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New Zealand: New Zealand government releases timeline for considering initiatives to address BEPS


Tim Stewart

The New Zealand government has released two reports detailing its tax policy work regarding base erosion and profit shifting (BEPS) issues. The reports were prepared several months ago by Inland Revenue and Treasury officials to update government ministers on BEPS issues and were more recently released to the public. The OECD's work on BEPS issues has been well publicised. New Zealand has been actively involved in the OECD's BEPS work, and the New Zealand government has been considering whether changes to New Zealand's domestic laws may be necessary to address BEPS concerns in the country.

Inland Revenue and Treasury officials view New Zealand's international tax policy settings as generally robust, but have advised the New Zealand government that there are areas in which they are considering reform to New Zealand domestic law to conform to the OECD's recommendations. These areas are:

  • neutralising the effects of hybrid mismatch arrangements; and

  • limiting base erosion via interest deductions.

The OECD's work in these areas is expected to be finalised by the end of 2015. Inland Revenue and Treasury officials are aiming to release public consultation papers in late 2015 (following the conclusion of the OECD's work) regarding possible domestic law reform in these areas.

Inland Revenue and Treasury officials have also identified certain issues that are not part of the OECD's BEPS action plan for consideration as part of New Zealand's response to BEPS. These include:

  • reviewing the taxation of foreign trusts. At present, New Zealand tax resident trustees of a trust are generally not taxed on the trust's non-New Zealand sourced income unless a New Zealand resident has made a settlement on the trust;

  • strengthening non-resident withholding tax (NRWT) rules as they apply to interest. Aspects of the NRWT rules to be considered will include:

    • timing mismatches between when interest expenditure is deductible to the payer, and when NRWT becomes payable on the interest;

    • who is subject to NRWT and, in particular, how New Zealand's associated persons tests apply in the context of NRWT. For example, one concern is whether related parties are able to interpose unrelated intermediaries in back-to-back arrangements to qualify for an exemption from NRWT; and

    • a longstanding exemption from NRWT that applies to non-residents with branches in New Zealand;

  • improving the quality and usefulness of tax-related disclosures via administrative measures (Compliance Measures). Possible measures include:

    • requiring large corporates to file their income tax returns earlier, and to disclose additional information in a standardised electronic format; and

    • introducing a voluntary code of practice for large corporates.

Inland Revenue and Treasury officials were due to report to government ministers before the end of 2014 regarding the rules for taxing foreign trusts. As for the other possible initiatives, Inland Revenue and Treasury have yet to reach any views regarding the need for reform, but intend to commence public consultation by the middle of 2015 on any reform proposals.

The possibility of New Zealand's response to BEPS extending beyond the matters in the OECD's action plan to include a review of the foreign trust rules, aspects of the NRWT rules and Compliance Measures is controversial, since any changes to these rules will likely affect business-as-usual arrangements, rather than being targeted at instances of double non-taxation or aggressive tax planning. Considering that New Zealand already has one of the most robust anti-avoidance measures of any country in the world, businesses will no doubt be concerned that this BEPS mission creep may needlessly result in uncertainty, or in unintended consequences, for commercial arrangements.

Tim Stewart (

Russell McVeagh

Tel: +64 4 819 7527


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