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Key Practical Issues to Eliminate Double Taxation of Business Income – New Zealand Report to the International Fiscal Association in Paris 2011

25 Pages Posted: 12 May 2011 Last revised: 6 Apr 2015

Craig Elliffe

University of Auckland - Faculty of Law

John Prebble QC

Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law

Neil Russ

Buddle Findlay

Date Written: March 7, 2011

Abstract

This paper considers New Zealand's hybrid tax credit system consisting principally of a credit system combined with exemption features in respect of certain classes of income, both of which aim to provide relief to minimise the impact of foreign income being taxed in a foreign jurisdiction as well as in New Zealand.

At first sight, these credit and exemption regimes would appear to relieve New Zealand residents from incurring income tax liability on foreign sourced income in both the source jurisdiction and New Zealand. This is generally true for the immediate recipient of the income, although the extent of the relief can vary depending on the basis in which the income is taxed in New Zealand and the foreign jurisdiction due to the manner in which the New Zealand foreign tax regime operates, as discussed later.

Furthermore, as will be examined in further details in this paper, the New Zealand tax system may not provide adequate relief against double taxation of foreign income where the immediate recipient of the foreign income is not the ultimate beneficiary of the income, and the foreign sourced income is repatriated to another entity or person (whether or not the ultimate beneficiary of that repatriated income is a New Zealand resident).

The paper focuses on the practical problems of double taxation arising from the NZ tax credit systems.

Keywords: foreign tax credits, exemption, credit, controlled foreign companies, double taxation, imputation systems

JEL Classification: K34

Suggested Citation

Elliffe, Craig and Prebble QC, John and Russ, Neil, Key Practical Issues to Eliminate Double Taxation of Business Income – New Zealand Report to the International Fiscal Association in Paris 2011 (March 7, 2011). Available at SSRN: https://ssrn.com/abstract=1780546 or http://dx.doi.org/10.2139/ssrn.1780546

Craig Macfarlane Elliffe (Contact Author)

University of Auckland - Faculty of Law ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

John Prebble QC

Victoria University of Wellington - Faculty of Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)

HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Notre Dame Australia - School of Law

Sydney Campus, New South Wales
Australia

Neil Russ

Buddle Findlay ( email )

Wellington
New Zealand

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