New Zealand Planning Response To BEPS
On March 13, 2015, New Zealand’s Minister of Revenue, Todd McClay, announced the Government’s tax policy work program for 2015/16, which includes key international tax reforms aimed primarily at countering base erosion and profit shifting (BEPS).
In particular, the Government intends to focus on the following areas of reforms:
• Negotiation of new double tax avoidance agreements (DTAAs) with Samoa, Luxembourg, Portugal, and Slovak Republic, and the renewal of existing DTAAs with Norway, China, Korea, and Australia;
• Work towards progress on the mutual recognition of trans-Tasman imputation credits, which would see both New Zealand and Australia recognize company tax paid in the other jurisdiction for imputation purposes;
• Consideration of changes to rules concerning hybrid instruments and entities in view of the recommendations in this area from the Organisation for Economic Co-operation and Development’s BEPS project;
• Addressing problems with the application of non-resident withholding tax on interest on related-party debt;
• Consideration of the country’s interest limitation rules in view of the BEPS project; and
• Working to clarify the relationship between the general anti-avoidance rules and DTAAs.
Announcing the tax reform package at the IFA Annual Conference in Queenstown, McClay said: “The Government is conscious of the fine balancing act required to ensure that overseas investors continue to see New Zealand as a good place to do business. It is critical that the tax system does not stand in the way of businesses growing and thriving in New Zealand. But part of being a good place to do business means ensuring that our tax rules are fair – for everyone.”
“Countering BEPS will help to level the playing field and will also help maintain confidence and belief in the tax system. We will therefore continue to work with the OECD and the G-20, and there are plans to consult on both hybrids and entities and interest limitation rules after the OECD has released its BEPS action plan this year.”