On 7th June 2017 the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (referred to as the Multilateral Instrument, or MLI) was signed in Paris. This OECD measure targets base erosion and profit shifting (BEPS). It will enable signatory countries, including New Zealand, to quickly update existing double tax treaties to include articles on permanent establishment avoidance, treaty abuse, dispute resolution and hybrid mismatches. New Zealand’s position on which of its tax treaties should be covered and which provisions it will adopt was contained in the officials’ issues paper New Zealand’s implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, and this final position remains virtually unchanged.
The Multilateral Instrument includes articles on “permanent establishment” avoidance, treaty abuse, dispute resolution and hybrid mismatches. These address the key treaty-related BEPS issues. The extent to which these provisions are incorporated into New Zealand’s treaties will depend on the final positions of both New Zealand and our treaty partners.
Once both parties have signed and ratified the Multilateral Instrument, it will prospectively modify most of New Zealand’s existing bilateral treaties. It is likely that New Zealand’s treaties will begin to be modified from 2019.