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Canada-New Zealand Double Tax Pact In Force

by Mike Godfrey, Tax-News.com, Washington

02 July 2015


A new double tax agreement and an accompanying protocol between New Zealand and Canada entered into force on June 26, 2015, which will lower withholding tax rates on certain cross-border income from August 1, 2015.

The new treaty provides for a lower withholding rate on royalties income of 10 percent, down from 15 percent. A lower, five percent rate will apply to income from royalties on copyright, computer software, and other specified items.

The withholding rate on interest payments has also been lowered, from 15 percent to a maximum of 10 percent. The withholding tax rate on dividends will fall from 15 percent to a maximum of five percent for an investor who holds a minimum of 10 percent of the shares in the dividend-paying company.

In addition, the treaty stipulates that an enterprise will be deemed to have a permanent establishment in either Canada or New Zealand if it carries on business in that state for more than 183 days in any 12-month period.

New Zealand's Revenue Minister, Todd McClay, said the new agreement will be welcome news for businesses and investors in both countries. "For businesses, tax agreements provide greater certainty and reduce the likelihood of being taxed twice on cross-border transactions, while investors will generally be better off as a result of lower withholding taxes on their cross-border investment returns," he said.

"Canada is an important investment and trading partner for New Zealand. The new tax agreement updates and modernizes the 1980 agreement between our two countries and is testament to the strong relationship we continue to share."

For New Zealand income tax, the new agreement applies to income years beginning on or after April 1, 2016, and for Canadian income tax, it applies to income years beginning on or after January 1, 2016.

TAGS: tax | investment | business | interest | royalties | copyright | agreements | tax rates | withholding tax | Canada | New Zealand | dividends

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