New Zealand: MLI positions

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

New Zealand: MLI positions

intl-updates-small.jpg
brown.jpg
claude.jpg

Brendan Brown

Claude Smith

New Zealand was one of many countries to sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) at a signing ceremony in Paris on June 7 2017. New Zealand has 40 double tax agreements (DTAs), 31 of which are with jurisdictions that have signed the MLI. In 27 cases, New Zealand and the DTA partner have elected that the DTA will be covered by the MLI; these DTAs are referred to as covered tax agreements (CTAs).

New Zealand's initial positions indicate that it does not wish to exclude any of the main optional provisions of the MLI. This is in contrast to the majority of jurisdictions with which New Zealand has a CTA, which have taken a much more selective approach to which of the optional provisions will apply.

New Zealand has indicated that it intends to apply Article 4 of the MLI, which modifies the rules for determining the treaty residence of a person other than an individual that is resident in more than one jurisdiction, by requiring the contracting jurisdictions to determine residence by mutual agreement. In the absence of such an agreement, Article 4 of the MLI denies relief under the CTA. Eleven of the jurisdictions with which New Zealand has a CTA have also chosen to include this provision.

The most significant of those 11 CTAs to which Article 4 of the MLI is expected to apply is New Zealand's DTA with Australia. New Zealand's close economic relations with Australia, together with the breadth of both countries' domestic law tests for determining the residence of companies, create greater potential for companies (which may have management functions split between the two countries) to be dual resident. Subjecting New Zealand's DTA with Australia to Article 4 of the MLI could therefore have a significant practical impact on some businesses.

New Zealand has indicated that it intends to adopt without reservation Article 10 of the MLI (which in certain circumstances would deny relief from source based tax where income is treated by the residence state as attributable to a permanent establishment in a third state), and Article 12 (which addresses artificial avoidance of permanent establishment status through commissionaire arrangements). New Zealand's major trading partners including Australia, China and the UK have reserved the right for Articles 10 and 12 not to apply to their CTAs.

New Zealand and 14 of its treaty partner jurisdictions have elected to adopt the arbitration provisions of the MLI. At present, only two of New Zealand's DTAs provide for arbitration and the extension of arbitration to other DTAs will likely be welcomed by taxpayers. New Zealand, in common with many other countries that have elected into the MLI arbitration provisions, reserves the right for the arbitration provisions not to apply once a court or administrative tribunal in either DTA country has rendered a decision on the issue.

In summary, many of the jurisdictions with which New Zealand has a CTA have made significant reservations in relation to a number of provisions and as a result, many of the MLI Articles will not apply to a number of New Zealand's DTAs even if they are covered by the MLI. It is possible that (though as yet unclear whether) in those instances, the relevant MLI provisions will be extended to the DTA in question by a later bilateral agreement. In addition, it remains to be seen whether New Zealand may, in determining its final MLI positions, make further reservations in light of the cautious approach taken by a number of its DTA partners.

Brendan Brown (brendan.brown@russellmcveagh.com) and Claude Smith (claude.smith@russellmcveagh.com)

Russell McVeagh

Tel: +64 4 819 7748 and +64 4 819 7505

Website: www.russellmcveagh.com

more across site & shared bottom lb ros

More from across our site

Over two-thirds of survey respondents back the continuation of the UK’s digital services tax, research commissioned by the Fair Tax Foundation also found
Given the US/G7 pillar two deal, the OECD is in danger of being replaced by the UN as the leading global tax reform forum
Cinven’s latest investment follows its acquisition of a stake in Grant Thornton UK in December; in other news, a barrister listed by HMRC as a tax avoidance promoter has alleged harassment
CIT base narrowing measures remain more prevalent than increased CIT rates, the report also highlighted
ITR's parent company, LBG, will acquire The Lawyer, a leading news, intelligence and data-driven insight provider for the legal industry, from Centaur Media
KPMG UK’s Graeme Webster and KPMG Meijburg & Co’s Eduard Sporken outline the 20-year evolution of MAPAs, with DEMPE analyses becoming more prevalent and MAPA requirements growing stricter
Rishi Joshi, of the Institute of Chartered Accountants of India, warns of potential judicial overreach as assets are recharacterised to bypass a legislative exclusion
Only 2% of in-house survey respondents said they were ‘heavy’ users of AI for TP, Aibidia’s report also found
There was a ‘deeply embedded culture within PwC that routinely disregarded formal confidentiality obligations,’ the chairman of Australia’s Tax Practitioners Board said
Jennifer Best was most recently the acting commissioner of the IRS’s large business and international division
Gift this article