New Zealand Finalizes MNE Tax Avoidance Rules

; posted on
June 28th, 2018

The Inland Revenue in New Zealand announced the third reading of the Taxation (Neutralising Base Erosion and Profit Shifting) Bill had been passed in Parliament, which contains measures to prevent multinational companies from avoiding tax by shifting profits out of New Zealand.

Enforcement of the Bill being Next Week

The Bill it takes effect from 1 July and will considerably improve the integrity of the tax system. This transpose of BEPS legislation is a first step, according to Revenue Minister Stuart Nash. “These changes enjoy the unanimous support of Parliament and are possible thanks to the work of MPs from all political parties, as well as valuable advice from tax professionals and useful submissions from members of the public,” Mr Nash said. Inland Revenue officials have been asked to work closely with international agencies like the OECD and G20 to consider whether further measures are required.

Measures to be Implemented

The changes will prevent multinationals from using BEPS strategies, including:

  • artificially high interest rates on loans from related parties to shift profits out of New Zealand;
  • related-party transactions which are intended to shift profits to offshore group members in a manner that does not reflect the actual economic activities undertaken in New Zealand and offshore;
  • hybrid mismatch arrangements that exploit differences between countries' tax rules to achieve an advantageous tax position;
  • artificial arrangements to avoid having a taxable presence or a permanent establishment in New Zealand;
  • tactics to stymie an Inland Revenue investigation, such as withholding relevant information that is held by an offshore group member.

Sources: Inland Revenue – New Zealand

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