New Zealand

Market overview

As is in many jurisdictions around the world, there is keen interest in New Zealand around the BEPS Project. The government's approach to BEPS implementation, however, is less intense.

"The government and Inland Revenue Department (IRD) have generally taken a wait and see approach to the evolving global transfer pricing landscape, choosing to continue with annual areas of transfer pricing focus, whilst the OECD and other jurisdictions have introduced more substantial changes," said Leslie Prescott-Haar of TP Equilibrium.

The IRD has introduced country-by-country reporting (CbCR) requirements however and in the 2016 budget, the government has provided new capital funding for IRD's new tax administration system to help it better enforce multinationals' tax compliance.

CbCR is applicable to New Zealand-headquartered companies with global gross revenues exceeding NZ $1.2 billion ($860 million), for fiscal years commencing on or after January 1 2016. It is expected around 20 local companies will be affected. The automatic exchange of information will begin on a voluntary basis from 2018 and on a mandatory basis from 2019.

Furthermore, Mathew McKay of Bell Gully assumes that New Zealand will be part of the multilateral instrument (MLI) which is likely to impact international investment in New Zealand.

"Among the concerns seen in the submissions on the MLI is a strong sentiment that the detailed MLI text should be made public before it is signed, as well as a preference for the focus to be on 'getting it right' through full consultation, rather than on the current December 31 2016 deadline for signing the MLI. It is unfortunate that wider interest groups in New Zealand have no visibility over its detail, and may not do so until the instrument is signed," said McKay.


Tax authorities

Inland Revenue
PO Box 39010, Wellington Mail Centre, Lower Hutt 5045
Tel: +64 4 978 0779
Website: www.ird.govt.nz


Tax rates at a glance

(As of January 1 2016)

Corporate income tax rate 28%
Capital gains tax rate 0%
Branch tax rate 28%
 
Withholding tax
Non-residents
Dividends 30% (a)
Interest 15% (b)
Royalties from patents, know-how, etc. 15% (c)
Payments to contractors 15%
Branch remittance tax 0%
Residents
Dividends 33%
Interest 33% (d)
 
Net operating losses (years)
Carryback 0
Carryforward Unlimited

  1. This is a final tax. If dividends are fully imputed, the rate is reduced to 15% (for cash dividends) or to 0% (for all non-cash dividends and for cash dividends if non-resident recipients have direct voting interests of at least 10% or if a tax treaty reduces the New Zealand tax rate below 15%). The rate is also reduced to 15% to the extent that the dividends are fully credited under the dividend withholding payment system (which is being phased out) or to the extent that imputation credits are passed on to foreign investors through the payment of supplementary dividends under the foreign investor tax credit regime.
  2. This is a final tax if the recipient is not associated with the payer. For an associated person, this is a minimum tax (the recipient must report the income on its annual tax return, but it may not obtain a refund if the tax withheld exceeds the tax that would otherwise be payable on its taxable income). Under the Income Tax Act, associated persons include the following:
    • Any two companies in which the same persons have a voting interest of at least 50% and, in certain circumstances, a market value interest of at least 50% in each of the companies
    • Two companies that are under the control of the same persons
    • Any company and any other person (other than a company) that has a voting interest of at least 25% and, in certain circumstances, a market value interest of at least 25% in the company
    Interest paid by an approved issuer on a registered security to a non-associated person is subject only to an approved issuer levy (AIL) of 2% of the interest payable. An AIL rate of 0% applies to interest paid on or after May 7 2012 to nonresidents on certain widely offered and widely held corporate bonds that are denominated in New Zealand currency.
  3. This is a final tax on royalties relating to literary, dramatic, musical or artistic works. For other royalties, this is a minimum tax.
  4. The 33% rate is a default rate if recipients' tax file numbers are not supplied. Individuals may elect rates of 10.5% (if their expected annual income does not exceed NZD14,000), 17.5%, 30% or 33%. The basic rate for interest paid to companies is 28%, but companies may elect a 33% rate.

Source: EY 2016 Worldwide Corporate Tax Guide