The Government recently announced their proposals to combat base erosion and profit shifting. It is estimated that these measures will result in $200m additional tax income for the government.

The measures announced are set to:

  • Stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand.
  • Stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand.
  • Ensure multinationals are taxed in accordance with the economic substance of their activities in New Zealand.
  • Counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world.
  • Make it easier for Inland Revenue to investigate uncooperative multinational companies.

The new measures are set to be included in a bill later this year and enacted by July 2018.