NEW ZEALAND Law and Practice Contributed by: Greg Neill, Fred Ward and Callum Burnett, Russell McVeagh
tax treaties to facilitate tax avoidance. New Zealand has introduced a new anti-avoidance rule for large multinationals using a corporate structure intended to avoid having a permanent establishment in New Zealand. In addition, through the MLI, there has been a focus on “treaty shopping” by multinationals and the ability for New Zealand to deny treaty benefits to com - panies that are using treaties to avoid tax. In conjunc - tion with the BEPS reforms, New Zealand amended the law to provide that its general anti-avoidance rule overrides tax treaties where applicable. 9.10 Transfer Pricing and IP Taxation New Zealand has made changes to its transfer pricing rules in response to the BEPS initiatives. Rather than radically changing the rules, the amendments as a result of BEPS are generally seen as strengthening the application of those rules by adopting economic sub - stance and reconstruction provisions (consistent with the OECD’s transfer pricing guidelines). As a result, in certain cases the legal form may be disregarded where it does not align with economic substance, and transactions that would not be entered into by parties acting at arm’s length can similarly be disregarded or reconstructed. New Zealand’s non-resident withholding tax regime extends to the payment of royalties to non-residents. This existing framework reduces the incentive for multinationals to shift intellectual property offshore to generate deductible payments that reduce profits in New Zealand. 9.11 Country-by-Country Reporting and Transparency Provisions As an administrative matter, Inland Revenue had an existing practice of requiring New Zealand-headquar - tered multinationals groups to file a “country-by-coun - try” report. This applied to groups with annual con - solidated group revenue of EUR750 million or more in the previous financial year and for all income years beginning on or after 1 January 2016. However, as part of the wide-ranging BEPS initiatives introduced in 2018, a specific legislative provision was introduced that requires country-by-country reports to be filed. The codification of this requirement was considered to be useful in the context of the BEPS
reforms as it provided an explicit signal to the affected multinationals and other countries of New Zealand’s commitment to country-by-country reporting. 9.12 Digital Economy Businesses New Zealand has two GST regimes targeting digital economy businesses operating largely from outside New Zealand in relation to: • low-value imported goods; and • cross-border remote services and intangibles. Collection of GST on Low-Value Imported Goods In 2019, New Zealand introduced measures to require non-resident suppliers to register and return GST on low-value imported goods that are supplied to New Zealand-resident customers. Low-value goods are physical goods valued at NZD1,000 or less. To remain consistent with New Zealand’s domestic GST regime, non-resident suppliers supplying New Zealand-resident customers with low-value import - ed goods are only required to register and return GST when the value of these supplies exceeds (or is expected to exceed) NZD60,000 in a 12-month period. In addition, such suppliers are not required to return GST on supplies made to New Zealand GST- registered businesses. It should be noted that sup - pliers operating through electronic marketplaces can have GST charged on their supplies by the electronic marketplace (despite the supplier itself not reaching the NZD60,000 threshold). GST on Cross-Border Remote Services and Intangibles In 2016, New Zealand introduced measures to require certain non-resident suppliers to register and return GST on remote services provided to New Zealand- resident customers. Services where, at the time of the performance of the service, there is no necessary con - nection between the physical location of the customer and the place where the services are performed will be subject to these rules. Again, to remain consistent with New Zealand’s domestic GST regime, non-resident suppliers supply - ing New Zealand-resident customers with remote ser - vices are only required to register and return GST when
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