International tax update – June 2015
New Zealand: Budget 2015
The New Zealand Budget was handed down on 21 May 2015 and included a new tax on residential property sold within two years of purchase (with some exceptions). For further information on the New Zealand Budget see PwC New Zealand’s Budget commentary.
New Zealand: Issues paper on nonresident withholding tax and related party/branch lending
The New Zealand (NZ) Inland Revenue Office has released an Issues Paper Issues Paper regarding non-resident withholding tax (NRWT) and related party/branch lending. The Issues Paper identifies several perceived issues with the application of the current NRWT and approved issuer levy rules, and proposes legislative changes to address these concerns. Submissions are due by 16 June 2015.
Base erosion and profit shifting (BEPS) update
BEPS Action 8: Revisions to Chapter VIII of the Transfer Pricing Guidelines on Cost Contribution Arrangements
On 29 April 2015 the Organisation for Economic Cooperation and Development (OECD) released a discussion draft on BEPS Action 8: Revisions to Chapter VIII of the Transfer Pricing Guidelines on Cost Contribution Arrangements (CCAs). The discussion draft proposes fundamental modifications to Chapter VIII of the OECD Transfer Pricing Guidelines:
* with respect to measuring the value of contributions to CCAs and the tax characterisation of contributions, balancing payments and buy-in/ buy-out payments
* to make it consistent with other BEPS amendments including those addressing the fundamental issues on risk, capital, re-characterisation and intangibles.
The primary goal is to ensure that contributions are commensurate with the benefits received under a CCA. This is a difficult task when the contributions are complex and cannot be valued at cost. The guidance suggested by the OECD, although it acknowledges the need to achieve simplification, may nevertheless increase complexity and disputes.
BEPS Action 7: Prevent the Artificial Avoidance of PE Status
On 15 May 2015 the OECD released a revised discussion draft on BEPS Action 7: Prevent the Artificial Avoidance of PE Status. On 31 October 2014, the OECD released a first discussion draft which described a number of permanent establishment (PE) avoidance strategies and included a number of proposed options on how to deal with each. The revised discussion draft now details a specific preferred proposal on how to address each PE avoidance strategy previously identified. Comments on the revised discussion draft are required to be submitted by 12 June 2015.
BEPS Action 6: Prevent Treaty abuse
On 22 May 2015 the OECD released a revised discussion draft on BEPS Action 6: Prevent Treaty abuse. The revised discussion draft reflects the conclusions and proposals that resulted from meetings of OECD Working Party 1 that considered responses to the original 21 November 2014 discussion draft. Part 1 of the revised draft reflects the outcome of the discussion of a new proposal for an alternative simplified limitationon-benefits (LOB) rule. Part 2 presents the outcome of the discussion of each of the 20 issues for follow-up work that were previously identified, including new proposals for treaty rules intended to address concerns related to special tax regimes and to changes to domestic law made after the conclusion of a treaty. Comments on the revised discussion draft are required to be submitted by 17 June 2015.
