On December 14, 2016 a Government discussion document on measures to strengthen transfer pricing rules and prevent permanent establishment (PE) avoidance was published on the website of the New Zealand Inland Revenue. In this so-called cabinet paper the New Zealand cabinet states that it currently considers introducing a package containing certain features of a DPT and to combine them with the OECD’s BEPS measures and some domestic law amendments to produce a package that is tailored for the New Zealand environment.
The paper seeks the agreement of the New Zealand Economic Growth and Infrastructure Committee to prepare and issue a Government discussion document primarily on measures to strengthen transfer pricing rules and prevent PE avoidance.
The proposed discussion document would outline the New Zealand Government’s package as the currently preffered method of addressing transfer pricing and PE avoidance, while nothing that a Diverted Profits Tax (DPT) has not been ruled out. The propsed discussion document would be released in early 2017.
As stated above in the Government discussion document as published on the website of the New Zealand Inland Revenue, the New Zealand cabinet states that it currently considers introducing a package containing certain features of a DPT and to combine them with the OECD’s BEPS measures and some domestic law amendments to produce a package that is tailored for the New Zealand environment. According to the cabinet paper, the package would include:
· Measures to prevent the avoidance of a PE in New Zealand, which would be similar in effect to this aspect of the Australian/UK DPT (including a possible override of New Zealand’s Double Taxation Agreements) and consistent with the OECD’s BEPS measures;
· Amendments to New Zealand’s transfer pricing legislation in order to collect better information, tax multinationals more in accordance with the economic substance of their activities in New Zealand (in accordance with the OECD’s), and so that the Inland Revenue does not have the burden of proof in transfer pricing cases;
· Adoption of other BEPS measures relating to transfer pricing and PE avoidance, which includes strengthening New Zealand's tax treaties so they cannot be used for this purpose; and
· Other domestic law amendments to address issues specific to New Zealand.
In the cabinet paper the New Zealand cabinet emphasizes that while its current preference is not to adopt a DPT, it has not rules it out. The New Zealand cabinet states that following consultation on the discussion document (or at any other time in the future) it considers that its proposed package would not be effective in addressing transfer pricing and PE avoidance, it will revisit the adoption of a DPT.
Click here to be forwarded to the Government discussion document on measures to strengthen transfer pricing rules and prevent permanent establishment avoidanceas published on December 14, 2016 on the website of New Zealand Inland Revenue, which will open in a new window.
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