New Zealand

New Zealand: Budget for 2017

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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

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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

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The competent authorities of New Zealand and the U.S. have concluded an arrangement on the exchange of Country-by-Country Reports. On May 31, 2017, the U.S. Internal Revenue Service (IRS) updated its listing of competent authority arrangements (CAAs) between the U.S. and its treaty partners. The listing includes a CAA between the U.S. and New Zealand on the exchange of country-by-country (CbC) reports.

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.

New Zealand: Business organization endeavor progressive corporate tax

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Small and medium measured organizations (SMEs) in New Zealand need the nation to change partnership charge in accordance with recent changes presented by Australia. It said that 63% of entrepreneurs support presenting a graduated organization tax scale similar to the system for organizations in Australia.

The most recent budget of Australia saw organization charge tax rates for businesses procuring up to AUD10m (USD7.5m) drop to 27.5% with those over paying of 30% and it’s objective is to diminish corporate tax rates down to 25% for all organizations by 2026-27. The current corporate tax rate of 30% in New Zealand as of now.  MYOB included that 68% of business owners in New Zealand might want the Government to present an instant asset write-off plan to good speculation.

New Zealand: Finance Minister releases BEPS consultation papers

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The Revenue and Finance Minister on 3 March 2017 released three BEPS related consultation papers which address the issue of Base Erosion and Profit Shifting (BEPS). The consultation papers proposed new measures to strengthen New Zealand’s rules for taxing large multinationals.

The consultation documents contain three proposals. Firstly, tackling concerns about multinationals booking profits from their New Zealand sales offshore, even though these sales are driven by New Zealand- based staff. Secondly, prevent multinationals using interest payments to shift profits offshore. And thirdly, implement New Zealand’s entrance into an international convention for aligning our double tax agreements with OECD recommendations.

Submissions on the consultation document on implementing the international convention are open until 7 April. Submissions on the other two are open until 18 April. Ministers will consider final proposals arising from the documents later in the year.

TIEA between Anguilla and New Zealand enters into force

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The Anguilla – New Zealand Exchange of Information Agreement (TIEA) of 2009 has been entered into force on 6th January 2017 regarding tax matters. The TIEA will be applicable from 1st April 2017.

Tax agreements between British Virgin Islands and New Zealand enter into force

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The two tax related agreements between the British Virgin Islands and New Zealand was signed on 14 August 2009 and it has been entered into force on 23 December 2016. The effective dates are given below:

  • The British Virgin Islands – New Zealand Exchange of Information Agreement of 2009: 1 January 2017; and
  • The British Virgin Islands – New Zealand Income Tax Treaty of 2009: 1 January 2017 for the British Virgin Islands and 1 April 2017 for New Zealand.