martes, 27 de junio de 2017

New Zealand: Changes made to offshore and onshore branch exemptions

A law enacted on 30 March 2017 (and applicable as from that date) introduced changes to New Zealand’s withholding tax rules for interest payments made to nonresidents and, on 11 April 2017, New Zealand’s Inland Revenue Department released a special report on the new rules. The rules address both offshore and onshore branch structures, specifically, the withholding tax treatment of interest paid to a nonresident by an offshore branch of a New Zealand company and certain interest paid by a New Zealand resident to a foreign lender with a New Zealand branch.
These interest payments now will be subject to nonresident withholding tax (NRWT) or the approved issuer levy (AIL).
Under New Zealand law, a 15% NRWT is imposed on interest paid by a New Zealand borrower to a foreign lender, with the rate usually reduced to 10% under New Zealand’s tax treaties. However, where the lender is not related to the New Zealand borrower (e.g. a foreign bank lender), an election can be made to pay the 2% AIL instead of the higher NRWT. The lender typically will be able to obtain a credit for the NRWT withheld against the tax it pays on the interest in its country of residence; in contrast, foreign lenders are not entitled to a credit for the AIL. This disparity has meant
that it may have been more tax-efficient for NRWT to be paid, rather than the AIL, leading to government concerns about potential abuse of the rules and, ultimately, to the recent changes to the offshore and onshore branch exemptions.

Source & more info: Deloitte

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