P3 $26.68 LPPs imposed |
Terminal Tax (TT) $6,000 due $6,000 paid on time *$443.73 applied to UOMI $556.08 applied to P3 $5000.19 applied to TT $50.39 LPPs imposed on TT UOMI will continue to accrue |
Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.
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