Bill introduces further international tax reforms
A tax bill introduced in Parliament today will bring New Zealand's international tax rules into line with those of other countries and help New Zealand-based companies to compete more effectively overseas, Revenue Minister Peter Dunne said.
"The Taxation (International Investment and Remedial Matters) Bill takes another step forward in the reform of our international tax rules by allowing joint ventures and other significant New Zealand shareholdings in foreign companies that are not controlled by New Zealand firms an active income exemption," said Mr Dunne.
New Zealanders holding stakes of 10% or more in offshore companies will not be subject to New Zealand tax on those interests unless the companies earn passive income such as interest, royalties and rents. If those companies have just a small amount of passive income of less than 5% of their total income, there will be no New Zealand tax on the interest at all.
Investors who are unable to use the active income exemption because they do not have sufficient information or do not meet the 10% shareholding threshold would generally be taxed on an assumed 5% rate of return using the fair dividend rate or cost methods of calculation.
The bill replaces the current exemption for non-portfolio foreign investment funds in the eight "grey list" countries with an exemption for non-portfolio FIFs that are resident and subject to tax in Australia.
"The bill also removes a potential barrier to non-resident investment in New Zealand corporate bonds by applying the approved issuer levy at zero percent rather than the usual 2% on interest paid on corporate bonds that meet certain criteria."
Other changes in the bill are intended to make the new international tax rules introduced last year work as intended.
"The changes in this bill will be very positive news for New Zealand companies with overseas interests and for investors generally," said Mr Dunne.
Ministerial Advisor to Hon Peter Dunne
Minister of Revenue | Associate Minister of Health | MP for Ohariu | UnitedFuture Leader
Tel: DDI 04 8176991 | Mobile: 021 917339