BY TARITA HUTCHINSON
Cook Islands Parliament is set to debate amendments to the Cook Islands Income Tax Act (1997) which will further clarify tax residency and reporting rules for all companies including international business companies.
The Cook Islands has been fine tuning its tax programme in line with Organisation for Economic Cooperation and Development (OECD) guidelines to meet Base Erosion and Profit Shifting (BEPS regime) and the changes are expected to provide more guidance to corporations on tax reporting obligations.
Public submissions have now closed on whether to repeal sections 82(2) and 82(3) of the Income Tax Act (1997):
82. Place of residence, how determined –
(1) For the purposes of this Part, a natural person is deemed to be resident in the Cook Islands if-
(a) the person’s home is in the Cook Islands; and
(b) the person is personally present in the Cook Islands for more than 183 days in a 12- month period.
(2) A company shall be deemed to be resident in the Cook Islands within the meaning of this Part if the company – (a) is incorporated in the Cook Islands, or (b) has its head office in the Cook Islands.
(3) For the purposes of this Act the head office of a company means the centre of its administrative management.
and replace with the following provision:
Section 82(2): A company shall be resident in the Cook Islands within the meaning of this Part if any of the following are true –
1. its directors, in their capacity as directors, exercise control of the company in the Cook Islands, even if the directors’ decision-making also occurs outside the Cook Islands;
2. its place of effective management is in the Cook Islands;
3. It is a Cook Islands Company, and at any moment in time during the income year, there are three or more Cook Island resident directors.
It is anticipated that changes will come into effect from 1 January 2022.