The commissioner of IRD has concluded that a person who provides only directorship services is not eligible to be registered for GST. This statement comes after the commissioner has brought to light that some professional directors have incorrectly registered for GST, believing that they are carrying on a taxable activity. The commissioner will not require these taxpayers to retrospectively deregister they will however need to deregister by 30th June 2023 if they are not carrying on a taxable activity.
Upon deregistration, the taxpayer may be required to return GST on the market value of any goods and services that they retain that had form part of their taxable activity (s 5(3) of the Goods and Services Tax Act 1985).
Professional directors who may be affected by this operational statement may include:
- Professional directors who are registered but should never have been registered. This includes people who never had a separate taxable activity (consulting activity, law practice, accounting practice etc) but despite this were registered for GST.
- Professional directors who are registered and were appropriately registered at that time because they carried on a separate taxable activity aside from directorships but who have subsequently ceased to carry on that other activity and whose only “taxable supplies” are from their directorship fees and so should now be deregistered. .
- Professional directors who are registered and were appropriately registered at that time because they carried on a separate taxable activity under which their directorship income was included, and who still carry on that separate taxable activity. This group can continue to remain registered for GST and continue to operate on that basis. However, if the turnover of their “non-directorship income” falls below the registration threshold they may choose to deregister consistent with category 2 above.
Note that this statement does not apply to professional directors who are registered and were appropriately registered at that time because they carried on a taxable activity separate to their directorships (for example, as an accountant), and still carry on a separate taxable activity (whether above or below the registration threshold) and wish to remain registered for GST.D
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