New Zealand Ramps Up Tax Rules for Multinationals

March 5, 2017 Taxation in New Zealand

Taxation of large business in New ZealandWELLINGTON – Multinational business operating in New Zealand, such as Facebook or Apple, may soon have a harder time shifting profits overseas, as the national government aims tightens up its tax rules.

On March 3rd the Revenue Minister of New Zealand Judith Collins and the Finance Minister of New Zealand Steven Joyce jointly announced a set of new legislative changes aimed at ensuring that large multinational companies operating in New Zealand pay their “fair share” of tax in the country.

The new changes fall in line with the Base Erosion and Profit Shifting strategies developed by the Organisation for Economic Cooperation and Development.

There are several proposed changes, however, the main update to tax rules includes stricter requirements regarding the declaration of profits raised through activities performed by staff located in New Zealand, a move that is expected to restrict the ability of businesses to shift their profits to low-tax jurisdictions.

Further, changes have also been proposed to the tax treatment of interest payments paid offshore, which, if approved, will stop businesses from reducing their profits in New Zealand by taking on artificially inflated loans from their offshore parent companies.

The new rules would be enforced by the country’s tax authority, the Inland revenue Department, which may even be granted greater enforcement powers in order to ensure that companies do not try to further skip out on their tax obligations.