Cloud computing is predicted to become increasingly popular with businesses looking for a complete outsourcing solution to their IT needs. It allows access to computer infrastructure, software and storage (amongst other things) over the internet.
New Zealand’s Inland Revenue Department has concerns about the “storage” part of cloud services. They’ve just issued a Revenue Alert warning businesses using cloud storage services to be careful. The Department has concerns because NZ businesses are required to keep all tax records in New Zealand, unless they get specific approval not to.
According to the Department’s Alert businesses using cloud storage services should ensure their tax records are stored on data centres physically located in New Zealand or they must seek approval to hold records offshore. They point out, failure to do so is an offence which could result in a conviction and fine.
Sometimes our tax legislation struggles to keep up to date with technological advances. The Department is to be commended for alerting people to the issues with cloud computing and I’m sure officials are also looking at whether our legislation and international tax agreements need to be modernised to reflect these sorts of business practices.