Cook Islands Issues New Tax Liability Guidelines for International Companies

Cook Islands Issues New Tax Liability Guidelines for International Companies

New tax obligations for international companies

The Law on Amendments to the Law on International Companies (Cancellation of Tax Benefits) of 2019 abolished tax incentives for international companies on December 17, 2019 and provided a transition period (also known as the “grandfather period”) for existing multinational companies until December 31, 2021. The transition period does not apply to income derived from newly acquired assets or new business activities commenced after December 17, 2019 by existing international companies; also, the transition period does not apply to international companies registered after December 17, 2019.

Cook Islands Tax Registration and Application

The new tax liability requires international companies to register with the Revenue Authority and apply for an RMD number. An official of an international company, such as an owner or director, must complete and sign an application. Alternatively, the Office of Revenue assumes that in most cases a service provider (such as a licensed Cook Islands trustee) is appointed by international companies as an agent for the application of the RMD number and future tax liabilities.

Which year is considered income tax in the Cook Islands?

The income tax year runs from January 1st to December 31st. An international company that aligns its financial accounts with a balance sheet date of December 31st is considered to have a standard balance sheet date.

What is the deadline for filing my first tax return?

The first annual tax return for international companies in transition and with a standard balance sheet date must be filed on May 1, 2023.

What is the due date for the payment of my first contribution of input tax?

For companies with a standard balance sheet date and during the transition period, the preliminary tax payment is due in first installment on June 1, 2023.

A company is considered a preliminary taxpayer if the income tax paid by the company in the previous fiscal year was in excess of NZ $ 5,000. The provisional tax is payable in two installments; June 1 and December 1 of the year following the reporting year.

What is the due date for my first income tax payment?

For companies in transition with a standard balance sheet date of December 31, the first income tax is payable on November 1, 2023.

Do I need to file a tax return if my income is zero?

A company that estimates its income as zero must file a zero tax return along with supporting financial statements (regardless of whether they are also zero).

What are the minimum financial reporting requirements?

Financial statements must be filed with the Office of Revenue along with the filing of the annual tax return. Financial statements should include the following:

• Profit and loss statement showing income and expenses for the reporting year
• Balance sheet of assets, liabilities and net assets at the end of the year
• Statement of accounting and valuation principles used.
• Your financial statements should contain comparable figures for the previous year, a reconciliation of changes in equity and related party transactions such as interest and royalty payments.

What are the penalties for not meeting the above deadlines?

Failure to register or late registration, or failure to file or late filing of tax returns, may incur penalties of up to $ 10,000. It is best to contact the Revenue Office as soon as possible if you expect not to register or submit in time so that we can develop a plan of action in the circumstances.

Additional taxes, which are accumulated on a daily basis, are applied in the event of a delay in tax payment.

The above is for informative purposes only.  Further professional advice should be sought for each particular case. Our firm does not accept any responsibility for any loss or damage occurring by acting on the basis of this information.