Platform Economy

With the increased development and popularity of the platform economy, a significant amount of economic activity is facilitated by digital platforms. Buyers are connected with service providers through their smartphones in seconds. This means that there are likely to be thousands of taxpayers who earn their income from activity on digital platforms.

Currently, IRD does not receive information about the income earned by taxpayers through online platforms unless the information is requested. This increases compliance costs for platform operators who will need to accumulate and provide the relevant information. Costs are significantly high for multinational digital platforms who could be receiving requests from multiple tax authorities.

What are the proposed amendments?

It is crucial to ensure that NZ’s tax system adapts to accommodate the rise of the platform economy. This will be ensured through the proposal of an information reporting and exchange network that has been advised by the OECD.

Platform operators will be required to provide information about the income earned by sellers from the following activities through their platform:

• Rental of immovable property (Commercial, Short-stay and visitor accommodation)
• Personal Services (Ridesharing, Food/beverage delivery and any time/task-based work)
• Sale of goods
• Vehicle Rentals

This information will be provided only to the tax authority in the jurisdiction in which the platform operator is based once a year. This means that NZ based platform operators will be required to provide information such as tax file number, country of residence and other identifying information to IRD. They will then be required to report about the income earned by sellers on their platform to IRD. This is so IRD can check whether sellers are including all income in their year-end income tax returns. The information will be regarding the calendar year and will need to be provided by the 31^st of January the following year. This information can then be exchanged between different tax authorities within the OECD.

Penalties for Non-Compliance

Changes will be made to the TAA to support the implementation of the new reporting framework. Platform operators will need to comply with the requirements set out in the reporting standards such as due diligence procedures, reporting and record keeping. Civil penalties will be in place for those who do not act in accordance with the reporting standards.

Effective Date

The proposed amendments will take effect on the 1^st of January 2024. Platform operators will be required to collect information on sellers throughout 2024. This information will need to be reported in early 2025.

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