On 28 March 2024, New Zealand officially published the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 in the Official Gazette. This legislation received royal assent on 28 March 2024 with various measures. The Bill provides key measures for the introduction of the Pillar 2 income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) to ensure a minimum corporate tax of 15% for large multinational (MNE) groups with annual consolidated revenue of at least EUR 750 million in at least two of the preceding four fiscal years. The income inclusion rule (IIR) and under-taxed profits rule (UTPR) will go into effect from 1 January 2025, while the domestic income inclusion rule will be applied from 1 January 2026.
One key amendment in this legislation pertains to the rules surrounding the classification of income that is considered to originate from New Zealand. Specifically, the legislation modifies exemptions related to the source rule for the income of non-residents, stating that their income will be deemed to be originating from New Zealand, which results in it being taxed in New Zealand under a double tax agreement.
This rule is applicable unless the income falls under the following categories:
- Dividends received from shares in foreign companies, which are not considered revenue account property;
- Fees for management, technical, or related services classified as royalties under a double taxation agreement;
- Royalties or interest payments that are designated to a permanent establishment abroad under the double taxation agreement.
