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New Zealand: MLI positions


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 ( and Claude Smith (

Russell McVeagh

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


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