New Zealand’s Taxation (Neutralising Base Erosion and Profit Shifting) Act received royal assent on 27 June 2018. The main measures of the Act are summarized as follows:
CbC reporting requirement: According to the published guidance on country-by-country (CbC) reporting requirements under OECD BEPS Action 13 On 27 June 2018, taxation (Neutralising Base Erosion and Profit Shifting) act 2018 was approved by the royal assent and entered into force on 1 July 2018. The CbC report must be submitted in English and New Zealand has adopted the OECD’s XML Schema standardized electronic format.
Under the Taxation (Neutralising Base Erosion and Profit Shifting) Bill which received royal assent on 27 June 2017, proposed penalties for not filing CbCR are at the discretion of the commissioner but are not to exceed NZD 100K.
CbC reporting: A new section is inserted in the Tax Administration Act to codify the requirement for large New Zealand multinationals to file a Country-by-Country (CbC) report. . On 6 December 2017 the New Zealand government introduced a taxation bill into parliament addressing Base Erosion and Profit Shifting (BEPS) concerns. Under the bill, New Zealand headquartered multinational groups with annual consolidated group revenue of €750million (approximately $1.3 billion) or more are required to prepare and file a CbC report for fiscal years beginning on or after 1 January 2016.
PE anti-avoidance rule: For large multinational companies with a consolidated global turnover of at least € 750 million, which are structuring to avoid a permanent establishment in New Zealand, a new anti-avoidance rule is introduced. The requirement is that a non-resident entity in New Zealand has a PE if all of the following criteria are met:
- The intermediary is affiliated with the non-resident or is commercially dependent on the non-resident (80% or more of the taxable income in the current year and the previous year from services provided to non-residents or persons connected to the non-resident);
- Non-resident income from the supply, unlike the avoidance rule, to a PE in New Zealand of the non-resident;
- The amounts of income and expenditure of the person that must be attributed to the permanent establishment are the amounts of income and expenditure that the permanent establishment might be expected to derive and incur if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the person.
The PE anti-avoidance rule applies to income years beginning on or after 1 July 2018.
