New Zealand is the number one country for ease of doing business, according to the World Bank. In terms of tax, it climbed two places to number 11 in the World Bank's latest Doing Business report. However, in keeping with most other nations, the country is increasingly flexing its muscles on tax compliance.
In March 2017, it was reported that Apple had not paid tax in New Zealand in the past decade. This has caused outrage in the country, despite Apple protesting it had done nothing wrong.
In 2017, the New Zealand government put forward proposals to ensure MNEs like Apple pay what is considered to be their fair share of tax. A key proposal concerns the strengthening of the rules on permanent establishment (PE). Under this proposal, businesses with a global turnover of more than $895 million will be deemed to have a PE in New Zealand if they carry out sales-related operations through a related entity.
One option the government had considered was a diverted profits tax (DPT), however a cabinet paper shows the government's reluctance.
The paper states: "Introducing a DPT would mean that there would be a new type of tax, separate to income tax, to deal with a minority of aggressive multinationals. It could impact on foreign investor's perceptions of the predictability and fairness of New Zealand's tax system for foreign investment. As a separate tax from our general income tax it may produce unintended adverse consequences for taxpayers – especially with regard to normal grouping of tax attributes (for example income tax losses would not be able to be set off against diverted profits). A DPT may also have an unintentional negative impact on compliant taxpayers. The more we get into imposing arbitrary taxes the greater the risk of other countries doing the same to our exporters. Overall a DPT chips away at the consistency, neutrality and relative simplicity of our tax system from a global perspective."
Although the current New Zealand government favours a more tailored approach to the PE issue, things could easily change after September 2017's election, as the Labour Party has pledged to introduce a DPT should it win.
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|Corporate Income Tax||28%|
|Capital Gains Tax||0%|
|Net Operating Losses (years)|
|Dividends paid to non-residents||30%||A|
|Royalties from, for example, patents, know-how||15%||C|
|Payments to contractors||15%|
|Branch Remittance Tax||0%|
|Dividends paid to residents||33%||D|
|Interest paid to non-residents: Individuals||15%||B|
|Interest paid to residents: Individuals||33%||D|
A) This is a final tax. If dividends are fully imputed, the rate is reduced to 15% (for cash dividends) or to 0% (for all non-cash dividends and for cash dividends if non-resident recipients have direct voting interests of at least 10% or if a tax treaty reduces the New Zealand tax rate below 15%). The rate is also reduced to 15% to the extent that the dividends are fully credited under the dividend withholding payment system (which is being phased out) or to the extent that imputation credits are passed on to foreign investors through the payment of supplementary dividends under the foreign investor tax credit regime.
B) This is a final tax if the recipient is not associated with the payer. For an associated person, this is a minimum tax (the recipient must report the income on its annual tax return, but it may not obtain a refund if the tax withheld exceeds the tax that would otherwise be payable on its taxable income). Under the Income Tax Act, associated persons include the following:
Interest paid by an approved issuer on a registered security to a non-associated person is subject only to an approved issuer levy (AIL) of 2% of the interest payable. An AIL rate of 0% applies to interest paid on or after May 7 2012 to nonresidents on certain widely offered and widely held corporate bonds that are denominated in New Zealand currency.
C) This is a final tax on royalties relating to literary, dramatic, musical or artistic works. For other royalties, this is a minimum tax.
D) The 33% rate is a default rate if recipients' tax file numbers are not supplied. Individuals may elect rates of 10.5% (if their expected annual income does not exceed NZ$14,000), 17.5%, 30% or 33%. The basic rate for interest paid to companies is 28%, but companies may elect a 33% rate.
Bell Gully has the largest tax practice in the market. The firm's tax team has had major transactions in the areas of indirect tax and customs and excise. The tax practice is led by Mathew McKay and comprises four partners and 11 other professionals.
Its tax group is consistently involved in the country's largest and most high profile corporate and commercial transactions. This year, McKay and Graham Murray advised Vodafone Group on the tax aspects of the proposed merger of Vodafone New Zealand with NZX and ASX-listed Sky Network Television Limited. The transaction has an estimated value of NZ$3.4 billion ($2.4 billion), which will make it the largest New Zealand M&A transaction since 2003. It also advised HNA Group on the tax aspects of its acquisition of UDC Finance, New Zealand's largest financial company, for NZ$660 million from ANZ Bank New Zealand Limited. Furthermore, Jarrod Walker advised US-based hotels group Host Hotels & Resorts on the sales of all its hotels in New Zealand. This is the largest hotel transaction to have taken place in New Zealand since the acquisition of a New Zealand hotel portfolio by Host in 2010.
