New Zealand Government announces BEPS decisions

07/08/2017 News Team

New Zealand’s Finance Minister Steven Joyce and Revenue Minister Judith Collins have announced the Government’s final decisions on proposals to address base erosion and profit shifting (BEPS).

“The new measures will significantly strengthen our tax rules and our ability to ensure that multinationals are taxed fairly and on the basis of their actual level of economic activity in New Zealand,” Mr Joyce said.

In combination the new measures 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 the NZ Inland Revenue to investigate uncooperative multinational companies.

“These changes will result in an estimated $200 million a year in additional tax being paid by multi-national companies,” Mr Joyce added. 

“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.”

“These decisions have been arrived at after weighing up public feedback on three government discussion documents relating to: hybrid mismatch arrangements; interest limitation rules; and transfer pricing and permanent establishment avoidance,” Ms Collins said.

It is expected that the BEPS measures will be included in a tax bill to be introduced by the end of the year, for enactment by July 2018.

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