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The IRD screens GST returns filed by taxpayers to determine if a review or investigation of that return is warranted. This is likely to occur where a taxpayer claims a GST refund that is higher than normal based on that taxpayer’s GST return filing history or where a first GST return is filed claiming a GST refund.

The legislation requires that where the IRD does not investigate a GST refund or request information from the taxpayer, the IRD must release that refund within 15 working days of the IRD receiving that return. If for instance, the refund is higher than normal and no information is sent by the taxpayer to the IRD to support the GST return, an IRD investigation will invariably arise and involve a request for information from the taxpayer.

The High Court in Contract Pacific v CIR has recently confirmed that where the IRD commences an investigation and requests information from the taxpayer the refund must be released if the request for information is not made within 15 working days after the return is received by the IRD.

If a request for information is made within the 15 working day timeframe and the IRD requires further information, requests for that further information must be made within 15 working days from the time the IRD received the last submission of information. If however the IRD were to make a request for further information after the 15 working day period is up, they must then release the refund.

In the event the IRD requests information and the IRD satisfies the 15 working day timeframe requirement, there is no legislated time limit for when a refund must be released. However, administrative law principles require a refund to be processed within a reasonable timeframe.

The value for taxpayers in this decision stems from the requirement that the IRD must progress its investigations in a timely manner. If delays occur and a request for information is then made after the 15 day timeframe the IRD will have to release the refund. It should be noted that the release of the refund is subject to the taxpayer’s remaining tax obligations being satisfied and the IRD could continue to investigate and dispute the validity of the refund after its release.