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NZ To Amend BEPS Bill's 'Restricted Transfer Pricing Rule'

by Mary Swire, Tax-News.com, Hong Kong

21 February 2018


New Zealand's Inland Revenue Department has flagged up an upcoming amendment to the Taxation (Neutralising Base Erosion and Profit Shifting) Bill due to a drafting error.

It has issued a letter that concerns the new rule to limit the rate of deductible interest on related-party cross-border debt (the restricted transfer pricing rule).

The letter states: "Officials have become aware that, as the Bill is drafted, the use of the general transfer pricing ownership threshold means this rule does not apply as widely as was intended. Officials will be recommending to the Finance and Expenditure Committee that in line with the stated policy intention, the ownership threshold is changed to align with that in the thin capitalization rules, which also deal with the issue of interest deductibility."

The letter goes into greater depth into the reason for the change but, summarizing the overall policy intent, concludes: "Officials will recommend to the Committee that the restricted transfer pricing rules be amended so that they will also apply to a New Zealand person borrowing from a non-resident person or group if the lender and borrower would be associated if their voting interests were determined based on their highest shareholder decision-making right rather than their average shareholder decision-making rights."

TAGS: Finance | interest | transfer pricing | New Zealand | Tax | BEPS

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