Page 87 - Export and Trade

Taxation

tax credit in New Zealand, there are some cases where tax residency under New Zealand tax law. However, they
it is not possible to claim the NRWT as a tax credit. may gain residency of the other jurisdiction depending on
Additionally, NRWT creates extra compliance costs. the rules of that country.
Many countries have their own forms of withholding
Income tax: New Zealand on employee remuneration, and the interaction between
Beyond the overseas issues, there may be additional New these rules and New Zealand’s rules need to be
Zealand tax rules to consider. For instance, if you choose considered.
to incorporate a company overseas to handle your export Finally, the various components of the employee’s
operation, then you may have a ‘controlled foreign remuneration may be treated differently for tax purposes
FRPSDQ\¶ &)& :KLOH WKH VKRUW WHUP 1HZ =HDODQG WD[ in different countries.
obligation arising from the interest in the CFC is unlikely
WR EH VLJQL¿FDQW WKH DGYDQFHG FRPSOLDQFH UHTXLUHPHQWV Transfer pricing
can be more onerous. If your business has a presence in another country,
Engaging in business overseas will also mean dealing whether through a branch or a subsidiary, there is the
in foreign currencies. Movements in foreign currencies issue of transfer pricing. At a simple level, transfer
may have an impact on your business’ income tax return pricing relates to charges between related parties for
FRXUWHV\ RI UHJLPHV VXFK DV WKH ¿QDQFLDO DUUDQJHPHQWV
rules.
An added complication is the potential impact back
in New Zealand. In some situations, effective double
taxation may arise. An example of where double taxation IT’S ACCRUAL
may arise is where a company has an overseas branch.
The overseas branch pays tax in the foreign jurisdiction WORLD, BUT
and the company can claim the tax as a credit in New
Zealand. This reduces the overall tax bill of the company YOU CAN
in New Zealand and therefore the level of imputation
credits generated. When the company wants to distribute COUNT
SUR¿WV DV D GLYLGHQG WKH GLYLGHQG LV OLNHO\ WR EH SDUWLDOO\
imputed and therefore the shareholders will need to ON US!
make a top-up payment of tax.

Income tax: Employees
There may be situations where you have New Zealand Staples Rodway
resident employees of your business that you would like is an independent
to transfer to the overseas operation either permanently member of the Baker
or for a short-term secondment. This raises a number of Tilly International
questions around the tax residency of the employees and network, with experts
a number of tax issues that impact both on them and in 147 countries.
your business.
The primary issue for a permanent transfer is whether www.staplesrodway.co.nz
the employee will lose their tax residency of New
Zealand and how the transition between countries can be
managed.
On the other hand, a short-term secondment can raise
a myriad of tax complications. Due to New Zealand’s
residency tests, it is unlikely that an employee on a
short-term secondment would lose their New Zealand

NZ Export & Trade Handbook 2018 85