IRD News

Revenue Alert on "cloud computing" and tax records

Posted 13 December 2010

Inland Revenue is reminding people of their obligations for keeping tax records as the use of "cloud computing" becomes more popular.

It has issued a Revenue Alert on the matter. The Commissioner of Inland Revenue uses Revenue Alerts to provide information about significant or emerging tax planning issues.

"We are concerned cloud computing may mean some businesses aren't meeting their record keeping obligations," said Group Tax Counsel, Graham Tubb.

Cloud computing is an internet-based computing service, where users are provided with access to servers, software, applications, storage and networking, or any other aspects of computing, all of which are delivered over the internet.

"These services are offered by software providers operating data centres that can be located anywhere in the world and are becoming a popular way for businesses to set up their IT infrastructures," Mr Tubb said.

"Generally the end users won't know where their business records are stored, but under New Zealand's tax laws they have clear obligations."

The Tax Administration Act 1994 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 Inland Revenue to readily ascertain information about their tax affairs.

"Records kept in an electronic form must also be capable of being retrieved and produced upon request, either in legible hard copies or in an electronic form," Mr Tubb said.

"If you're using or thinking of using cloud computing, you need to ensure you can still meet record keeping obligations. This could involve obtaining an assurance that your data is only stored in data centres in New Zealand and that there are back up and recovery procedures to guarantee availability of records."

The Revenue Alert can be found at http://www.ird.govt.nz/technical-tax/revenue-alerts/