The High Commission in London has confirmed that the Governments of New Zealand and the Isle of Man have appropriately completed their legal ratification processes regarding the Tax Information Exchange Agreement (TIEA) and Double Taxation Agreement (DTA) signed by the countries. With the stipulated one year waiting period over, as outlined in the agreements, the DTA and TIEA came into force on July 27th.

Under the new TIEA, the Governments of both countries will be able to request taxation and bank information on taxpayers in cases of suspected tax evasion or investigations. The agreement is aimed at greatly reducing instances of tax evasion between the two countries, and counts towards the Organization of Economic Cooperation and Development’s (OECD) standards of international tax transparency.

The DTA eliminates the occurrence of double taxation on incomes earned in either country, by allocating taxation rights to Governments, on a pre-determined set of taxpayer incomes. The DTA also addresses transfer pricing adjustments on transactions carried out by cooperation operating between the nations.

The Isle of Man Government stated that the now-effective agreement shows the country’s dedication to upholding internationally agreed standards on taxation and cooperation, along with the principles of transparency and effective exchange of information in tax matters.

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On May 12th the New Zealand Government announced the signing of an Order in Council for the DTA between New Zealand and Singapore. The signing of the Order officially incorporates the agreement into national legislation. According to Peter Dunne, New Zealand Revenue Minister, the DTA will come into effect when the equivalent legal ratification process is carried out by the Government of Singapore.

The new agreement is intended to replace the DTA signed by Singapore and New Zealand in 1973. The DTA will lower withholding rates on dividends, royalties and interest. As the bi-lateral agreement will be updated to modern standards it will also serve to increase the levels of protection and certainty for cross-border business. The DTA will also conform to the international recognized standards of taxation transparency and information sharing, as set out by the Organization for Economic Cooperation and Development.

Singapore currently holds 61 Comprehensive Double Taxation Agreements, 7 limited taxation treaties, and 17 signed but un-ratified DTAs. New Zealand holds 35 ratified DTAs, and an additional 15 Tax Information Exchange Agreements.

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On March 29th Peter Dunne, New Zealand Revenue Minister, announced that the New Zealand Government and the Hong Kong Government expect to start negotiations on a DTA in October. The agreement aims to eliminate instances of double taxation on incomes earned by individuals and businesses entities while operating in the corresponding nation. The DTA will also feature measures to increase taxation transparency between the two nations, and comply with the Organization for Economic Cooperation and Development’s (OECD) international standards on tax information exchange.

Peter Dunne commented on the upcoming negotiation, saying, “I welcome Hong Kong’s change of stance on information exchange matters, which has made the double tax agreement negotiations possible.” Hong Kong has recently signed three similar bi-lateral agreements with Indonesia, the Netherlands, and Brunei, with several more negotiations underway.

The DTA announcement was accompanied by the signing of a Closer Economic Partnership (CEP) agreement between Hong Kong and New Zealand. According to Peter Dunne, Hong Kong is currently New Zealand’s ninth biggest export recipient, and provides significant foreign investment into the country.

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After much public anticipation the New Zealand Government released a media statement on March 22nd announcing that New Zealand and Australia have given legal effect to the DTA and passed legal notes which to that effect, allowing the agreement to come into effect soon. The newly established withholding rates will apply from May 1st 2010 onwards, and all other changes will begin on April 1st.

Under the now-established tans-Tasman agreement tax-free pensions from one country will remain exempt if the recipient moves to the corresponding nation. Several measures are taken within the DTA which attempt to reduce compliance costs for businesses, and raise tax payer. The agreement also gives strict definitions on a time period in which certain short-term business activities can be carried out in one country before they are to be considered resident activities for the purposes of taxation.

The DTA will serve to lower withholding rates on non-portfolio dividends from the current 15 percent to 5 percent or 0 percent, depending on shareholding levels. The rate of withholding tax on royalties will be halved to a new level of 5 percent. The withholding rate on interest from banks and financial institutions will be 0 percent, compared to the current 10 percent.

Commenting on the final ascendance of the document into law, Peter Dunne, New Zealand Revenue Minister, said, “The new DTA builds on the already close economic relationship that exists between our two countries and reflects the considerable growth and change that has occurred in trade and investment between our two countries since the last agreement was signed in 1995.”

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The New Zealand Government has begun to incorporate the DTA into the country’s law system through a signing of an Order in Council on February 17th, according to Peter Dunne, New Zealand Revenue Minister. Once the legal incorporation is complete for both nations the DTA will come into full effect. Australia is yet to commence their respective ratification process. Changes within the DTA are expected to begin in late 2010, two months after the expected conclusion of both countries’ ratification process.

The DTA which was a product of more than a year’s worth of negotiations was signed on June 29th 2009. The main features of the agreement are superannuation portability and several lowered withholding tax rates. On royalties the withholding rate levy will be cut by half to a level of 5 percent. The rate on interest will be lowered to 0 percent for all financial institutions, and remain at 10 percent for all other firms. Dividend payments will be categorized into one of three rates, ranging from 0 percent to the current 15 percent, differentiated by shareholding levels. Further, tax-exempt pension payments from either country will be regarded as tax-free in the corresponding nation.

At the Order of Council announcement, Peter Dunne described the DTA as a recognition and update of the already close business relationship between New Zealand and Australia. He continued on and said, “I expect the new DTA to bring significant benefits to New Zealand and improve certainty for trans-Tasman business.”

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The second protocol to the New Zealand-Belgium DTA was created to ensure the standing agreement’s relevance and applicability to the current tax laws of both countries. The DTA agreement is required to be amended in both countries before the second protocol can come into legal effect, in New Zealand this is done by Order in Council. Peter Dunne claimed in a media statement on December 10th, that he expects progress to be announced in early 2010.

The original DTA between New Zealand and Belgium was signed on September 15th, 1981, and came into force December 8th, 1983. New Zealand currently holds 35 DTA agreements and 10 Tax Information Exchange Agreements, one of which is with Belgium.

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New Zealand and Singapore currently have a Double Taxation Agreement, it was signed in 1973 and has been present since its inception. As stated by Peter Dunne, New Zealand Revenue Minister, at the release of this signing “The agreement will modernize our tax treaty arrangements with Singapore and bring them into line with best international practice,” and “In particular, the new agreement will allow for full exchange of information on tax matters between our two countries.”

Singapore imports approximately NZ$1.9 billion worth of goods into New Zealand, imports NZ$700 million worth of New Zealand goods and has NZ$1.6 billion worth of direct investments in New Zealand. The importance of Singapore as an economic and trading partner cannot be understated. The DTA will allow for this relationship to flourish further, by providing parties in both countries with certainties about the taxation liabilities that will be faced in their activities.

On the 29th of June New Zealand Trade Minister Tim Groser signed the new agreement on behalf of New Zealand in a Paris based ceremony. There is no date set yet to its enforcement as in it needs to be legally enacted in both countries. In New Zealand this will happen by the Order of the Council, which is expected to occur later in 2009.

The key changes in the new DTA, according to Tim Groser, are lower withholding taxes on dividend and royalty payments between Australia and New Zealand, changes to pension payments, and overall reduced compliance costs.

In the new DTA the standard withholding tax rate on dividends will be 15%, but, 5% for an investing company has at least a 10% shareholding in the company paying the dividend. This rate will be reduced to 0% if the investing company holds 80% or even more shares in the other company.

Pensions are also addressed, with pensions that are tax free in one country now being tax free in the other.