Tony Wilkinson and Neil Russ co-head the tax practice at Buddle Findlay. The firm comprises two partners and eight other professionals, including Erik Chamonte who joined the firm in January 2017.
Wilkinson has a highly regarded practice and is the lead tax adviser for the firm's most significant corporate clients. His expertise includes corporate restructurings and acquisitions, tax disputes, inbound and outbound investments and customs and excise duty matters. Russ is involved in significant tax disputes in New Zealand and is regarded as a tax expert internationally. He has acted as an expert witness on New Zealand tax law in a foreign tax case and is the convenor of the New Zealand Law Society's Taxation Committee among other things.
The professionals at Buddle Findlay advise clients in corporate acquisition, restructuring, investments, divestments, securitisation, project finance, leasing, structured equity products and financing.
In 2017, the firm acted in the largest transaction of the year involving the merger of ASX and NZX listed Sky Network Television and Vodafone New Zealand via an acquisition of Vodafone New Zealand Ltd by Sky Network Television. It also represented NYSE-listed Newell Brands in the acquisition of very large scale Sistema Plastics business.
Chapman Tripp is a leading firm that advises on the full spectrum of matters, including M&A, restructurings, cross-border capital repatriation and dividend issues, tax disputes with the Inland Revenue Department and capital raising exercises. The firm is also heavily involved in high profile tax policy work and has contributed to changes to both domestic and international law.
This year, Chapman Tripp advised Tower Limited in relation to the NZ$197 million acquisition being made by Fairfax Financial Holdings. The firm advised its clients on the tax issues arising from the takeover including the tax implications of specific asset transfers contemplated as part of the wider transaction. It also advised NZ Post Limited on the sale of a 47% stake in Kiwi Group Holdings Limited to the NZ Superannuation Fund and Accident Compensation Corporation for NZ$494 million.
The firm's tax practice is led by Graeme Olding and comprises three partners and 10 other professionals, all of whom specialise in indirect tax and corporate tax.
Deloitte's tax practice is led by Peter Felstead, who advises in clients in tax planning and compliance matters. The firm comprises 25 partners and 133 other professionals, 19 of whom specialise in indirect tax and 135 in corporate tax. New members of the team include Julia Burdett-Clark, Cindy Dong, David Johnston, Jaco Reyneke, Alex Kingston, Graeme Fotheringham and Sofwa Khan who joined the firm in 2017.
The firm offers tax services in a broad range of areas, including M&A, business tax, international tax, TP and tax management consulting. In December 2016, the firm assisted Restaurant Brands New Zealand Limited with the acquisition of the shares in Pacific Island Restaurant. This involved collaborating with its US team to provide tax advice in relation to funding the transaction through an underwritten accelerated pro-rata entitlement offer and US dollar denominated bank debt. It also assisted in the acquisition of Vector Gas Limited from Vector, and the subsequent acquisition of the Maui pipeline from the Maui joint ventures.
"Deloitte have been our primary tax advisers in New Zealand for many years. The team has exceptional depth and experience. They are at the forefront of tax thought leadership in New Zealand," said one client.
Geoff Blaikie oversees the tax practice at EY. The firm offers a broad range of services, including tax advisory, tax accounting, tax policy and controversy, transaction tax, TP, VAT, GST and other sale taxes among other things.
Blaikie has more than 25 years of experience advising multinational groups on a broad spectrum of taxation matters, including restructuring and offshore.
The tax and TP practice at Grant Thornton is led by Greg Thompson. The firm has four partners and 11 other professionals, including Don MacKenzie who joined in January 2017.
Grant Thornton offers specialist tax services in corporate, indirect, TP, direct international and global mobility. The firm also provides tax advisory and compliance services to a broad spectrum of entities including multinationals, entrepreneurial business, central and local government and high-net-worth individuals.
Thompson's practice focuses on Inland Revenue management, domestic and international taxation, including the tax regimes of common trading partners. He is also a frequent speaker at national and international conferences.
