Arrangements involving establishments and non-resident businesses

Heading: inserted, on 1 July 2018, by section 39(1) (and see section 39(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).

GB 54 Arrangements involving establishments
When this section applies

(1)

This section applies when—

(a)

a non-resident makes, under an arrangement, a supply, as defined in section 5 of the Goods and Services Tax Act 1985, (the facilitated supply) that is of goods or services to—

(i)

a person in New Zealand (the recipient); or

(ii)

a person in New Zealand (the intermediary), who makes under the arrangement a supply of the goods or services to another person in New Zealand (the recipient) whose existence is known to the facilitator referred to in paragraph (b), at the time of the facilitated supply; and

(b)

a person (the facilitator), who is not an intermediary for the facilitated supply, carries out in New Zealand under the arrangement an activity for the purpose of bringing about the supply by the intermediary to the recipient or the facilitated supply to the recipient; and

(c)

the facilitator—

(i)

is associated with the non-resident or is an employee of the non-resident:

(ii)

derives 80% or more of the facilitator’s assessable income in the income year of the activity, and in the previous income year, from services provided to the non-resident or to persons associated with the non-resident; and

(d)

the activity is more than preparatory for or auxiliary to the facilitated supply; and

(e)

income of the non-resident from the facilitated supply is not within the scope of a double tax agreement that—

(i)

incorporates article 12(1) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting:

(ii)

includes a provision having a scope equal to or greater than the scope of the article referred to in subparagraph (i) and enters into force after 7 June 2017; and

(f)

section YD 4B(3) (Meaning of permanent establishment) does not determine whether the non-resident has a permanent establishment in New Zealand; and

(g)

income of the non-resident from the supply is not attributable, other than under this section, to a permanent establishment in New Zealand of the non-resident; and

(h)

the arrangement has a purpose or effect of affecting the imposition on the non-resident of income tax or ancillary tax, or of income tax or ancillary tax and the income tax of a country or territory other than New Zealand, by directly or indirectly—

(i)

altering the incidence of income tax or ancillary tax:

(ii)

relieving a person from liability to pay income tax or ancillary tax or from a potential or prospective liability to future income tax or ancillary tax:

(iii)

avoiding, postponing, or reducing a liability to income tax or ancillary tax or a potential or prospective liability to future income tax or ancillary tax; and

(i)

the purpose or effect is more than merely incidental; and

(j)

the non-resident, or a group of persons that include the non-resident, is a large multinational group.

Activities attributed to permanent establishment

(2)

The non-resident is treated as having a permanent establishment in New Zealand—

(a)

through which the non-resident makes the facilitated supply in the course of a business carried on in New Zealand; and

(b)

to which activities of the facilitator referred to in subsection (1)(b) are attributed.

Defined in this Act: arrangement, assessable income, associated, business, double tax agreement, goods, income, income tax, large multinational group, New Zealand, non-resident, permanent establishment, services

Section GB 54: inserted, on 1 July 2018, by section 39(1) (and see section 39(2) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).

Section GB 54(1)(b): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(1) (and see section 204(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section GB 54(1)(h): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(2)(a) (and see section 204(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section GB 54(1)(h)(i): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(2)(b) (and see section 204(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section GB 54(1)(h)(ii): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(2)(c) (and see section 204(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section GB 54(1)(h)(iii): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(2)(d) (and see section 204(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section GB 54(1)(i): amended (with effect on 1 July 2018), on 18 March 2019, by section 204(3) (and see section 204(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).