A Week in Review

Richard AshbyPartner, Gilligan Sheppard

BEPS results in MNE guidance

The passing of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 in June 2018 was promoted as NZ’s response to the OECD/G20 BEPS project, introducing a series of anti-BEPS measures to protect the NZ tax base from aggressive practices by multinational enterprises.

The new rules prevented MNE’s from using:

  • artificially high-interest rates on loans from related parties to shift profits out of NZ;
     
  • related-party transactions which are intended to shift profits to offshore group members in a manner that does not reflect the actual economic activities undertaken in NZ and offshore;
     
  • hybrid mismatch arrangements that exploit differences between countries’ tax rules to achieve an advantageous tax position
     
  • artificial arrangements to avoid having a taxable presence or a permanent establishment in NZ; and,
     
  • tactics to stymie an IR investigation, such as withholding relevant information that is held by an offshore group member.

IR has now released a comprehensive guide to all the new measures for MNE’s, which includes details of IR’s forward Programme of Work which is focussed towards ensuring that MNE’s comply with the new legislation.

While a lot of us would switch off as soon as the MNE term hits the eardrum, you may be surprised to learn that the threshold for those who receive IR’s V.I.P treatment is not actually that high. Referred to as Significant Enterprises (SE’s) by IR, its population now includes all groups with an annual turnover greater than $80m and all foreign-owned SE’s with an annual turnover in excess of $30m. Presently this creates a target audience for IR of just under 1000 groups (623 foreign-owned).

The 40-page guidance document is full of all sorts of useful facts and figures, so those of you wishing to hone your knowledge skills to show your true level of intelligence to your fellow teammates at that next pub quiz night can find all the goss here – https://www.ird.govt.nz/international

BEPS Part Two

And since it’s almost Christmas, IR also wanted to ensure nobody’s stocking was empty, by issuing an important message to all tax agents, to advise that new BEPS disclosure forms have now been introduced (which can only be completed via MyIR), with associated guidance that:

  • BEPS disclosure forms will need to be filed for 30 June to 30 September 2019 balance dates at the same time as 2019 returns;
     
  • For balance dates outside the above period, BEPS disclosure forms will not be required until filing 2020 tax returns; and,
     
  • The forms should be filed by the income tax return due dates.

However if the new anti-BEPS rules don’t apply to you, then simply tick “No” in the relevant box on your income tax return.