The political and media pressure for the New Zealand Government to introduce tax measures to prevent base erosion and profit shifting (BEPS) has grown in recent times.
In September 2016, the Government released a discussion document to address hybrid mismatch arrangements. Then, earlier this year, the Government released three discussion documents for public consultation (see our 10 March 2017 Brief Counsel), outlining further proposals to combat BEPS including the adoption of rules that share features with the diverted profits taxes (DPT) that were introduced in Australia and the UK.
Chapman Tripp senior associate Jai Nario co-authored an article with Kathryn Bertram (Johnson, Winter & Slattery in Australia) and Shinasa Wasimi (Willkie Farr & Gallagher LLP in London) that was published in the July 24, 2017 issue of Tax Notes International (Tax Notes Article).
The Tax Notes Article examines aspects of DPT rules (or similar measures) from the perspective of jurisdictions at different stages of implementation and outlines the context for reform, key features of the rules, the risk of domestic and foreign double taxation, the actual and anticipated outcomes, and how these rules fit within the OECD’s efforts.
Since the Tax Notes Article was published, Finance Minister Steven Joyce and Revenue Minister Judith Collins announced the Government’s final decisions on proposals to address BEPS. It is expected that the measures will be included in a BEPS taxation bill to be introduced late this year, for enactment by July 2018. The proposed application date for most of the measures is income years beginning on or after 1 July 2018.
The Government will undertake further consultation on the legislative design for limited matters relating to the permanent establishment avoidance rule, the transfer pricing rules, the hybrid mismatch rules, rules relating to related-party interest and other thin capitalisation related items.
The indicative timeframe for further consultation is early to mid-September for most measures and mid to late-September for the hybrid mismatch rules.