Tax Watch, Edition 1, March 2018
Tackling BEPS – complex changes soon to be reality
Draft law containing well signposted and highly complex changes intended to combat base erosion and profit shifting (“BEPS”) is working its way through the legislative process.
The Taxation (Neutralising Base Erosion and Profit Shifting) Bill (“the BEPS Bill”) is currently being considered by the Finance and Expenditure Committee, with the public submission process having recently closed.
The package of measures included in the BEPS Bill are substantial reforms which will put New Zealand in the forefront of worldwide approaches to BEPS implementation. Key aspects include:
- New rules designed to tax hybrid and branch mismatch arrangements.
- Introduction of a permanent establishment anti-avoidance rule.
- Novel restricted transfer pricing rules for pricing inbound related party debt.
- Strengthening the transfer pricing rules.
- Changes to the thin capitalisation rules.
- Extended information gathering powers for Inland Revenue.
It’s positive that successive governments have generally adopted a consultative approach leading to the introduction of these measures. However, little, if any, evidence of tax avoidance by inbound investors has been put forward in support of the changes.
We are concerned several of the proposed BEPS measures are overly complex and will overreach in the New Zealand context.
Most of the reforms are scheduled to take effect for income years beginning on or after 1 July 2018. The reforms may significantly impact global operating models and tax economics for multinationals doing business in New Zealand.
Now is the time to consider what impact the changes may have on your business. Get in touch with us today.