Taxation – Avoiding Double Tax
New Zealand has entered into DTAs with 40 trading partners and is continuing to develop its treaty network by negotiating new DTAs with trading partners, as well as revising existing DTAs. The DTAs are designed to remove the double taxation (ie tax applying in two jurisdictions in respect of the same income) which would, in their absence, be suffered by New Zealand residents investing overseas and non-residents investing in New Zealand. DTAs have been entered into with Australia, Austria, Belgium, Canada, Chile, China, the Czech Republic, Denmark, Fiji, Finland, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, Norway, Papua New Guinea, Philippines, Poland, Russian Federation, Samoa, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, the United States of America, and Vietnam. As a member of the OECD, New Zealand has adopted the OECD Model Convention as the basis of its DTAs, although it has made a number of reservations to the model.
New Zealand has also entered into 21 Tax Information Exchange Agreements (TIEA) with Anguilla, Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Cook Islands, Curacao, Dominica, Gibraltar, Guernsey, Isle of Man, Jersey, Marshall Islands, Netherland Antilles, Niue, San Marino, Sint Maarten, St Christopher and Nevis, St Vincent and the Grenadines, the Turks and Caicos Islands, and Vanuatu. However, the agreements with Bermuda and St Christopher and Nevis are not yet in force.
New Zealand is also a signatory to the multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention). The Convention is designed to assist with the detection and prevention of tax evasion, by allowing cooperating tax authorities to request information from one another. It will also enable tax authorities to seek assistance in collecting outstanding tax debts from absconding taxpayers who move overseas.
Similarly, New Zealand is a signatory to the OECD’s Multilateral Competent Authority Agreement, an important step in New Zealand’s implementation of the new global standard on Automatic Exchange of Information (AEOI), aimed at cracking down on tax evasion. The AEOI initiative involves the collection, reporting and exchange of information with New Zealand’s treaty partners.
Under the AEOI standard, resident financial institutions are required to conduct specified due diligence procedures on financial accounts to identify those held (or in certain circumstances controlled) by non-residents and report such information to Inland Revenue. This information is shared with other jurisdictions under tax treaty exchange of information provisions. There is an annual reporting requirement for financial institutions on 30 June (for the 12 month period up to the previous 31 March). In June 2020, the OECD announced that in 2019, 97 jurisdictions had exchanged information on 84 million offshore accounts.
New Zealand has an intergovernmental agreement (IGA) with the United States in relation to FACTA. Domestic legislation giving effect to the IGA has also been enacted.
Lastly, the New Zealand government is a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI is a multilateral international treaty that will modify existing bilateral DTAs to address base erosion and profit shifting concerns. The MLI entered into force in New Zealand from 1 October 2018. The MLI will take effect in relation to each of New Zealand’s DTAs that are covered by the MLI on a staggered basis depending on subject area and when New Zealand’s DTA partners ratify the MLI. Once the MLI takes effect in relation to a particular DTA, that agreement will have effect as modified by the MLI. The MLI has taken effect in New Zealand’s DTAs with Australia, Belgium, Canada, Finland, France, India, Ireland, Japan, Netherlands, Poland, Russia, Singapore, Sweden and the United Kingdom.