Double tax agreement with Russia a step closer
The long-awaited double tax agreement between New Zealand and the Russian Federation was this week given legislative effect in New Zealand, Revenue Minister Michael Cullen said today.
The agreement will not enter into force, however, until it is legislated for under Russian law.
"The main focus of the agreement is to reduce tax impediments to cross-border trade and investment, and assist enforcement of the law between the two countries, " Dr Cullen said.
"It will assist New Zealand businesses that trade with Russia, one of our largest markets for dairy products, by providing greater certainty about future taxation and reducing compliance costs."
"The agreement between the two countries was signed last year, and has been given legislative effect in New Zealand through Order in Council. It will now need to proceed through the Russian legislative process before it comes into effect, which is unlikely to happen before next year," Dr Cullen said.
The text of the agreement is available on the website of the Policy Advice Division of Inland Revenue at www.taxpolicy.ird.govt.
Key features of the Russia-New Zealand double tax agreement are:
- New Zealanders will pay non-resident withholding tax of no more than 15% for dividends derived from Russia, 10% for interest, and 10% for royalties.
- The profits of New Zealand businesses will generally be exempt in Russia if the business is of a temporary nature.
- Mobile activities such as consultancy, building and construction sites, installation and assembly projects, and natural resource exploration and exploitation must be conducted in Russia for more than 12 months before Russia can tax the income.
- Income from professional services can be taxed in Russia only if the person performing the services is present for more than 183 days or has a fixed base there.
- New Zealand employees working in Russia will generally not be taxed by Russia unless they spend more than 183 days there.
- Profits from insurance, coastal shipping, domestic air transport and real property (including agriculture and forestry) can be taxed in the country in which they are situated, even if the activity is of a temporary nature.
- Pensions paid by the government of either state can be taxed in both states (although in the case of the state of residence of the recipient, the taxing right is limited to 50% of the amount of the pension. All other pensions and annuities are to be taxed solely by the state of residence.
- Certain forms of discriminatory tax treatment between non-residents by either tax authority are prohibited.
Russians living or carrying on a business in New Zealand will enjoy similar benefits.