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BG 1: Tax avoidance
or “Rules to prevent people from using special arrangements to avoid paying taxes”
You could also call this:

“Agreements to prevent paying tax twice on income from different countries”

A double tax agreement is a special agreement between New Zealand and other countries or territories. It helps people and businesses avoid paying tax twice on the same income. Here’s what you need to know about these agreements:

The government makes these agreements for different reasons. They might want to stop double taxation, give tax relief, or decide how to tax money earned by people from other countries in New Zealand. They also use these agreements to share information and catch people who try to avoid paying tax.

For an agreement to work, it needs to be approved by the Governor-General. Once approved, it affects how income tax and other taxes work. It can also change how information is shared about taxes.

If the agreement is about getting back unpaid tax, it has to follow special rules. There are also special rules for agreements about sharing information on foreign accounts.

When these agreements talk about profits from a business, they usually mean the money left after expenses. If they mention two people being ‘unrelated’, it usually means they’re not working together or connected in a way that affects their taxes.

Remember, these agreements are important because they change how tax rules work between New Zealand and other countries.

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Next up: CA 1: Amounts that are income

or “Income includes what the law defines as income and what is generally considered income”
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Part B Core provisions
Double tax agreements

BH 1Double tax agreements

  1. Double tax agreement means an agreement that—

  2. has been negotiated for 1 or more of the purposes set out in subsection (2); and
    1. has been agreed between—
      1. 1 or more governments of territories outside New Zealand and the government of New Zealand; or
        1. the Taipei Economic and Cultural Office in New Zealand and the New Zealand Commerce and Industry Office; and
        2. has entered into force as a result of a declaration by the Governor-General by Order in Council under subsection (3).

          1. The following are the purposes for which a double tax agreement may be negotiated:

          2. to provide relief from double taxation:
            1. to provide relief from tax:
              1. to tax the income derived by non-residents from any source in New Zealand:
                1. to determine the income to be attributed to non-residents or their agencies, branches, or establishments in New Zealand:
                  1. to determine the income to be attributed to New Zealand residents who have special relationships with non-residents:
                    1. to prevent fiscal evasion:
                      1. to facilitate the exchange of information:
                        1. to assist in recovering unpaid tax.

                          1. An agreement to which subsection (1)(a) and (b) apply comes into force as declared by the Governor-General by Order in Council and on the date determined under the agreement.

                          2. An Order in Council under subsection (3) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

                          3. Despite anything in this Act, except subsection (5), or section RF 11C (Interest paid by non-resident companies to non-residents) or (5B) or section BG 1 or GB 54 (which relate to tax avoidance) or, or in any other Inland Revenue Act or the Official Information Act 1982 or the Privacy Act 2020, a double tax agreement has effect in relation to—

                          4. income tax:
                            1. any other tax imposed by this Act:
                              1. the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax in section 3 of the Tax Administration Act 1994.

                                1. An agreement that provides for the recovery of unpaid tax is subject to Part 10A of the Tax Administration Act 1994.

                                2. A foreign account information-sharing agreement is subject to Part 11B of the Tax Administration Act 1994.

                                3. A reference in a double tax agreement to the profits of an activity or business is to be read, if possible, as a reference to the amount that would be a person's net income if that activity or business were their only activity or business.

                                4. A reference in a double tax agreement to 2 persons being unrelated is to be read, if possible, as a reference to 2 persons being not associated.

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                                Notes
                                • Section BH 1(1)(b)(i): amended (with effect on 21 October 2013), on , by section 4 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                • Section BH 1(3): replaced, on , by section 6(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                • Section BH 1(3B) heading: inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
                                • Section BH 1(3B): inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
                                • Section BH 1(4): amended, on , by section 217 of the Privacy Act 2020 (2020 No 31).
                                • Section BH 1(4): amended, on , by section 4(2) (and see section 4(4) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                • Section BH 1(4): amended (with effect on 1 April 2008), on , by section 4(1) (and see section 4(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                • Section BH 1(4): amended, on , by section 6(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                • Section BH 1(5B) heading: inserted, on , by section 6(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                • Section BH 1(5B): inserted, on , by section 6(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                • Section BH 1(7) heading: added, on , by section 5 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                • Section BH 1(7): added, on , by section 5 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                • Section BH 1 list of defined terms associated: inserted, on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).