New Zealand

New Zealand: Government announces BEPS decisions

Posted on Updated on

The Finance Minister and Revenue Minister have announced the Government’s final decisions on proposals to address base erosion and profit shifting (BEPS) on 3rd August 2017.

In combination the new measures will:

  • Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand.
  • Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand.
  • Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand.
  • Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world.
  • Make it easier for Inland Revenue to investigate uncooperative multinational companies.

According to the proposals, these decisions have been arrived at after weighing up public feedback on three government discussion documents relating to: hybrid mismatch arrangements; interest limitation rules; and transfer pricing and permanent establishment avoidance. For the most part, the proposals will proceed as originally devised but in some instances, public feedback made a good case for refining the scope of proposals or for fleshing out technical detail. The government will carry out further targeted consultation on matters of technical detail (including draft legislation), without reducing the effectiveness of the proposals.

It is expected that the BEPS measures will be included in a tax bill to be introduced by the end of the year, for enactment by July 2018.

New Zealand-Hong Kong: Protocol to tax treaty updated

Posted on Updated on

Revenue Minister has signed a new tax protocol between New Zealand and Hong Kong on 28th June 2017. The protocol updates the existing double tax agreement between New Zealand and Hong Kong, to allow full exchange of information on tax matters between the two jurisdictions. Once in force, the updated double tax treaty will require both Hong Kong and New Zealand to automatically exchange tax information with each other, in line with the G20 and OECD Automatic Exchange of Information global standard.

New Zealand’s existing double tax agreement with Hong Kong was signed in 2010 but was limited to exchanges of information on request. The Second Protocol will come into force once both signatories have completed their respective legal requirements.

Hong Kong signs AEOI agreement with New Zealand

Posted on

Hong Kong has signed an agreement with New Zealand for conducting automatic exchange of financial account information in tax matters (AEOI), a Government spokesman said on July 14, 2017.

The spokesman added that they have been seeking to expand Hong Kong’s AEOI network with their tax treaty partners. Including the agreement with New Zealand, Hong Kong now has 14 AEOI partners. The others are Belgium, Canada, Guernsey, Indonesia, Ireland, Italy, Japan, Korea, Mexico, the Netherlands, Portugal, South Africa and the United Kingdom.

The spokesman added also that the Government plans to extend the application of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to Hong Kong. An amendment bill will be introduced into the Legislative Council by late 2017.

New Zealand updates TIEAs with 6 countries

Posted on Updated on

Inland Revenue of New Zealand has updated tax information exchange agreements (TIEAs) with the following jurisdictions:

Agreement with Entered into force Applies
Anguilla 6-Jan-17 1-Apr-17
Bahamas 10-Jan-17 10-Jan-17
British Virgin Islands 23-Dec-16 1-Jan-17
Saint Vincent and the Grenadines 17-Oct-16 1-Jan-17
Turks and Caicos Islands 23-Dec-16 1-Apr-17
Vanuatu 27-Oct-16 1-Jan-17

New Zealand: Budget for 2017

Posted on Updated on

The budget for 2017 was passed by Parliament on 26th May 2017. The Budget bill contains changes to tax thresholds and to Working for Families. The changes will come into effect on 1 April 2018.

The changes are given below:

Income tax thresholds: Income tax threshold increases the $14,000 to $22,000, and the $48,000 threshold to $52,000. This provides a tax reduction of $11 a week to people earning $22,000 or more rising to $20 per week for anyone earning $52,000 or more.

Family Tax Credit: The Family Tax Credit rates increases for the first child under 16 by $9 a week, and for each subsequent child under 16 by between $18 and $27 a week. Also increases the abatement rate to 25% and reduces the abatement threshold to $35,000.

Housing supplement: The accommodation supplement goes up by between $25 and $75 a week for a two person household and for larger households by between $40 and $80 a week.

Accommodation Facilities: Accommodation Benefit Increases weekly payments by up to $20 for students to reflect increasing housing costs for students.

Rail: $548 million investment in the rail network with KiwiRail, including $98 million for the Wellington Commuter Rail Network.

Economy: The Treasury forecasts economic growth of 3.1% in the June 2017 year to peak at 3.8% in 2019, before easing back.

Education: Invest $1.1 billion for schools and early childhood centres, roll growth and demand, and an increase in operational grant funding for schools.

Independent Earner Tax Credit: Independent Earner Tax Credit will be discontinued. Those claiming it are fully compensated by the tax threshold adjustments.

New Zealand signs BEPS Multilateral Instrument

Posted on Updated on

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.

US: Government sign an arrangement with New Zealand to exchange CbC reports

Posted on Updated on

The competent authorities of New Zealand and the U.S. have concluded an arrangement on the exchange of Country-by-Country Reports. The competent authority arrangement (CAA) for exchange of country-by-country reports is on the basis of a double tax convention (DTC). The agreement was signed on 11 May 2017.

Under the arrangement, both countries desire to increase international tax transparency and improve access of their respective tax authorities to information regarding the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which multinational enterprise groups (“MNE Groups”) operate through the automatic exchange of annual country-by-country reports (“CbC Reports”), with a view to assessing high-level transfer pricing risks and other base erosion and profit shifting related risks, as well as for economic and statistical analysis, where appropriate.

The first fiscal year for which the U.S. and New Zealand intend to exchange CbC Reports is for the fiscal years of MNE Groups commencing on or after January 1, 2016. Such CbC Report is intended to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates. CbC Reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2017 are intended to be exchanged as soon as possible and no later than 15 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates.

The Competent Authorities intend to exchange the CbC Reports automatically through a common schema in Extensible Markup Language (XML). The Competent Authorities intend to work toward and decide on one or more methods for electronic data transmission including encryption standards.