Other base erosion and profit shifting measures

Under a BEPs related anti-avoidance rule, a non-resident entity that belongs to a global group with at least €750 million in annual turnover is deemed to have a permanent establishment in New Zealand if a related entity carries out sales-related activities for it in New Zealand under an arrangement with a more than merely incidental purpose of tax avoidance. This permanent establishment will be deemed to exist for the purpose of any applicable DTA.

Further, there is a comprehensive set of inbound and outbound rules to reduce the unintended tax advantages that result from hybrid and branch mismatches in cross-border arrangements.

Broadly, the outbound rules are intended to ensure that a New Zealand resident entity is not entitled to a deduction as the result of an agreement if an associated entity does not return the amount received from the New Zealand resident as income overseas. The inbound rules require a New Zealand resident entity to return an amount of income received from a related offshore entity if that offshore entity is entitled to a deduction and the amount received would otherwise not be taxed in New Zealand.