A few tweets just came in noting that the IRD has issued an alert concerning location of data for cloud computing. There is no issue for Xero customers as we have been working with the IRD for some time on a blanket dispensation and assisting IRD on policies around the cloud.
Section 22 of the Tax Administration Act 1994 (“TAA”) requires a person who carries on any business or any other activity for the purpose of deriving assessable income in New Zealand, to keep sufficient records in New Zealand, in the English language, to enable the Commissioner to readily ascertain information about their tax affairs. The same requirements for GST records are contained in section 75 of the Goods and Services Tax Act 1985. Similarly, section 32 of the TAA requires that all gift-exempt bodies must keep in New Zealand sufficient records to enable the Commissioner to determine both the sources of donations made to them and the application of their funds.
It is the Commissioner’s view that only business records stored in data centres physically located in New Zealand will comply with the record keeping obligations in the Inland Revenue Acts. Taxpayers are responsible for ensuring they comply with their record keeping obligations. Therefore, taxpayers using a cloud computing service will need to be satisfied that all their business records will be stored in data centres located in New Zealand.
New Zealand legislation hasn’t kept up with developments in technology compared to other countries. We are working towards certification of our current customers and in the longer term expect to see the legislation amended to better reflect contemporary technology. We’d expect this to end up in a similar position to Australia where there is no onshore storage requirement, only that your records are available if requested. There are a number of fall back positions if the industry doesn’t get there.
As a leader in the industry we’ve been proactively working on this issue for some time for the benefit of other software developers.
We have a great relationship with the IRD and working with them on a range of initiatives as they understand the benefits of cloud technology to reduce compliance costs and improve small business productivity.
This is a great discussion we’ve been looking forward to having.