Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
GB 53C: On-lending at lower rate
or “Rules for lending borrowed money at lower rates to connected people”
You could also call this:

“How non-resident companies selling to New Zealand may be taxed”

This law applies when a non-resident company sells goods or services to someone in New Zealand. It’s about how the non-resident company might be taxed in New Zealand.

The law says that if certain conditions are met, the non-resident company will be treated as if it has a permanent establishment in New Zealand. This means the company will have to pay New Zealand tax on the income from these sales.

Here are the main conditions:

Someone in New Zealand (called a facilitator) helps to make the sale happen. This person is closely connected to the non-resident company, either as an employee or by getting most of their income from the company.

The facilitator’s work is more than just basic preparation or support for the sale.

The non-resident company is part of a large multinational group.

The arrangement is set up to affect how much tax the non-resident company pays, either in New Zealand or in another country.

If all these conditions are met, New Zealand will treat the non-resident company as if it has a permanent business here. This means the company will need to pay New Zealand tax on the income from these sales.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: GB 55: Arrangements involving tax credits for charitable or other public benefit gifts

or “Rules for tax credits on charitable donations and preventing misuse”
Next

Part G Avoidance and non-market transactions
Avoidance: specific: Arrangements involving residential land

GB 54Arrangements involving establishments

  1. This section applies when—

  2. 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—
    1. a person in New Zealand (the recipient); or
      1. 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
      2. 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
        1. the facilitator—
          1. is associated with the non-resident or is an employee of the non-resident:
            1. 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
            2. the activity is more than preparatory for or auxiliary to the facilitated supply; and
              1. income of the non-resident from the facilitated supply is not within the scope of a double tax agreement that—
                1. incorporates article 12(1) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting:
                  1. 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
                  2. section YD 4B(3) (Meaning of permanent establishment) does not determine whether the non-resident has a permanent establishment in New Zealand; and
                    1. 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
                      1. 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—
                        1. altering the incidence of income tax or ancillary tax:
                          1. 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:
                            1. 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
                            2. the purpose or effect is more than merely incidental; and
                              1. the non-resident, or a group of persons that include the non-resident, is a large multinational group.

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

                                2. through which the non-resident makes the facilitated supply in the course of a business carried on in New Zealand; and
                                  1. to which activities of the facilitator referred to in subsection (1)(b) are attributed.

                                    Notes
                                    • Section GB 54: inserted, on , 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 , 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 , 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 , 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 , 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 , 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 , 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).