New Zealand - BEPS Decision on Multinationals

The New Zealand government confirmed final decisions regarding taxation of multinationals to address Base Erosion and Profit Shifting (BEPS) and facilitate a fairer taxation. All these changes will be implemented via a tax bill and come into force by July 2018.

Measures to be introduced

The decisions consider the feedback of public consultation regarding governmental documents relating to hybrid mismatch arrangements, interest limitation rules, transfer pricing and permanent establishment avoidance. The measures proposed in the decisions 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.

Efficiency Assessment

The decisions intend to have companies operating in New Zealand to pay their fair share of tax, and multinationals that attempt to minimize or eliminate their New Zealand tax obligations are also targeted by the proposals. On their implementation, the changes are supposed to ensure that multinationals are on the basis of their actual level of economic activity in New Zealand.

“The Government budgeted for $100 million annually in out-years for additional multi-national tax, and these decisions mean that will be increased by a further $100 million annually from Budget 2018 onwards.” according to Finance Minister Steven Joyce and Revenue Minister Judith Collins.

Sources: beehive.govt, Taxpolicy IRD, New Zealand Times

TPA BEPS Desk

Transfer Pricing Associates introduces TPA BEPS Desk. If you have any questions, or need more detailed advice on any aspects of BEPS related issues, please get in touch with us. The TPA Global network has alliance partners throughout the world, and the network can provide multi-disciplinary approach on today's critical transfer pricing challenges faced by multinational enterprises.

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