Global

Details

  • Service: Tax, International Corporate Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 1/15/2013

New Zealand - Proposals to amend thin capitalisation rules 

January 15:   An “issues paper” focuses on the effectiveness of certain tax base-protection measures aimed at non-residents—e.g., thin capitalisation, transfer pricing, and non-resident withholding tax.

Specifically, the issues paper [PDF 490 KB]—Review of the thin capitalisation rules (14 January 2013)—proposes changes to the rules for claiming New Zealand interest deductions when a business is owned by non-residents.


Comments concerning the proposals are due by 15 February 2013.

Summary

While the proposals generally would not affect the thin capitalisation safe harbour thresholds, the issues paper proposes to address perceived “gaps” in the thin capitalisation rules—including measures to extend these rules to multiple non-residents holding / controlling more than 50% of a New Zealand company / group if these parties are “acting together.”


A concern is how this concept would be reflected in legislation, and practically applied / interpreted by Inland Revenue, in such a way that does not affect non-resident investors who are genuinely operating at arm’s length from each other.


A further concern is the potential adverse impact on inbound investment, particularly in large-scale projects such as infrastructure (at a time when infrastructure investment is a priority for Christchurch, Auckland and many other parts of the New Zealand).


Read a January 2013 report [PDF 66 KB] prepared by the KPMG member firm in New Zealand: Proposals to further tighten interest deductibility released



Contact a tax professional with KPMG's Global Transfer Pricing Services.




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