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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:

  1. Used the standard method for 2020 provisional tax; and
  2. Paid all instalments due before 14 February 2020 on time and in full; and
  3. Paid one or more instalments that fell due after 14 February 2020 late; and
  4. 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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