KPMG's tax practice is led by Ross McKinley. The firm comprises 14 partners and 82 other professionals, 60 of which specialise in corporate tax.
The firm acts for for a wide range of domestic and international clients, advising on all tax matters and across all key industry sectors. Over the past year, the firm has assisted New Zealand Superannuation Fund in the acquisition of 25% of Kiwi Group Holdings from New Zealand Post. This transaction involved several complex direct and indirect tax issues arising as a consequence of Kiwi Group Holdings exiting a consolidated income tax group. Further, Bruce Bernacchi assisted a client with a tax audit that related to the pricing of an inter-company loan between two parts of a significant family owned agricultural business.
New members of the team include Virag Singh who joined the firm in April 2017.
Moreover, John Cantin and Darshana Elwela are members on the Institute of Chartered Accountants New Zealand Tax Committee. The pair regularly liaise with senior Inland Revenue officials on tax reform and tax issues.
MinterEllisonRuddWatts is a full service firm renowned for its technical capability and extensive experience in the market. The tax practice is led by partner Andrew Ryan and special counsel Sacha Oudyn.
The firm assists clients with a range of tax matters, including GST, international tax, fringe benefit tax and income tax. The tax team also has a strong practice in the wholesale and private equity and venture capital funds sectors, advising companies such as Atlas Funds, Continuity Capital, New Ground Capital, Pioneer Capital Partners and Milford Private Equity.
In July 2016, MinterEllisonRuddWatts advised one of New Zealand's leading private equity firms, Pencarrow Private Equity, on the tax aspects of the sale of Rishworth Aviation to Empresaria Group. It also advised the management team of Rishworth Aviation on their reinvestment arrangements with Empresaria. Five months later it acted for the shareholders of MMC Limited on their sale of 50% of the company to Pencarrow Private Equity. The firm assisted with all tax aspects of the transaction, including the sale arrangements and ongoing shareholder arrangements.
Geof Nightingale is the managing partner at PwC and is broadly experienced in corporate tax, transaction advisory, tax accounting and tax policy. The tax team provide services across a broad spectrum of areas, including GST, M&A, international tax, TP and disputes. Other notable contacts are directors Michelle Chan, Steve Camage, Riaan Geldenhuys, Tony Lyle and Suzie Chichester.
Russell McVeagh is highly regarded in New Zealand as a leading firm. The tax team is recognised for its track record in large corporate and cross-border transactions. Its professionals have acted for all of the major banks and have represented clients in leading tax disputes at the judicial level.
Over the past year, the firm has advised Trustpower on its demerger into two separate listed companies. The demerger was the first of its kind and was valued at NZ$3.6 billion. It also advised BNZ on the New Zealand tax and regulatory aspects of its issue of convertible notes, which qualified as an additional tier 1 regulatory capital under the Basel III guidelines. The transaction required multiple regulatory approvals, including approval by the prudential banking regulator of certain tax consequences of the arrangement.
The team has also been involved in the tax law reform process, including advising industry groups such as the New Zealand Bankers Association and the Corporate Taxpayers Group on tax policy issues. The tax practice is led by Brendan Brown.
Stuart Hutchinson oversees the tax practice at Simpson Grierson. Hutchinson has extensive experience in the industry and has advised clients on inbound and outbound investments, structured financing proposals, M&A and divestments, tax disputes, GST, and accident compensation.
The firm's tax practice provides services in corporate and commercial transactions across all industries, including M&A and capital raising. Its professionals are also highly experienced in handling tax disputes, including regulatory proceedings and tax litigation.
A key member of the team is partner Barney Cumberland who is highly experienced across aspects of domestic and international tax law. He also assists clients with tax disputes, litigation, and domestic and cross-border transactions.
The professionals at Staples Rodway offer services in structuring, compliance, governance and tax risk management, M&A, exit strategy, research and development, audits and disputes, employee engagement and retention. Chris Lynch and Spencer Smith are directors at the firm. Lynch is experienced in tax advisory and audit proceedings and has served clients from the property, engineering, business, oil and gas, agriculture, transport and local government sectors. Smith has extensive experience advising companies from the petroleum and mining sectors. His areas of specialism includes business structures and special projects, GST, acquisitions and divestments, tax planning, due diligence and deal negotiations, tax investigations and dispute resolution among other things.